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THE VIENNA TENEMENT: HISTORICAL GLORY IN THE CHANGE OF TIME
WHAT IS A RENTAL PROPERTY?
Investment properties are essentially rental houses with multiple residential units that are rented out long-term. The word "interest" here refers to "rent." Thus, not only buildings constructed before 1945 fall under the definition of investment properties, but also newer structures that offer apartments for rent. Overall, the stock of investment properties in this country is larger than generally assumed. However, cooperative housing and subsidized apartments do not fall under this category.
OLD AND NEW BUILDING
Residential buildings constructed after June 30, 1953, are considered new buildings and are subject to the rental law to a limited extent. The returns on new constructions 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 revenue potential when old tenants leave.
COSTS AND RETURNS
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 is difficult to recover under capped rent prices.
For an accurate estimation of the purchase price, a professional should be consulted. Our experts for rental properties are happy to advise you!
HISTORICAL EXCURSION
The Gründerzeit between 1848 and 1918 marks an era of economic upswing, social change, and primarily an impressive building boom in Vienna. This era shaped the city with the characteristic Gründerzeit rental buildings, which still adorn the urban landscape today. The term "Zinshaus" comes from the fact that these buildings were often designed as investment properties for rental purposes. They contain a mixture 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 immigration 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 dismantling of the fortifications and the construction of the Ringstraße in 1857. This magnificent boulevard became a highlight of the 19th century and shaped the city's development.
The architecture of the Gründerzeit rental houses reflects the societal changes. In the early Gründerzeit, plain facades dominated, while the high Gründerzeit was inspired by representative elements adopted from the Ringstraße. The late Gründerzeit brought an 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 properties. This form of rent regulation established that rent was to be assessed based on the economic conditions of the year 1914. As a result, the revenues of landlords were limited, and the rental properties from the founding era 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 fixed maximum rent for rental contracts prior to 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 rent freeze was to limit rents by freezing them at this maximum rate. Over the years, this led to a property-like right for tenants, which provided financial relief but meant a creeping expropriation for landlords, causing the previously significant construction of private rental houses before 1914 to come to a standstill due to a lack of achievable returns. Municipal housing construction that began in its place during the interwar period was tax-funded. Necessary repairs to old buildings could be financed in the case of insufficient rental income through an approved allocation process according to § 7 of the Rent Law (later § 18 of the Rent Law). Since these preservation works had a significant impact on effective rent, they were known as § 7 renovations.
Today, over 100 years later, the topic of rent is once again at the center of heated debates as the government works on a new rental law that could show certain parallels to the situation before 1917.
FUTURE PERSPECTIVES 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, mainly due to conversion into condominiums, sale, or demolition.
The conversion from rental to owner-occupied 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 erect new buildings so that rent control regulations do not take effect.
The loss of Gründerzeit rental buildings 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 the protection of historical monuments with the need for housing.
To promote the preservation of these historical buildings, financial incentives and support programs are necessary. Investors could thus be motivated to invest in the restoration and maintenance of these architectural jewels.
The future of the Gründerzeit rental houses 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.oeaw.ac.at/isr/forschung/innovation-und-urbane-oekonomie/wiener-zinshausmarkt-die-transformation-des-gruenderzeitlichen-baubestandes
https://www.wohnnet.at/finanzieren/investment/was-ist-ein-zinshaus-4296503
https://publikationen.ehl.at/view/872529523/
https://www.buergerleben.com/die-entwicklung-des-gruenderzeithauses/
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: General Construction Newspaper 17 (1852) Sheet 438