Vienna is often viewed as a model for other countries struggling with high rents. Here’s a closer look at the city’s housing system.
If you live in a big city, you’ve likely experienced the effects of the global housing crisis. High rents eat up an increasing portion of wages, leading to lower living standards and forcing many people to move to less desirable places with fewer opportunities. No obvious solutions appear on the horizon. Proposed remedies often fall into two categories. The market-oriented YIMBYs believe that if cities would simply change zoning laws and let developers build more housing, then the new supply will ease price pressures. The other camp – while not denying the need for additional construction – advocates for more active state involvement via rent-stabilization and rent-control laws and social housing.
Enter Vienna, which straddles these two approaches. On the one hand, sixty percent of Vienna’s two million residents live in some form of rent stabilized apartment. Vienna’s housing system is internationally famous, of course. One of the city’s first municipal housing blocks, the vast Karl-Marx-Hof, has even become a pilgrimage site for housing experts and urbanists. Vienna regularly ranks as the world’s most liveable city, in part due to the availability of good quality housing; the New York Times recently called Vienna a “renter’s utopia.”
The foundation of Vienna’s current social housing system was laid a hundred years ago, when the city’s first Social Democratic government enacted a sweeping welfare program known as Red Vienna. The notion that affordable quality housing was a human right turned out to leave a lasting legacy. “I think the city of Vienna still perceives housing as a public responsibility,” said Georg Spitaler, a researcher at the Verein für Geschichte der ArbeiterInnenbewegung, an institute dedicated to Vienna’s labor movement.
At the same time, it often falls under the radar that the city's social housing policy is grounded as much in protecting the existing system as aggressively expanding it. Vienna is currently experiencing one of the great residential buildups of its history. Vast neighborhoods are springing up in place of abandoned train stations, industrial sites, and military airports. Those who haven’t visited Vienna in the past two decades would hardly recognize parts of it.
Vienna’s social housing stands on three different pillars, each with around 200,000 flats as per the chart below. The first pillar is municipal housing, the stuff that people usually associate with Vienna. Municipal housing construction was actually largely phased out in the 1990s; instead, the city is most focused on subsidizing affordable apartments erected by non-profit builders. The third pillar: all pre-war buildings in Austria are rent-stabilized. What follows is a closer look at each of these pillars, including some of their achievements and shortcomings.
Where it all started: municipal apartments
The 1918 collapse of the Habsburg Monarchy gave rise to the First Austrian Republic and the first completely democratic elections. The Austrian Social Democratic Workers’ Party won this election both nationally and in Vienna; their countrywide mandate didn’t last very long, but their power over Vienna surely did: save for a tragic disruption between 1934 and 1945, the Social Democrats have won every single election and nominated every single mayor, including Vienna’s current Bürgermeister, Dr. Michael Ludwig. There is no other major city in Europe with such a continuous history of socialist governments, and the likely reason for this is housing policy.
By 1934, in about a decade, Red Vienna built 60,000 affordable municipal flats (Gemeindewohnung) that came to house eleven percent of the population. Equipped with running water, indoor toilets, and artificial lighting, they were a huge upgrade for the residents who had previously lived in abhorrent conditions. Many of these flats are inside catchy Art Deco buildings named after international socialist thinkers such as Jean Jaurès. The costs of Red Vienna were borne by the Viennese ultra-rich in the form of a sharply progressive real estate tax and new taxes on luxury spendings.
Where did the city get the land from? One, it had accumulated large areas already during the Habsburg period (before 1918). Two, land prices had been very low because of a rent restriction law introduced during World War I, which was meant to “calm the home front” and protect soldiers returning from the war. This rent restriction, which was still in place during Red Vienna, together with the new real estate tax caused investors to disappear and land values to plummet – in turn, the city bought even more land for construction.
Red Vienna was widely popular because it benefited not only the working class. Small business owners could also obtain municipal apartments and liked the city-wide rent control at a time of persistent hyperinflation. Red Vienna ended in 1934, but the restored Social Democratic Party (SPÖ) continued to push for social housing after World War II. By the 1960s more municipal apartments had been built than during all of Red Vienna (this time paid for by a generally thriving economy fueled by the Marshall Plan).
Unlike the segregated public housing projects in the United States, those in Vienna come in all shapes and sizes, some even in the historic city center of District 1. They include, for example, the idiosyncratic Hundertwasserhaus, whose playful facade has become a major tourist attraction. Vienna’s municipal buildings today are recognizable by the red inscriptions on their facades, implicit mementos to a long line of socialist regimes.
