Affordable housing – could we learn something from Vienna?

Vienna, a metropolis rich in both cultural and architectural heritage, which often ranks as the most liveable city in the world, also boasts some of the lowest housing costs in Europe. Alec Haglund, IF Researcher, discusses key aspects of Vienna’s housing policy and argues that we should not overlook Vienna’s model when searching for answers to the housing crisis in the UK.

A long history of guaranteeing affordable housing

Before the First World War, Vienna faced a monumental housing crisis. Up to a quarter of the population experienced some form of homelessness and those tenants lucky enough to have a roof over their head were crammed into substandard rental units without any rights or protections. However, as the monarchy fell after the war and voting rights were guaranteed for all citizens regardless of gender or class, the new Viennese legislators were elected on a platform of guaranteeing good quality, affordable housing for all the city’s inhabitants.

They immediately set out to achieve this immense task. Strict rent controls had been temporarily imposed during the war to avoid war wives from being evicted, which was one of the reasons land values had been falling. The municipality began buying large swathes of land on which they could build social housing.

The financing initially came from measures such as progressive taxation of private property and land. Even today, 1% of income is taxed for the specific purpose of constructing and maintaining subsidised housing. When much of Europe, including the UK, sold off their social housing during the privatisation measures in the 1980s and 1990s, Vienna not only held onto their social housing but continued to build more.

A price worth paying for good housing?

Today, Vienna boasts some of the lowest-cost housing among European capital cities while commonly ranking as “the most liveable city in the world”. Approximately half of Vienna’s current inhabitants live in subsidised housing, either in one of the 220,000 units owned by the municipality or in one of the 200,000 co-operative, not-for-profit, housing association units, which are privately developed with municipal subsidies and support. Right now, another 4,000 municipally owned flats are being constructed.

Subsidised housing is so popular that many of those who could afford to move elsewhere, or buy their own property, choose to stay. That is because Viennese social housing complexes often offer libraries, nurseries, gardens, sports’ fields, and even roof-top swimming pools in some cases. Many of the buildings are energy efficient, low-carbon, and in central locations close to transport links, while older complexes are renovated and updated.

Housing costs are low

Because 50% of the Viennese population live in subsidised housing, and pay lower social rents, the effect on private sector rents is to keep them at reasonable levels. Although rents have increased by about 15% in the subsidised sector and 40% in the private sector over the past decade, average rental prices remain much lower than in comparable European capitals.

As of 2020, private rentals in Vienna cost on average €10.3 per square metre per month, while the average cost in housing associations is €7.9 and in municipality-owned housing it is €7.0. Rents in the subsidised sector are regulated by the city in order to ensure that households do not need to pay more than 20-25% of income towards housing costs. That is well below the 33% of income renters have to pay in the UK.

Low housing costs lead to increased purchasing power for the city’s residents which benefits the health of the wider economy of Vienna. It means that the Viennese can spend more in their local economy and that they have more time to do things they enjoy, thereby helping local businesses and the wider community prosper. From the perspective of living in the UK, it is not difficult to see why Vienna consistently ranks among the most liveable cities in the world. High rents in the UK put immense pressure on people in both a financial and psychological sense while it simultaneously reduces their spending power in the real economy and entrenches intergenerational and intra-generational inequalities.

Are there any downsides of Vienna’s housing model?

If you are thinking of immediately moving to Vienna to benefit from its cheap, subsidised housing, you should be aware that there are restrictions over who can apply. For example, proof of residency for the past two years is required. Additionally, you are likely to be on a waiting list for a year or two, or longer if you are not satisfied with the first or second flat that is offered to you, in which case you would be put back at the end of the waiting list. It means that you would likely find yourself living in the private rented sector for a while, where rents are not regulated, except for buildings constructed more than 80 years ago which have some controls on rent increases.

Vienna does not impose rent controls on newly built (post-1950s) private rentals in order not to disincentivise the construction of new housing stock. Legislators recognise the need for more construction across all housing sectors and they do not need to impose rent controls to keep costs low because the private sector cannot charge overly excessive amounts as long as the much-used social housing sector exists to provide an attractive alternative.

However, as land costs rise, there is a concern that the city is not going to be able to construct enough social housing to satisfy demand in the future. This might lead to a negative spiral in which private rents go up, land prices increase, both of which make it more difficult for the municipality to acquire land for the construction of new social housing.

Wide appeal leads to widespread support across Vienna

Vienna’s housing policy is successful in its goal of providing good quality housing for its inhabitants without exorbitant costs. Furthermore, instead of focusing solely on building social housing for those on the lowest incomes, Vienna’s model means that subsidised housing is also open to the wider working- and middle-classes. It is still possible to sign up for social housing even if one earns an above median income of around €50,000, and once you have found an apartment you are welcome to stay as long as you like. This is obviously attractive to young families seeking stability.

It could be argued that those who start to earn large sums of money a few years after having been accepted as a social housing tenant should move on in order to free up space for those who truly require affordable rents. However, the fact that subsidised housing is available for a wide stratum of Viennese people is part of the reason why it has such broad political support, is well funded and maintained, and avoids becoming isolated communities of marginalised people. Instead, they become stable and diverse communities with a wide social mix, in which citizens and residents can have a meaningful say in questions of urban planning and local development.

Affordable housing for both present and future generations

The Viennese model provides a housing policy template that is not primarily driven by the financialisation and speculation of housing. Rather, it demonstrates a model that functions well to create a liveable, affordable city. Although it is not possible to simply copy and paste the Viennese model to the UK, there are certainly many aspects of Vienna’s housing policy that UK legislators and policy makers could and should learn from.

According to the Viennese Executive City Councillor for Housing, the “Vienna model ensures that future generations, too, will have access to a sufficient number of affordable dwellings”. Of course, in the end it is always a political choice. If we are serious about wanting to stop the housing crisis, then we must address the destructive role played by profiteering and speculation in the UK housing market. Although no housing policy model is perfect, Vienna has successfully managed to ensure that affordable housing is seen as an inalienable right to all its inhabitants – and that is something the Viennese are right to be proud of!

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