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THE VIENNA TENEMENT: HISTORICAL GLORY IN THE CHANGE OF TIME
WHAT IS A RENTAL PROPERTY?
Income properties are essentially rental buildings with multiple residential units that are rented out long-term. The word "interest" here refers to "rent." Therefore, not only buildings constructed before 1945 fall under the definition of income properties, but also newer structures that offer apartments for rent. Overall, the stock of income 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
Properties built after June 30, 1953, are considered new constructions and are subject to limited provisions of the rental law. The returns on new constructions are generally higher, and the maintenance costs are lower. The aesthetics of new rental properties may vary, but they offer long-term investors opportunities, particularly in properties with a high proportion of old tenants, to increase the yield potential when old tenants leave.
COSTS AND REVENUES
The value of a rental property depends on yield, location, size, substance, and occupancy rate. An accurate estimate requires know-how and expertise. Renovations are expensive, especially facade renovations can become costly. Repairs and maintenance can increase operating costs, which can be difficult to recover in cases of capped rent increases.
For an accurate estimation of the purchase price, a professional should be consulted. Our experts for rental properties are happy to advise you!
HISTORICAL DIGRESSION
The founding period between 1848 and 1918 marks an era of upswing, social changes, and especially an impressive building boom in Vienna. This era shaped the city with its characteristic Gründerzeit tenement buildings, 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 house a mixture of rental apartments and occasionally also commercial spaces on the ground floor.
The origins of these tenement buildings lie in the population explosion during industrialization. The strong immigration 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 magnificent boulevard became the highlight of the 19th century and shaped the city's development.
The architecture of the Gründerzeit tenement houses reflects societal changes. In the early Gründerzeit, plain facades dominated, while the high Gründerzeit was inspired by representative elements adopted from the Ringstraße. The late Gründerzeit brought about an increased development of the ground areas, but at the cost of living quality.
PEACE INTEREST
The peace interest, introduced in 1917, marked the end of the heyday of rent-controlled apartments. This form of rent regulation stipulated that rents were calculated based on the economic conditions of 1914. As a result, the income of landlords was limited, and the Gründerzeit rental apartments became less attractive for owners and landlords.
Introduction and Background of the Peace Dividend
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 wartime 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 effects 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 gradual expropriation for landlords, causing the previously significant construction of private rental houses before 1914 to come to a halt due to lack of achievable returns. Instead, municipal housing construction during the interwar period was financed by taxes. Necessary repairs to old buildings could be financed through a regulatory approved allocation procedure according to § 7 of the Rent Act (later § 18 of the Tenancy Act) in cases of insufficient rental income for homeowners. Since these preservation works had a significant impact on the effective rent, they became 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 rental law that could have certain parallels to the situation before 1917.
FUTURE PERSPECTIVES AND CHALLENGES
Currently, the Gründerzeit tenement houses in Vienna are undergoing a transformation process. Between 2007 and 2019, nearly 12% of these historic buildings disappeared, primarily due to conversion into condominiums, sale, or demolition.
The conversion from rental to ownership apartments opens up lucrative opportunities for landlords. However, this has impacts on the cityscape and social mixing. Alternatively, some rely on demolitions to build new structures so that rent price regulations do not come into effect.
The loss of Gründerzeit rental buildings thus leads 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 with the need for housing.
To promote the preservation of these historical buildings, financial incentives and funding programs are necessary. Investors could thus be motivated 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 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 manage this tension between history and progress.
Sources and links
https://www.mieterschutzverband.at/general/tenant-protection-in-austria-from-1917-to-present/
https://www.derstandard.at/story/2000131457822/should-there-be-fewer-rental-properties-in-vienna
https://www.wohnnet.at/finanzieren/investment/what-is-a-rental-property-4296503
https://publikationen.ehl.at/view/872529523/
Gentrification in Vienna is overstated, according to a new study.
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: Allgemeine Bauzeitung 17 (1852) Sheet 438