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THE VIENNA INTEREST 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 long-term. The word "Zins" here stands for "rent." Therefore, not only buildings constructed before 1945 fall under the definition of investment properties, but also newer constructions that offer apartments for rent. Overall, the stock of investment properties in this country is larger than commonly assumed. However, cooperative apartments and subsidized housing do not fall under this category.
OLD AND NEW BUILDING
Residential buildings constructed after June 30, 1953, are considered new builds and are subject to limited rent control laws. The returns on new builds are generally higher, and maintenance costs are lower. The aesthetics of new residential buildings may vary, but they offer long-term investors opportunities, especially in properties with a high proportion of old tenants, to increase the yield potential when old tenants leave.
COSTS AND REVENUES
The value of an income 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 are difficult to recover with capped rent prices.
For an accurate estimate of the purchase price, a professional should be consulted. Our experts for investment properties will be happy to advise you!
HISTORICAL EXCURSION
The founding period between 1848 and 1918 marks an era of expansion, societal changes, and above all, an impressive construction boom in Vienna. This era shaped the city with the 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 tenement houses lie in the population explosion during industrialization. The large influx of people to Vienna created an enormous demand for housing. The Gründerzeit is divided into early Gründerzeit (approx. 1840 – 1870), high Gründerzeit (approx. 1870 – 1890), and late Gründerzeit (approx. 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 grand boulevard became the highlight of the 19th century and shaped the urban development.
The architecture of the Gründerzeit tenement houses reflects societal changes. In the early Gründerzeit, simple facades dominated, 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 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 regulation stipulated that the rent was calculated based on the economic conditions of the year 1914. As a result, the landlords' profits were limited, and the Gründerzeit 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 rental 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 war, and comprehensive tenant protection.
Development and effects on tenants and landlords
The main goal of the rent freeze 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 meant a gradual expropriation for landlords, causing the significant construction of private rental buildings that had been notable before 1914 to come to a standstill due to a lack of achievable returns. The municipal housing construction that began in its place during the interwar period was tax-financed. Necessary repairs to old buildings could be financed in the case of insufficient rental income for property owners through a procedure subject to official approval according to § 7 of the Rent Act (later §18 MRG) (Rental Law). Since these maintenance works had a strong 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 a new rental law that may exhibit certain parallels to the situation before 1917.
FUTURE PERSPECTIVES AND CHALLENGES
Currently, the Gründerzeit apartment buildings in Vienna are undergoing a transformation process. Between 2007 and 2019, nearly 12% of these historical buildings disappeared, mainly due to condominium conversion, sale, or demolition.
The conversion of rental apartments into condominiums opens up lucrative opportunities for landlords. However, this has an impact on the urban landscape and social integration. Alternatively, some opt for demolitions to erect new buildings so that rent control regulations do not take effect.
The loss of Gründerzeit tenement houses 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 tenancy law, are at the center of these developments. The city of Vienna faces the challenge of balancing heritage protection and housing needs.
To promote the preservation of these historic buildings, financial incentives and support programs are necessary. Investors could be motivated to invest in the renovation and maintenance of these architectural gems.
The future of the Gründerzeit rental houses in Vienna remains uncertain. The city and its residents face the challenge of preserving the heritage while meeting current housing demands. Open questions remain regarding the impacts on rental prices, the urban landscape, 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/
https://www.derstandard.at/story/2000131457822/should-there-be-fewer-rental-apartments-in-vienna
https://www.wohnnet.at/finanzieren/investment/what-is-an-interest-building-4296503
https://publikationen.ehl.at/view/872529523/
https://www.oeaw.ac.at/detail/news/gentrification-in-vienna-is-overestimated-according-to-new-study-1
https://www.buergerleben.com/the-development-of-the-founder-era-house/
https://www.derstandard.at/story/2000131457822/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