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THE VIENNESE INTEREST HOUSE: HISTORICAL GLORY IN THE CHANGE OF TIME
WHAT IS A RENTAL APARTMENT?
Investment properties are essentially rental buildings with multiple residential units that are leased out long-term. The word "interest" here refers to "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 larger than commonly assumed. However, cooperative housing and subsidized apartments do not fall under this category.
OLD AND NEW BUILDING
Residential properties built after June 30, 1953, are considered new constructions and are subject to the rental law regulations to a limited extent. The yields 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 in properties with a high percentage of old tenants, to increase income potential when old tenants leave.
COSTS AND REVENUES
The value of a rental property depends on yield, location, size, condition, and occupancy 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 can be difficult to recover with capped rent levels.
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 founding period between 1848 and 1918 marks an era of prosperity, social changes, and especially 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" derives from the fact that these buildings were often designed as investment properties for rental purposes. They house a mixture of rental apartments and occasionally also commercial spaces on the ground floor.
The origins of these rental buildings lie in the population explosion during industrialization. The significant influx of people to Vienna created an enormous demand for housing. The Gründerzeit is divided into early Gründerzeit (approx. 1840 – 1870), high Gründerzeit (approx. 1870 – 1890), and late Gründerzeit (approx. 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 highlight of the 19th century and shaped the development of the city.
The architecture of the Gründerzeit rental buildings reflects societal changes. In the early Gründerzeit, unadorned facades dominated, while the high Gründerzeit was inspired by representative elements adopted from the Ringstraße. The late Gründerzeit brought 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 determined that the rent was to be assessed based on the economic conditions of the year 1914. This limited the earnings of landlords, 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 prescribed maximum rent for rental agreements before August 1, 1914. This was done in response to the war-related overcrowding of apartments, especially to protect soldiers and their families from rent increases and evictions. The strategy consisted of a combination of rent control, depreciation of money after the end of the war, and comprehensive tenant protection.
Development and impact 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 provided financial relief but meant a gradual expropriation for landlords, causing the once significant construction of private rental buildings 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 through taxes. Necessary repairs on old buildings could, in the case of insufficient rental income for property owners, be financed through an agency-approved allocation procedure according to § 7 of the Rent Act (later §18 MRG (Rent Law)). Since these preservation works had a significant impact on effective rent, they were known as § 7 renovation.
Today, more than 100 years later, the issue of rent 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 buildings 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 parification, the conversion of rental apartments into ownership apartments, offers landlords lucrative opportunities. However, this has an impact on the urban landscape and social mixing. Alternatively, some opt for demolitions in order to construct new buildings so that rental price regulations do not take effect.
The loss of Gründerzeit rental buildings thus leads to a decline in affordable housing in central locations. This threatens the social mix and the characteristic flair of Vienna. Legal challenges, particularly in the rental law, are at the center of these developments. The city of Vienna is faced with 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 rental houses in Vienna remains uncertain. The city and its residents are faced with 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.wohnnet.at/finanzieren/investment/what-is-a-rental-property-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: Allgemeine Bauzeitung 17 (1852) Sheet 438