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THE VIENNA RENTAL PROPERTY: HISTORICAL SPLENDOR IN THE CHANGE OF TIME
WHAT IS A RENTAL PROPERTY?
Investment properties are essentially rental houses with multiple residential units that are leased long-term. The word "interest" here stands for "rent." Accordingly, not only buildings constructed before 1945 fall under the definition of investment properties, but also newer buildings 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
Rental properties built after June 30, 1953, are considered new constructions and are subject to the rental law to a limited extent. The yields from new constructions are generally higher, and the maintenance costs are lower. The aesthetics of new rental properties may differ, but they offer long-term investors opportunities, especially with properties that have a high proportion of long-term tenants, to increase the earnings potential when long-term tenants leave.
COSTS AND REVENUES
The value of a rental property depends on yield, location, size, substance, and occupancy rate. An accurate estimation requires know-how and expertise. Renovations are expensive, especially facade refurbishments can become costly. Repairs and maintenance can increase ongoing costs, which can be difficult to recoup when rental rates are capped.
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 a period of economic upswing, social changes, and above all, an impressive building boom in Vienna. This era shaped the city with the characteristic Gründerzeit tenement houses that still adorn the cityscape today. The term "tenement house" comes from the fact that these buildings were often designed as investment properties for rental. They house a mix of rental apartments and occasionally commercial spaces on the ground floor.
The origins of these tenement houses lie in the population explosion during industrialization. The strong influx of people to Vienna created a tremendous demand for housing. The Gründerzeit is divided into the Early Gründerzeit (around 1840 – 1870), the High Gründerzeit (around 1870 – 1890), and the 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 the development of the city.
The architecture of the Gründerzeit apartment buildings reflects societal changes. In the early Gründerzeit, simple facades dominated, while the high Gründerzeit was inspired by representative elements adopted from the Ringstraße. The late Gründerzeit led to increased construction on the land, but at the cost of living quality.
PEACE INTEREST
The peace rent, introduced in 1917, marked the end of the heyday of rental houses. This form of rent regulation stipulated that rent was determined according to the economic conditions of the year 1914. As a result, the income of landlords was limited, and the historic rental houses became less attractive for owners and landlords.
Introduction and background of the peace tax
The peace rent, also known as the peace crown rent, was introduced in Austrian rental law as a legally defined maximum rent for rental agreements predating August 1, 1914. This was a response to the war-induced overcrowding of apartments, especially to protect soldiers and their families from rent increases and evictions. The strategy involved a combination of rental price regulation, currency depreciation after the end of the war, and comprehensive tenant protection.
Development and impact 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 creeping expropriation for landlords, causing the significant construction of private rental houses that had been prevalent before 1914 to come to a standstill due to a lack of achievable returns. The municipal housing construction that commenced in its place during the interwar period was tax-funded. Necessary repairs to old buildings could be financed in cases of insufficient rental income from the homeowners through an official approval process according to § 7 of the Rent Act (later § 18 MRG). Since these maintenance works strongly affected 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, which could exhibit certain parallels to the situation before 1917.
FUTURE PERSPECTIVES 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, mainly due to conversion to ownership, sale, or demolition.
The conversion of rental apartments to condominiums opens up lucrative opportunities for landlords. However, this has an impact on the cityscape and social mixing. Alternatively, some are opting for demolitions in order to construct new buildings so that rent control regulations do not apply.
The loss of historic rental buildings from the Gründerzeit period is leading 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 the need for housing.
To promote the preservation of these historic buildings, financial incentives and funding programs are necessary. This could motivate investors to invest in the renovation 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 rent 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/
Should there be fewer rental buildings in Vienna?
https://www.wohnnet.at/finanzieren/investment/what-is-an-income-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/the-development-of-the-founder-era-house/
Should there be fewer rental buildings in Vienna?
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