Anyone below the maximum annual after-tax income level – currently around €60,000 for a single person – and with a registered Vienna address for at least two years can apply for a flat through the city’s Housing Advice Center. Wait times are anywhere from a few months to several years depending on desired location and apartment size (the city prioritizes longtime Vienna residents). Eighty percent of the population qualifies, and a quarter of Vienna’s residents actually live in municipal flats.
Is there a stigma about living in a municipal flat? Certainly not the kind that surrounds public housing in the United States, but unfavorable stereotypes do exist. “Silly TV shows often present a flawed idea about who lives in public housing,” said Julia Tyll-Schranz, a historian at the Verein für Geschichte der ArbeiterInnenbewegung. Critics say that comfort level can be an issue as some find municipal apartments short on space, privacy, and natural light.
Today, a tenant would pay about €620 in rent for a 70 square meter (750 sqft) apartment. The contracts are permanent, and once a person has been approved, the city no longer checks how much money the tenant makes. The government believes that a social mix creates healthy communities, and the presence of well-off people can foster upward mobility.
Of course, this is also smart politics. Social housing is very popular and the fact that it is now viewed as an international benchmark makes it nearly untouchable. Even the SPÖ’s main opposition, the pro-business conservative People’s Party (ÖVP), is in favor of building more Gemeindewohnungen in their campaign program for the upcoming Vienna elections (as is the far-right FPÖ, with the condition that only Austrian citizens be allowed to live in municipal housing).
Based on the above, it might appear surprising that Vienna drastically scaled back its municipal house-building program in the 1990s. At the time, the population stagnated around 1.5 million and the city government didn’t think that more housing was needed. There were also changing international trends in housing. This was the beginning of the neoliberal era and the reversal of welfare-state economics – privatization was the name of the game. The city of Berlin, for example, sold a large chunk of its municipal flats to private investors, something it deeply regrets today.
“It was the Zeitgeist of the time. Some of Vienna’s politicians also considered privatizing the flats,” said Mario Holzner, the director of the Vienna Institute for International Economic Studies. He doesn’t think that phasing out the municipal program was a good idea, because it’s the most affordable pillar of Vienna’s social housing where flats go to those who need them most.
In 2015 Vienna restarted the construction of city-owned flats with a limited scope of 5,500 new units. However, the project was plagued by years-long delays and cost overruns and it‘s just currently nearing completion. At some point, even the current mayor admitted that it didn’t make sense to build municipal flats anymore because they were too expensive and burdened with legal and procurement costs. He said that during Red Vienna it was much easier to build houses. "We have to comply with completely different requirements today than we did back then."
The way forward: subsidized apartments
In the early 2000s Vienna shifted its approach to social housing. Instead of flats that are built, owned, and operated by the city, construction is now outsourced to limited-profit developers who are subsidized by the state. Advocates believe that these public-private partnerships yield affordable apartments more quickly and cheaply.
“The city can provide subsidies for three apartments from the money that is required to build one municipal flat,” said Kurt Hofstetter, an urban planner who has been in charge of housing developments in the north-east, where many of these "Genossenschaftswohnungen" are built (their origins go back to Austria’s 19th-century co-ops). Typically, the subsidies take two forms: builders get near interest-free 40-year loans, and they obtain the land at a reduced price. In exchange, they build the kinds of affordable flats that the city tells them to.
Subsidized housing isn’t unique to Vienna. What is unique is the program’s scale and ambition. The number of subsidized apartments has grown so fast in the last 15 years that they will soon eclipse the total number of municipal flats. “They get less attention even though the city really focuses on them. Subsidized apartments are highly desirable, but more for the middle class,” said Tyll-Schranz.
They are often found in brownfield developments, such as Aspern Seestadt, where the city has converted its dilapidated military airport into a city within the city. Developers are building 12,600 new apartments, half already completed, of which nearly seventy percent is subsidized and rent-controlled, leaving only thirty percent to the open market (in other cities, subsidized usually accounts for between five and thirty percent of the total).
From the outside, it’s hard to tell apart the subsidized and the market-based buildings. They all look sleek, with spacious balconies, and usually six or seven stories high to remain within “human scale.” Andreas Trisko, who heads the office which coordinates Vienna’s urban developments believes that the subsidized units can actually be nicer, because developers are subject to a rigorous tender process and quality control tests by Vienna’s housing agency, wohnfonds_wien. Every step of the construction is controlled by the city, from architecture to energy efficiency to landscaping to social engagement.
