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THE VIENNESE RENTAL APARTMENT: HISTORICAL GLORY IN THE CHANGE OF TIME
WHAT IS A RENTAL PROPERTY?
Investment properties are essentially rental houses with multiple units that are leased long-term. The word "Zins" here refers to "rent." Consequently, the definition of investment properties includes not only buildings constructed before 1945 but also newer structures that offer apartments for rent. Overall, the stock of investment properties in this country is larger than is generally assumed. However, cooperative housing and subsidized apartments are not included.
OLD AND NEW BUILDING
Residential buildings that were constructed after June 30, 1953, are considered new constructions and are only partially subject to rental law. The returns on new constructions are generally higher, and the maintenance costs are lower. The aesthetics of new residential buildings may differ, but they offer long-term investors opportunities, especially with properties that have a high proportion of old tenants, to increase the revenue potential when old tenants leave.
COSTS AND REVENUES
The value of a rental property depends on yield, location, size, condition, 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 can be difficult to recoup with capped rent rates.
For an accurate estimate 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 upswing, social change, and above all, an impressive construction boom in Vienna. This era shaped the city with the characteristic Gründerzeit rental apartments, which still adorn the cityscape today. The term "Zinshaus" originates 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 tenement houses lie in the population explosion during industrialization. The significant influx of people to Vienna created an enormous demand for housing. The Gründerzeit is divided into the early Gründerzeit (approx. 1840 - 1870), the high Gründerzeit (approx. 1870 - 1890), and the late Gründerzeit (approx. 1890 - 1918).
The first city expansion occurred 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 the city's development.
The architecture of the Gründerzeit rental buildings reflects social changes. In the early Gründerzeit, plain facades dominated, while the High Gründerzeit was inspired by representative elements borrowed from the Ringstraße. The late Gründerzeit brought increased development of land areas, but at the expense of living quality.
PEACE INTEREST
The peace rent, introduced in 1917, marked the end of the heyday of rental apartments. This form of rent control stipulated that the rent was determined according to the economic conditions of the year 1914. As a result, the landlords' profits were limited, and the historic rental apartments 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 tenancy law as a legally established 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 goal of the peace rent was to limit rents by freezing them at this maximum rate. Over the years, this led to a kind of property-like right for tenants, which provided financial relief but resulted in a gradual expropriation for landlords, causing the significant construction of private rental buildings that occurred before 1914 to come to a standstill due to a lack of achievable returns. The municipal housing construction that took its place during the interwar period was financed by taxes. Necessary repairs to old buildings could, in cases of insufficient rental income for property owners, be financed through a government-approved allocation process according to § 7 of the Rent Law (later §18 MRG). Since these maintenance works had a significant impact on the effective rent, they were known as § 7 renovations.
Today, more than 100 years later, the issue of rents is once again at the center of heated debates, as the government is working on a new rental law that could have certain parallels to the situation before 1917.
FUTURE PROSPECTS AND CHALLENGES
Currently, the Gründerzeit rental buildings in Vienna are undergoing a transformation process. Between 2007 and 2019, almost 12% of these historical buildings disappeared, primarily due to conversion into condominiums, sale, or demolition.
The conversion from rental to ownership apartments offers landlords lucrative opportunities. However, this has an impact on the urban landscape and social mix. Alternatively, some are opting for demolitions to construct new buildings so that rent controls do not take effect.
The loss of Gründerzeit rental houses thus leads to a decline in affordable housing in central locations. This threatens social mixing and the characteristic flair of Vienna. Legal challenges, particularly in rental law, are at the center of these developments. The city of Vienna faces the challenge of balancing monument protection and housing demand.
In order to promote the preservation of these historical buildings, financial incentives and support programs are necessary. Investors could be motivated to invest in the restoration and maintenance of these architectural gems.
The future of the Gründerzeit tenement houses in Vienna remains uncertain. The city and its residents face the challenge of preserving heritage while simultaneously meeting current housing demands. Open questions remain regarding the impacts on rental prices, the cityscape, and the quality of life in Vienna. It remains to be seen how the city will navigate this tension between history and progress.
Sources and Links
https://www.mieterschutzverband.at/allgemein/mieterschutz-in-oesterreich-von-1917-bis-heute/
https://www.derstandard.at/story/2000131457822/should-there-be-fewer-rental-buildings-in-vienna
https://www.oeaw.ac.at/isr/forschung/innovation-und-urbane-oekonomie/wiener-zinshausmarkt-die-transformation-des-gruenderzeitlichen-baubestandes
https://www.wohnnet.at/finanzieren/investment/what-is-a-rental-property-4296503
https://publikationen.ehl.at/view/872529523/
https://www.oeaw.ac.at/detail/news/gentrifizierung-in-wien-wird-laut-neuer-studie-ueberschaetzt-1
https://www.buergerleben.com/die-entwicklung-des-gruenderzeithauses/
https://www.derstandard.at/story/2000131457822/should-there-be-fewer-rental-buildings-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) Page 438