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THE VIENNESE INTEREST HOUSE: HISTORICAL GLORY IN THE CHANGE OF TIME
WHAT IS A RENTAL PROPERTY?
Rental properties are primarily residential buildings with multiple units that are leased long-term. The word "Zins" here stands for "rent". Therefore, not only buildings constructed before 1945 fall under the definition of rental properties, but also newer structures in which apartments are offered for rent. Overall, the stock of rental properties in this country is larger than generally assumed. However, cooperative apartments and subsidized housing are not included.
OLD AND NEW BUILDING
Residential buildings constructed after June 30, 1953, are considered new construction and are subject to the rental law only 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 share of old tenants, to increase income potential when old tenants vacate.
COSTS AND REVENUES
The value of a rental property depends on yield, location, size, substance, 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 recover with capped rent prices.
For an accurate estimate of the purchase price, a professional should be consulted. Our experts for rental properties are happy to advise you!
HISTORICAL EXCURSUS
The Gründerzeit 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 tenement houses, which still adorn the cityscape today. The term "tenement" comes from the fact that these buildings were often designed as investment properties for rental purposes. They host 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 the industrialization. The significant influx of migrants to Vienna created an enormous demand for housing. The Gründerzeit is divided into the 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 magnificent boulevard became the highlight of the 19th century and shaped the development of the city.
The architecture of the Gründerzeit tenement houses reflects the social 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 a denser construction on the plots, 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 stipulated that the rent was determined based on the economic conditions of the year 1914. As a result, landlords' profits were limited, and the period-style 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 rental law as the 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 impacts on tenants and landlords
The main objective 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 resulted in a creeping expropriation, causing the significant construction of private rental houses 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 financed by taxes. Necessary repairs to old buildings could be financed, in the case of insufficient rental income for homeowners, through a government-approved surcharge procedure according to § 7 of the Rent Act (later § 18 of the Rental Law). 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 show 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, almost 12% of these historic buildings disappeared, mainly due to conversion, sale, or demolition.
Parification, the conversion of rental apartments into ownership apartments, offers landlords lucrative opportunities. However, this has an impact on the cityscape and social diversity. Alternatively, some resort to demolitions in order to construct new buildings so that rent control regulations do not apply.
The loss of Gründerzeit rental buildings 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 rental law, are at the center of these developments. The city of Vienna is faced with the challenge of balancing heritage protection and housing demands.
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 jewels.
The future of the Gründerzeit tenement 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 navigate this tension between history and progress.
Sources and Links
https://www.mieterschutzverband.at/allgemein/mieterschutz-in-oesterreich-von-1917-bis-heute/
https://www.wohnnet.at/finanzieren/investment/what-is-a-rental-building-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.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