A 70 square meter subsidized flat in Seestadt currently rents for about €700 plus utilities, while open-market apartments of that size go for north of €1,200. The subsidized rent is determined by a cost-plus model set by the limited-profit housing law, which also requires that developers reinvest much of their profits in building new subsidized apartments. Aspern Seestadt is often viewed as a textbook example of city planning, drawing urban designers from around the world.
“We care about building places where people want to live, everything is designed to suit the needs of the residents,” said Trisko. The U2 subway line was extended to connect the neighborhood with downtown Vienna, which is reachable within twenty minutes. Cars are few, pedestrian-only zones aplenty. During recent visits, I saw a lively community with lots of young families. New residents are invited to participate in the planning, which the city views as a constantly evolving process.
Following complaints about heat islands, patches of concrete are being replaced by trees on one of the main squares of Seestadt. “When the project started in 2005, the effects of climate change were not yet part of the planning,” said Trisko. “We try to accept if something doesn’t work. In our new design plans, you wouldn’t even recognize some of the streets. They look like a jungle.” Similar developments were completed recently at the Nordbahnviertel and the Sonnwendviertel. These neighborhoods aren’t visible from the city center, but Vienna’s outer districts have profoundly transformed in recent decades.
Vienna’s Social Democratic government is under pressure to build more affordable housing for its skyrocketing population. The last time Vienna’s population exceeded two million was during the days of Austria-Hungary, before World War I, when the city was a regional hub for the smaller nationalities. Today, there are notable parallels. With the fall of the Iron Curtain and the 2004 expansion of the European Union to Eastern Europe, sizable communities of Serbian, Bosnian, Polish, Romanian, Hungarian, Croatian, Slovakian, and Bulgarian people appeared (in addition to large groups of Turks, Germans, and Syrians).
The trend is circular: the attractive housing market draws people to Vienna, which has to build even more social housing to keep it affordable. If the European Union continues its eastward expansion, it’s possible that Vienna will once again grow into one of the biggest cities in Europe. “If Ukraine survives and becomes a member of the EU, these agglomeration forces will be even stronger. Everything hinges on how big the common market will be,” said Holzner.
For years, the city struggled to find affordable land because private developers could pay higher prices. The city responded by passing a law in 2019 creating a new zoning category for subsidized housing. Under this law, land prices for plots where the city wants to build social housing must be capped at a fraction of the market price (Vienna isn’t just the capital, but also one of the nine provinces of the federal state of Austria, which means that compared to other cities, it’s more independent and has more legislative power).
Landowners were not happy, but housing advocates applauded the decision. “This was a game changer,” said Trisko. The city maintains an in-house team dedicated to scouting and buying up cheap land. 50,000 subsidized apartments are currently in the planning and construction phases as part of the Nordwestbahnhof, the Rothneusidl, the Hausfeld, and many other developments whose progress prospective tenants can monitor through the city’s website.
The application criteria is identical to those of municipal apartments, but there’s an “entrance fee” of several thousand euros, which developers require for cash-flow reasons. This amount is returned at the end of the lease when the next tenant takes over, as with a co-op. For those who can’t afford it, the city offers a low-interest loan, and there’s a cheaper “smart” program aimed at young people, single parents, and those with disabilities. “There are many possibilities to make sure that everybody has access,” Hofstetter told me.
Hofstetter sees the system as being undermined by what he calls conservative and neoliberal forces, which have long been advocating for the deregulation of Vienna’s housing market. In an effort to boost home ownership, the right-wing federal government in 2001 passed a national housing law that gives tenants the option to buy their subsidized apartments after ten years. This period was shortened to five years in 2019 by the ÖVP.
“In Vienna, ownership is frowned upon by the Social Democrats; the only owner allowed is the red city of Vienna, with all its scandals,” said Peter Sittler a couple of years ago. He is the ÖVP’s representative in the City Council for housing policy (he declined my request for an interview to talk about his views on subsidized housing).
The Social Democrats are against this purchase option because they think it only benefits those who can afford to buy a place, while reducing the supply of low-priced rentals on the market. “People in Vienna don’t always understand that we have a really special situation that you have to fight for, because there is always a threat to destroy the system,” said Hofstetter.
The opaque world of rent-stabilized private rental: the Altbau
The third pillar of Vienna’s social housing is the least known to people outside of Vienna. In theory, it’s very straightforward: all pre-war buildings are subject to rent controls. In practice, it’s kind of a mess and nobody seems to like it. This rent control goes back to the hyperinflationary post-World War I years, when the federal state of Austria extended the tenant protections introduced in 1917, drastically reducing and freezing rents, and making all rental contracts permanent.
