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THE VIENNESE RENTAL APARTMENT: HISTORICAL GLORY IN THE CHANGE OF TIME
WHAT IS A RENTAL HOUSE?
Investment properties are basically rental houses with multiple apartments that are leased long-term. The word "interest" here stands for "rent." Therefore, not only 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 apartments and subsidized housing do not fall under this category.
OLD AND NEW BUILDING
Rental properties built after June 30, 1953 are considered new construction and are subject to limited rent 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 with properties that have a high proportion of older tenants, to increase the yield potential when older tenants vacate.
COSTS AND RETURNS
The value of a rental property depends on yield, location, size, condition, and occupancy rate. An accurate assessment requires knowledge and expertise. Renovations are expensive, and facade restorations can be particularly costly. Repairs and maintenance can increase ongoing costs, which is difficult to recoup when rental rates are capped.
For an accurate estimate of the purchase price, a professional should be consulted. Our experts for rental properties are happy to assist you!
HISTORICAL EXCURSION
The Gründerzeit between 1848 and 1918 marks an era of upswing, social changes, and above all, an impressive construction boom in Vienna. This era shaped the city with the characteristic Gründerzeit apartment buildings that still adorn the urban landscape today. The term "Zinshaus" originates from the fact that these buildings were often designed as investment properties for rental. They house a mix of rental apartments and occasionally also commercial spaces on the ground floor.
The origins of these rental buildings lie in the population explosion during the industrialization. The significant immigration to Vienna created an enormous demand for living space. The Gründerzeit is divided into early Gründerzeit (approximately 1840 - 1870), high Gründerzeit (approximately 1870 - 1890), and late Gründerzeit (approximately 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 apartment buildings 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 increased development of the building lots, but at the expense of living quality.
PEACE INTEREST
The peace rent, introduced in 1917, marked the end of the golden age of rental houses. This form of rent regulation stipulated that the rent was to be based on the economic conditions of the year 1914. As a result, the landlords' profits were limited, and the Gründerzeit rental houses became less attractive for 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 established maximum rent for tenancy agreements made 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 combined rent control, currency devaluation after 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 very significant construction of private rental houses prior to 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, in the case of insufficient rental income for the property owners, be financed through a procedure requiring official approval according to § 7 of the Rent Act (later § 18 of the Rental Law). Since these maintenance works had a strong impact on the effective rent, they became known as § 7 renovations.
Today, more than 100 years later, the issue of renting 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 PROSPECTS AND CHALLENGES
Currently, the Gründerzeit rental buildings in Vienna are undergoing a transformation process. Between 2007 and 2019, almost 12% of these historical buildings disappeared, primarily due to conversion into condominiums, sale, or demolition.
The conversion from rental to owner-occupied apartments opens up lucrative opportunities for landlords. However, this impacts the urban landscape and social mix. Alternatively, some opt for demolitions to build new constructions, so that rent regulations do not take effect.
The loss of Gründerzeit rental housing is thus leading 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 historic buildings, financial incentives and support programs are necessary. Investors could thus be motivated to invest in the restoration and maintenance of these architectural jewels.
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 requirements. Open questions remain regarding the impacts 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-apartments-in-vienna
https://www.wohnnet.at/finanzieren/investment/what-is-an-income-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/die-entwicklung-des-gruenderzeithauses/
https://www.derstandard.at/story/2000131457822/should-there-be-fewer-rental-apartments-in-vienna
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