German municipal investment backlog hits record 231 billion euros, KfW survey shows

The scale of the backlog

Germany's municipal investment backlog has reached a record 231 billion euros, according to a survey of more than 1,000 municipal treasury offices commissioned by the state development bank KfW. The figure marks a 7.2 percent increase from the previous year's 215.7 billion euros. The largest single category of need is school buildings, accounting for 68.9 billion euros, followed by roads and transport infrastructure at 53.7 billion euros. Sports facilities, disaster protection infrastructure and administrative buildings also saw growing investment requirements.

The municipal financial situation has deteriorated further noticeably, the mood in the treasury offices is depressed.

Regional divergence

The national picture masks sharp regional differences. In Saxony, municipal construction spending fell 9.8 percent to 390 euros per inhabitant, while nationwide spending rose 4.3 percent. Thuringia moved in the opposite direction, with construction spending up 7.6 percent, well above the national average of 4.3 percent. At 427 euros per inhabitant, however, Thuringia still ranks among the states with below-average per-capita construction outlays. Thuringia was the only federal state where municipalities recorded a budget surplus, at 50 euros per inhabitant.

The special fund and its reception

The special fund for infrastructure and climate neutrality, adopted in March 2025, is meant to provide relief. But the majority of surveyed municipalities do not expect it to generate more investment this year than would have occurred without the extra resources. Forty-two percent of municipalities expect the investment backlog to continue growing. Nationwide, planned investments for the current year total around 50 billion euros, up from 44 billion euros the previous year. The largest share, 27 percent, is earmarked for schools, with 23 percent for roads and transport and 10 percent for fire and disaster protection.

Thirty percent of municipalities stated they can maintain roads and transport infrastructure 'not at all' or only to a 'limited extent'.

Structural pressures

Seventy percent of treasury offices nationwide assess their financial situation as negative. Roughly every second municipality expects to become more dependent on credit financing in the future. KfW chief economist Dirk Schumacher pointed to adjusting the distribution of tax revenues between federal, state and local levels as one path to improving municipal finances. Experience shows that not all planned funds are spent as intended, partly due to lengthy approval procedures and understaffed building authorities. The rising cost of construction and the broad range of municipal responsibilities are driving investment needs higher across all regions.