Proposal from Vienna: Abolishing Rent Caps for Renovated Buildings Aimed at Boosting Construction Sector

Specifically, Kluge points to order data from the Federal Guild of Construction (Bundesinnung Bau): In the first quarter of this year, a construction company had an average of 15 weeks of orders on its books. In the record year 2022, the figure for the comparable period was 20.6 weeks. Following the pandemic and the end of the EU's low-interest-rate policy, the sector has thus shrunk back to the level of the 2010s, "roughly the level of 2012 to 2017," as Kluge emphasizes. "The sector grew very large, with many more companies and employees," says the economist.

Three Benefits, No Costs

Kluge sees three advantages to his proposal: First, the measure would cost no money; second, it could help the construction sector; and third, it would address the renovation backlog in the housing sector. "But it would have its charm," says Kluge. "This is a highly interesting proposal," he adds – well aware that implementation would be politically contested: "Of course, something like that wouldn't happen quickly, and some interest groups would go up in arms."

From the economist's perspective, the problem lies in current regulation: For old-build apartments subject to the guideline-value system, a renovation simply does not pay off at present, "because the guideline values don't take that into account," says Kluge. His proposal envisages that renovated apartments should in future – similarly to newly built ones – be exempted from rent regulation. A comparable measure already existed in 1985: "At that time, Category A apartments were exempted from rent regulation upon rapid re-letting, which triggered a real renovation boom."

Consequences for Tenants

Such a reform would have tangible consequences for tenants: "The tenant pays a higher rent, but has lower energy costs because he simultaneously has to heat less," says Kluge. In the economist's view, the balance would therefore not automatically be negative, but would depend on the individual case.

The pressure to act is significant: According to Kluge, a total of around 1.7 of just over five million apartments in Austria have an inadequate thermal standard. The Environment Agency Austria (Umweltbundesamt) and the Institute for Real Estate, Construction and Housing (IIBW) quantify the need accordingly: "To fully decarbonize by 2040, however, we would need a doubling of the renovation rate," Kluge emphasizes.

Vienna's Housing Question in Research Focus

In parallel, the scientific community is also intensively addressing the questions raised by Vienna's urban development. As part of the RC21 conference, taking place from 20 to 22 July, Michael Friesenecker from the University of Natural Resources and Life Sciences (Boku) Vienna and Judith Lehner from TU Wien will lead a city walking tour. "The walking tour is based on the 'ReHousIn' research project, in the context of which we are comparing Vienna with cities in nine other European countries," says Friesenecker.

During this time, the City of Vienna has grown by around half a million people since the 1990s. Friesenecker sees Vienna facing major challenges on the issue of housing: "In times of the climate crisis, we have to ask ourselves whether we can still afford vacant apartments and unused office buildings," he says. In the segment of Wilhelminian-era buildings (Gründerzeit), he observes increasing commercialization, profit-oriented real estate companies, many Airbnb apartments, and conflicts over climate-related renovations.

A structural problem is the distribution of subsidized housing: "At the same time, the City of Vienna tends to be less fair to newcomers than to people who have already lived in the city longer and have access to subsidized housing," says Friesenecker. Those wishing to apply for a municipal apartment must prove a main residence in Vienna for around two years. Newcomers are initially reliant above all on the private rental market, which is disproportionately concentrated in densely built Wilhelminian-era districts, "where more asphalt and less greenery lead to above-average temperatures."

Friesenecker, who is working on the ReHousIn research project, nevertheless draws a positive interim conclusion: "The fact that high-quality construction is being carried out in an affordable segment still makes Vienna unique," he says. In many other countries, the political and institutional prerequisites for subsidized housing are lacking: "In many countries, the institutions for this no longer exist at all, or it is politically not desired."

In future, Vienna will primarily have to orient itself toward the climate crisis, an increasingly diverse population, and growing economic inequality, says Friesenecker. "Ultimately, it always comes down to the same question: For whom are we actually building our cities?" he concludes. The RC21 conference, titled "Inequalities and the City. Old Problems, New Challenges," brings together around 1,200 researchers from sociology, human geography, architecture, and social anthropology.

While Kluge therefore bets on a regulatory change as a stimulus for the economy, research points to deeper distributional issues. Both perspectives are united by the recognition that the Austrian and Viennese housing market is entering a phase in which climate protection, affordability, and the economic situation are equally on the agenda – and answers for tenants can be waited for just as little as for the construction sector.