Reining in the Rents

The soaring property prices are spurring a raft of political promises, and as Austrians gear up for the general elections, the disputes surround fairness and budget allocation

Some SPÖ members involved include Vienna's Councilor for Housing Michael Luwig (left), Councilor for Social Affairs Sonja Wehsely (center), and Federal Minister of Labour Rudolf Hundstorfer | Photo by Manfred Werner

A Gemeindebau apartment  | Photo: Josef Moser

Over the past decade, private rents have risen by 40%  | Photo: APA

 Spring brought the first hints of electioneering ahead of September’s national vote with Austria’s governing coalition parties, the centre-right People’s Party (ÖVP) and centre-left Social Democrats (SPÖ), presenting diverging plans for “offensives” to tackle the country’s rocketing housing costs.

An increase in the number of Austrian households by over a quarter million, a surge in investor demand for the safe-haven of property, and a sharp drop in the construction of new apartments are just some of the factors that have combined to push private rents up by an average of over 40% during the past decade – far outpacing the rate of inflation – with the price of buying spiralling too.

These ever-greater sums are hitting tenants hard, particularly those who are new to the market. Indeed, the Austrian Chamber of Labour  (Arbeiterkammer, or AK) estimates that young families who have signed private contracts in the last five years already spend almost half their monthly take-home pay on rent.


Over the past decade, private rents have risen by 40%  | Photo: APA

Over the past decade, private rents have risen by 40%  | Photo: APA

Living in a box

“Many people are asking themselves if, in the future, they’ll be able to afford the four walls they dream of,” said ÖVP leader and vice-chancellor Michael Spindelegger at the launch of his party’s six-pronged housing reform plan in March.

Spindelegger foresees the investment of €2 billion of state pension and insurance funds into building an additional 10,000 subsidized apartments each year – enough to plug the current annual shortfall of 8,000 new homes.

Deregulation in the construction sector will stimulate private investment, says Spindelegger, who would also like to transform certain state owned properties, such as dormant military barracks, into land for real estate development.

However, the ÖVP’s plan has also provoked controversy thanks to measures aimed at bringing “fairness” to the subsidised housing system.

At present, those applying to live in Austria’s low-cost municipal housing, the distinctive Gemeindebauten so familiar to Vienna’s residents and home to over half-a-million of its population, are required to fulfill criteria demonstrating a certain “need”. These criteria include earning an income below a certain level. Successful applicants usually receive open-termed rental agreements, and no further checks are made.

Spindelegger’s plan would change this, introducing periodical vetting of all Gemeindebauten residents to ensure that their wages have not surpassed the entry thresholds. Residents found to earn more would then be obliged to either pay more or move out. The ÖVP believes this measure will help free up 10,000 apartments in Vienna alone.


Back to black

Despite the fact that waiting lists for Gemeindebauten now stretch to a record 40,000 individuals, the SPÖ firmly opposes the ÖVP’s proposal of introducing ongoing checks aimed at removing less needy tenants, insisting that a mix of social strata is a positive in the municipal housing projects.

“In Vienna we have good reason to be proud that social status cannot be read from a postcode,” said the city’s Councillor for Housing, Michael Ludwig, who also pointed to the unacceptable interference in current rental agreements that such a measure would require.

The SPÖ does agree that many more new apartments need to be built, with party leader and Austrian Chancellor Werner Faymann asserting that the issue of affordable housing has been a priority for the reds since the days his now famous head of silvery hair was still jet.

Faymann’s seven-point plan, presented shortly after the ÖVP’s, also promises up to 10,000 new apartments per year, provided for in large part by reintroducing the obligation for Austria’s regions to spend federal housing funds only on housing.

Since 2008, Austria’s regions have been allowed to use their share of the €1.78 billion Wohnbauförderung (housing aid) transferred annually from the federal coffers as they wished. Obligating this cash would mean a billion euros for construction, says Faymann, enough to build 25,000 flats over the next legislative term.


Some SPÖ members involved include Vienna#s Councilor for Housing Michael Luwig (left), Councilor for Social Affairs Sonja Wehsely (center), and Federal Minister of Labour Rudolf Hundstorfer. Photo by Manfred Werner

Some SPÖ members involved include Vienna#s Councilor for Housing Michael Luwig (left), Councilor for Social Affairs Sonja Wehsely (center), and Federal Minister of Labour Rudolf Hundstorfer. Photo by Manfred Werner

It’s in the contract

Besides new construction, both parties also see the need for far-reaching reform of Austria’s complex and unwieldy tenancy laws (Mietrechtsgesetz, or MRG).

