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THE VIENNESE INTEREST HOUSE: HISTORICAL SPLENDOR IN THE CHANGE OF TIME
WHAT IS A RENTAL PROPERTY?
Investment properties are essentially rental buildings with multiple residential units that are rented out long-term. The word "interest" here stands for "rent." Accordingly, not just buildings constructed before 1945 fall under the definition of investment properties, but also newer structures 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
Apartment buildings constructed after June 30, 1953, are considered new builds and are subject to limited rental law. The returns on new builds are generally higher, and the maintenance costs are lower. The aesthetics of new apartment buildings may differ, but they offer long-term investors opportunities, especially in properties with a high proportion of old tenants, to increase revenue potential when old tenants vacate.
COSTS AND REVENUES
The value of a rental property depends on yield, location, size, substance, and rental rate. An accurate appraisal requires know-how and expertise. Renovations are expensive, particularly façade renovations can become costly. Repairs and maintenance can increase ongoing costs, which is difficult to recover when rent increases are capped.
For an accurate estimate 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 growth, social change, and above all, an impressive building boom in Vienna. This era shaped the city with the characteristic Gründerzeit apartment buildings that still adorn the cityscape today. The term "Zinshaus" comes from the fact that these buildings were often designed as investment objects for rental purposes. They house a mix of rental apartments and occasionally commercial spaces on the ground floor.
The origins of these rental houses lie in the population explosion during the industrialization. The large 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 city expansion took place during the reign of Emperor Franz Joseph I, who ordered the demolition of the fortifications and the construction of the ring road in 1857. This magnificent boulevard became a highlight of the 19th century and shaped the city's development.
The architecture of the Gründerzeit rental houses reflects the societal 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 about an increased development of ground areas, but at the cost of residential quality.
PEACE INTEREST
The peace rent, introduced in 1917, marked the end of the golden age of rental properties. This form of rent regulation stipulated that rents were to be assessed based on the economic conditions of the year 1914. As a result, the earnings of landlords were capped, 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 rental law as a legally established maximum rent for rental agreements prior to 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, currency devaluation after the end of the war, and comprehensive tenant protection.
Development and Effects on Tenants and Landlords
The main goal of the peace rent was to limit rents by freezing them at this maximum rate. Over the years, this led to a sort of property-like right for tenants, which meant financial relief but a creeping expropriation for landlords, causing the significant construction of private rental homes that had been prevalent 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 tax-funded. Necessary repairs to old buildings could be financed, in the case of insufficient rental income for property owners, through a government-approved allocation procedure according to § 7 of the Rent Act (later § 18 of the Rent Control Act). Since these maintenance works had a strong impact on the effective rent, they were known as § 7 renovations.
Today, over 100 years later, the issue of rents is once again at the center of heated debates, as the government is working on a new tenancy law that could exhibit certain parallels to the situation before 1917.
FUTURE PROSPECTS AND CHALLENGES
Currently, the Gründerzeit rental buildings in Vienna are undergoing a transformation process. Between 2007 and 2019, nearly 12% of these historical buildings disappeared, mainly due to conversion to 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 cityscape and social mixing. Alternatively, some rely on demolitions to build new constructions so that rental price regulations do not take effect.
The loss of Gründerzeit apartment buildings thus leads to a decline in affordable housing in central locations. This threatens social diversity and the characteristic charm 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 historical buildings, financial incentives and funding programs are necessary. Investors could be motivated to invest in the restoration and maintenance of these architectural treasures.
The future of the Gründerzeit rental houses in Vienna remains uncertain. The city and its residents face the challenge of preserving the heritage while also 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/general/tenant-protection-in-austria-from-1917-to-today/
https://www.derstandard.at/story/2000131457822/should-there-be-fewer-rental-properties-in-vienna
https://www.oeaw.ac.at/isr/forschung/innovation-und-urbane-oekonomie/wiener-zinshausmarkt-die-transformation-des-gruenderzeitlichen-baubestandes
https://www.wohnnet.at/finanzieren/investment/what-is-a-rental-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/
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: Allgemeine Bauzeitung 17 (1852) Page 438