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THE VIENNESE RENT HOUSE: HISTORICAL GLORY IN THE CHANGE OF TIME
WHAT IS A RENTAL HOUSE?
Investment properties are essentially rental buildings with multiple residential units that are rented out on a long-term basis. The word "interest" here stands for "rent." Therefore, not only buildings erected before 1945 fall under the definition of investment properties, but also newer constructions in which apartments are offered for rent. Overall, the stock of investment properties in this country is larger than generally assumed. However, cooperative apartments and subsidized housing are not included.
OLD AND NEW BUILDING
Income properties built after June 30, 1953, are considered new buildings and are subject to the rental law to a limited extent. The yields on new constructions are generally higher, and the maintenance costs are lower. The aesthetics of new income properties may differ, but they offer long-term investors opportunities, especially with properties that have a high proportion of old tenants, to increase the earnings potential when old tenants leave.
COSTS AND REVENUES
The value of a rental property depends on yield, location, size, substance, and occupancy rate. An accurate appraisal requires know-how and expertise. Renovations are expensive, especially facade renovations can become costly. Repairs and maintenance can increase ongoing costs, which is difficult to recoup with capped rental rates.
For an accurate estimation of the purchase price, a professional should be consulted. Our experts for income properties are happy to advise you!
HISTORICAL EXCURSION
The Gründerzeit between 1848 and 1918 marks a period of upheaval, social change, and especially an impressive construction boom in Vienna. This era shaped the city with its characteristic Gründerzeit apartment buildings, which still adorn the cityscape today. The term "Zinshaus" comes from the fact that these buildings were often designed as investment properties for rental purposes. They house a mix of rental apartments and occasionally also commercial spaces on the ground floor.
The origins of these rental houses can be traced back to the population explosion during industrialization. The significant influx of people to Vienna created an enormous demand for housing. The Gründerzeit is divided into Early Gründerzeit (around 1840 – 1870), High Gründerzeit (around 1870 – 1890), and Late Gründerzeit (around 1890 – 1918).
The first city expansion took place during the reign of Emperor Franz Joseph I, who ordered the demolition of the fortifications and the construction of the Ringstraße in 1857. This magnificent boulevard became the highlight of the 19th century and shaped urban development.
The architecture of the Gründerzeit rental houses reflects the societal changes. In the early Gründerzeit, plain facades predominated, while the high Gründerzeit was inspired by representative elements taken from the Ringstraße. The late Gründerzeit brought about increased development of the ground areas, but at the cost of living quality.
PEACE INTEREST
The peace rent, introduced in 1917, marked the end of the heyday of rental properties. This form of rent regulation stipulated that the rent was based on the economic conditions of the year 1914. As a result, the returns for landlords were limited, and the historic rental properties became less attractive to owners and landlords.
Introduction and background of the peace interest
The Peace Rent, also known as the Peace Crown Rent, was introduced in Austrian rental law as a legally set maximum rent for rental contracts before August 1, 1914. This was done in response to the war-related overcrowding of apartments, particularly to protect soldiers and their families from rent increases and evictions. The strategy consisted of a combination of rent control, currency devaluation after the end of the war, and comprehensive tenant protection.
Development and impacts on tenants and landlords
The main objective of the rent cap was to limit rents by freezing them at this maximum rate. Over the years, this led to a form of property-like right for tenants, which meant financial relief, but for landlords, it resulted in a gradual expropriation, causing the significant construction of private rental houses before 1914 to come to a standstill due to a lack of achievable returns. The municipal housing construction that started in its place during the interwar period was tax-funded. Necessary repairs to old buildings could be financed by landlords in the case of insufficient rental income through a procedure requiring official approval according to § 7 of the Rent Law (later §18 MRG). As these maintenance works had a significant impact on the effective rent, they were known as § 7 renovations.
Today, over 100 years later, the issue of rents is once again at the center of heated debates, as the government is working on new rental legislation that could show certain parallels to the situation before 1917.
FUTURE PERSPECTIVES AND CHALLENGES
Currently, the Gründerzeit rental houses in Vienna are undergoing a transformation process. Between 2007 and 2019, almost 12% of these historic buildings disappeared, mainly due to conversion to condominiums, sale, or demolition.
The conversion from rental to ownership apartments opens up lucrative opportunities for landlords. However, this has an impact on the urban landscape and social mixing. Alternatively, some opt for demolitions to construct new buildings so that rent control regulations do not apply.
The loss of historic rental buildings from the Gründerzeit leads to a decline in affordable housing in central locations. This threatens social diversity and the characteristic flair of Vienna. Legal challenges, particularly in the rental law, are at the center of these developments. The city of Vienna faces the challenge of balancing monument protection and the need for housing.
To promote the preservation of these historical buildings, financial incentives and funding programs are necessary. Investors could be motivated to invest in the restoration and maintenance of these architectural gems.
The future of the Gründerzeit apartment buildings in Vienna remains uncertain. The city and its residents face the challenge of preserving the heritage while simultaneously meeting current housing demands. Open questions remain regarding the impact on rental prices, the cityscape, and the quality of life in Vienna. It remains to be seen how the city will handle this tension between history and progress.
Sources and Links
https://www.mieterschutzverband.at/allgemein/mieterschutz-in-oesterreich-von-1917-bis-heute/
Should there be fewer rental apartments in Vienna?
https://www.wohnnet.at/finanzieren/investment/what-is-a-rental-building-4296503
https://publikationen.ehl.at/view/872529523/
Gentrification in Vienna is said to be overrated according to a new study.
https://www.buergerleben.com/the-development-of-the-founder-era-house/
Should there be fewer rental apartments in Vienna?
https://www.otto.at/de/marktberichte/zinshaus-marktbericht?gclid=EAIaIQobChMIv7m1xL7NgwMVxItoCR0nmwAyEAMYASAAEgIwuvD_BwE
https://www.baunetz.de/meldungen/Meldungen-Bauen_fuer_die_Metropole_8221143.html
Image: Ludwig Förster and Theophil Hansen, Reger's House, Riemergasse 2, 1948/49 in: Allgemeine Bauzeitung 17 (1852) Sheet 438