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THE VIENNA TENEMENT: HISTORICAL SPLENDOR IN THE FLOW OF TIME
WHAT IS A RENTAL PROPERTY?
Income properties are essentially rental buildings with multiple units that are rented out long-term. The word "interest" here refers to "rent." Accordingly, not only buildings constructed before 1945 fall under the definition of income properties, but also newer structures that offer apartments for rent. Overall, the stock of income properties in this country is larger than commonly 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 constructions 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 differ, but they offer long-term investors opportunities, especially with properties that have a high proportion of old tenants, to increase the income 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 assessment requires know-how and expertise. Renovations are expensive, and facade renovations can be particularly costly. Repairs and maintenance can increase ongoing costs, which can be difficult to recoup when rental rates are capped.
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 founding period between 1848 and 1918 marks an era of growth, social change, 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 mixture of rental apartments and occasionally commercial spaces on the ground floor.
The origins of these rental houses lie in the population explosion during industrialization. The significant immigration to Vienna created an enormous demand for housing. The Gründerzeit can be subdivided into the Early Gründerzeit (around 1840 – 1870), the High Gründerzeit (around 1870 – 1890), and the Late Gründerzeit (around 1890 – 1918).
The first expansion of the city 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 centerpiece of the 19th century and shaped the development of the city.
The architecture of the Gründerzeit tenements reflects societal changes. In the early Gründerzeit, unadorned facades dominated, while the high Gründerzeit was inspired by representative elements taken from the Ringstraße. The late Gründerzeit brought about increased development of ground areas, but at the expense of residential 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 assessed based on the economic conditions of the year 1914. As a result, the profits of landlords were limited, and the Gründerzeit 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 tenancy 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, devaluation of money after the end of 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 meant financial relief, but for landlords, it represented a creeping expropriation, causing the significant construction of private rental buildings that had taken place before 1914 to come to a standstill due to a lack of achievable returns. Instead, the municipal housing construction of the interwar period was financed through taxes. Necessary repairs to old buildings could be financed in the case of insufficient rental income of the property owners through a government-approved allocation procedure according to § 7 of the Rent Act (later § 18 MRG). Since these maintenance works had a strong impact on the effective rent, they became known as § 7 renovations.
Today, over 100 years later, the topic of renting is once again at the center of heated debates, as the government is working on a new rental law that may show certain parallels to the situation before 1917.
FUTURE PROSPECTS AND CHALLENGES
Currently, the Gründerzeit tenement buildings in Vienna are undergoing a transformation process. Between 2007 and 2019, almost 12% of these historic buildings disappeared, primarily due to conversion, sale, or demolition.
The conversion of rental apartments to condominiums offers landlords lucrative opportunities. However, this has implications for the urban landscape and social diversity. Alternatively, some resort to demolitions to construct new buildings so that rent controls do not take effect.
The loss of Gründerzeit rental apartment buildings thus leads to a decline in affordable housing in central locations. This threatens social diversity and the characteristic flair of Vienna. Legal challenges, particularly in tenancy law, are at the center of these developments. The city of Vienna faces the challenge of balancing heritage protection and the need for housing.
To promote the preservation of these historic 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 urban landscape, and the quality of life in Vienna. It remains to be seen how the city will manage 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-properties-in-vienna
https://www.wohnnet.at/finanzieren/investment/was-ist-ein-zinshaus-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/the-development-of-the-founders-era-house/
https://www.derstandard.at/story/2000131457822/should-there-be-fewer-rental-properties-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 Journal 17 (1852) Sheet 438