As in other countries with a history of rent controls, the Austrian state has since gradually chipped away at these tenant-friendly clauses. The Tenancy Law of 1994 allowed Viennese landlords to increase the rent based on a complicated system of surcharges. The idea was to introduce market mechanisms and to incentivize landlords to modernize their apartments while keeping rents affordable. There are location-based surcharges – a landlord in the city center can charge triple the rent, for example – and there are amenities-based surcharges for well-equipped apartments.
Every year, the central government announces the base rent (Richtwert) per square meter that Vienna landlords are permitted to charge in 183,000 so-called “Altbau” apartments that were built before 1945. This cap is currently about €7 before common charges and utilities. Does this mean that one could rent a small apartment in one of those high-ceilinged pre-war flats for about €500? Yes and no.
The Altbau system suffers from a lack of transparency. Landlords aren’t required to list the rent-controlled rent of their apartments and they habitually overcharge tenants. In practice, most people pay whatever the landlords ask. This is especially true for newcomers, who often don’t even know about this law. I, too, have been overcharged. For example, I paid €900 before utilities for a studio where my rent-controlled rent should have been €630 (the city has a helpful online rent calculator, which provides indicative figures). The city of Vienna can’t do much about these violations, because the Tenancy Law is a federal law.
This issue of Altbau-landlords overcharging rent got media attention in recent years, because predatory companies approach tenants promising to help them reclaim their money just to end up keeping the damages for themselves. This is unfortunate, because the Austrian Tenants' Association, a non-profit founded in 1911, exists for this reason. They review lease agreements and litigate landlords for an annual flat fee of about a hundred euros. Last year, they won back €2.7 million in damages from landlords. In an emailed comment, they pointed to additional problems. “The landlord only has to pay back what he has overcharged. There are no penalties for landlords who regularly overcharge the rent for the same apartments. This is repeatedly criticized by our organization.”
The Tenancy Law also made temporary contracts the new standard. This may not sound so bad if you come from a city like me – Budapest – where annual leases are normal, but here they undermine the system. “If you have a three-year contract and you might want to stay in that flat for longer, you won’t complain too much about the high rent or go to court,” explained Holzner.
The Austrian House and Landowners Association (ÖHGB) sees things very differently. They claim that the Tenancy Law unfairly penalizes private landlords, and that tenants pay absurdly low rents, sometimes even less than what people pay in municipal flats. Landlords also take issue with the fact that it can take more than a year to evict a tenant who doesn’t pay rent. The result is that many prefer to keep their apartments vacant or to rent only to “friends and family” whom they can trust.
Or opt for Airbnb. Even though Vienna has strict Airbnb regulations, some landlords make more money during the permitted window of 90 days than in a full year with rent-controlled rental. In the comment section of an article about a proposed vacancy tax on empty apartments, one of the most popular remarks was: “Reform our ‘Communist’ tenancy law and vacancy will be a thing of the past.”
The unregulated private rental market
What happens if somebody doesn’t want to or can’t live in a municipal flat, a subsidized apartment, or an Altbau? That person will have to rent an apartment on the private market where rents are determined by market dynamics. While still small, private rental has grown quickly in recent years and makes up a fifth of Vienna’s rental market. The average rent for a 70 square meter apartment is currently €1,350 according to the real estate company, ImmoScout24, so about twice as high as for other apartments. Many units go for more than €2,000. (Prices on Vienna’s private rental market are comparable to those in Western European capital cities.)
For-profit real estate developers are capitalizing on Vienna’s population growth, since newcomers aren’t limited to low-income Eastern Europeans and refugees; people from rich countries and the Austrian countryside also flock here. Austria’s rising wealth means that many locals can now afford better living conditions. The high ceilings and the grand architecture of an Altbau may be nice, but the conveniences of a modern flat have their own appeal.
Critics in Vienna accuse real estate companies of driving up rents and house prices, arguing that subsidized apartments should take the place of investment properties. The SPÖ broached the possibility of extending rent controls to all private apartments, including those built after 1945, but such a law is unlikely to pass under the current ÖVP-led coalition government. There is something slightly ironic about this: What in other cities might be applauded as a positive – a record number of new apartments being built – amounts to capitalist overreach in Vienna.
At the same time, the huge rent differential of the private sector throws into high relief Vienna’s social housing model. A local person saves hundreds of euros on rent every month, money that can be spent on leisure – culture, shopping, food, travel. This leads to a better quality of life and makes Vienna an attractive place for people at a time when Europe faces a shrinking population. Evidently, this is also the kind of housing policy that wins elections – for a century, at least.