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THE VIENNA RENTAL APARTMENT: HISTORICAL SPLENDOR IN 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 "Zins" here stands for "rent." Accordingly, 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 greater than commonly assumed. However, this does not include cooperative apartments and subsidized housing.
OLD AND NEW BUILDING
Rental properties built after June 30, 1953, are classified as new construction and are subject to limited rental law regulations. The returns on 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 revenue potential when those tenants leave.
COSTS AND REVENUES
The value of a rental property depends on yield, location, size, substance, and rental rate. An accurate assessment 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 recoup with capped rent prices.
For an accurate estimate of the purchase price, a professional should be consulted. Our experts for investment properties are happy to advise you!
HISTORICAL EXCURSION
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 residential buildings, which still adorn the city's landscape today. The term "Zinshaus" originates 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 rental 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 (approximately 1840 – 1870), High Gründerzeit (approximately 1870 – 1890), and Late Gründerzeit (approximately 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 city's development.
The architecture of the Gründerzeit rental houses reflects the social changes. In the early Gründerzeit, plain facades dominated, while the high Gründerzeit was inspired by representative elements taken from the Ringstraße. The late Gründerzeit brought an increased development of land area, 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 the rent was based on the economic conditions of the year 1914. As a result, the landlords' profits were capped, and the Gründerzeit rental houses 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 mandated maximum rent for rental agreements before August 1, 1914. This was done in response to the war-induced 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 kind of property-like right for tenants, which meant financial relief, but for landlords, it resulted in a creeping expropriation, causing the very significant construction of private rental buildings before 1914 to come to a standstill due to the lack of achievable returns. The municipal housing construction that began in its place during the interwar period was tax-funded. Necessary repairs to old buildings could, in cases of insufficient rental income for the homeowners, be financed through an administratively approved allocation procedure according to § 7 of the Rent Law (later §18 MRG). 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 rental apartments in Vienna are undergoing a transformation process. Between 2007 and 2019, almost 12% of these historic buildings disappeared, mainly due to conversion into condominiums, sale, or demolition.
The conversion, the transformation 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 construct new buildings so that rent controls do not take effect.
The loss of Gründerzeit rental buildings thus leads to a decrease 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 demand for housing.
To promote the preservation of these historic buildings, financial incentives and support programs are necessary. This could motivate investors 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 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.derstandard.at/story/2000131457822/should-there-be-fewer-rental-properties-in-vienna
https://www.wohnnet.at/finanzieren/investment/what-is-a-interest-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.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 Newspaper 17 (1852) Sheet 438