Governing all private rental agreements for properties built before 1945 (“Altbau”) and for those built thereafter with the help of State subsidies, the MRG sets rent controls by specifying a fixed price per square meter for each region. Landlords are entitled to add surcharges to this basic rate if the accommodation in question meets certain standards, such as if the building has an elevator or if the apartment has ample natural light. Likewise, reductions in the price should also be applied for a variety of reasons – if the location is particularly noisy, for example, or if the contract is limited to a certain period of time.

Presently, landlords are under no obligation to list the surcharges and reductions in the contracts, raising concerns that they have too free a hand in applying the former but tend to neglect the latter. In fact, a recent AK and Austrian Institute of Economic Research (WIFO) study suggests that a large majority of private Altbau tenants are unwittingly overpaying the equivalent of a whopping two months’ rent each year.

If the SPÖ and ÖVP reforms are put in place, these surcharges and reductions will be simplified and feature clearly in landlord-tenant agreements. The SPÖ would like to take the matter even further, setting an upper limit on surcharges, as well as shifting the burden of covering estate agent fees onto the landlord.



Austria’s governing coalition parties deny that the upcoming elections have prompted the renewed attention to affordable housing, and have formed a bi-partisan committee charged with producing a reform packet by the end of May.

Significant measures are not expected quickly, however, and the issue has already become a campaign issue whether Faymann or Spindelegger would like it or not.


The leader of the Austria’s right-wing Freedom Party (FPÖ), Heinz-Christian Strache, chided the government for suddenly discovering a problem for which they alone are responsible, describing the coalition as “property sharks” and reeling off a list of housing-related taxes and charges he would immediately scrap.

Strache also singled out Vienna’s administration for failing to oversee the addition of sufficient subsidized housing and, somewhat predictably, targeted foreigners: The FPÖ would like to strip non-nationals of the right to                        Gemeindewohnungen, while introducing “willingness to integrate” and German-language abilities as additional criteria.

The Greens were also miffed at the big two’s sudden attention to housing policy, an issue they have been flagging for some time. Back in October, Justice Speaker Albert Steinhauser was already calling for an end to the use of apartments as speculative objects, while pushing for MRG reforms even more sweeping than the SPÖ’s. More recently, the greens have presented detailed plans and called for a political summit.


So how much will I save?

All in all, many solutions are on the table, and all have their detractors.

The ÖVP’s plan to tighten controls on Gemeindebau residents may appeal to our sense of fair play, but critics have called into question the cost-effectiveness of introducing such a plan given the huge numbers of people living in public housing across the country. Furthermore, the income limits to qualify for socialised housing are actually very high – around €3,000 net per month for an individual living in Vienna, for example, almost twice the median wage – so such an operation could be compared to casting a huge net in order to catch a potentially small number of fish. Furthermore, the question of exactly how increasing the proportion of better off apartment-seekers affect private rents – it could actually push them down as well as up – should also be raised.

Likewise, the SPÖ’s planned reintroduction of obligations on federal housing aid should also be examined, as the data suggests that the regions already spend more on housing than the federal government would require. The regional governors in Lower Austria and Vorarlberg, both ÖVP, have voiced resistance to the idea on different grounds, stating that obligating these funds to housing would rip holes in other budgets, and that a cumbersome renegotiation of the entire financial deal between State and the provinces would need to take priority.

Finally, plans to reform the MRG are also revealing ideological differences within the Grand Coalition that could prove difficult to bridge, with the ÖVP claiming that establishing a ceiling to surcharges and forcing landlords to pay estate agent fees will only serve as a disincentive to entrepreneurs, while others will simply find a way to work these costs back into the rents.

But even the best efforts only address supply-side and technical aspects of the problem. The steady increase in demand, thanks both to demographic shifts and Austria’s stability in an era of widespread financial insecurity, is clearly a tougher policy issue, and perhaps a price one has to accept for living in a prosperous country weathering a storm around it, while many of its neighbours flounder.

In the short term, perhaps the best one can hope for is a slowing of housing cost increases, rather than a reversal of the trend.

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