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RENTING

EXPLAINED: What the new rent cap means for tenants in Austria

The Austrian government finally agreed on its controversial rent cap bill - but details could still be debated in courts. Here's what will change for tenants next year.

Apartments in Vienna.
Apartments in Austria. Photo by Hervé Papaux on Unsplash

Rents in Austria have increased sharply this year – mainly because they are all somehow tied to inflation, which skyrocketed in Austria in 2023. Regardless of whether you live in an old building (with specific and stricter regulations) or a new one regulated by private contracts, you probably saw your monthly payments rising substantially.

Since April this year, the guideline or reference rates, which are adjusted to inflation by the Justice Ministry, for flats in older buildings had risen in cost by 8.6 percent.

“Category rents”, which are levied in Austria for leases concluded between 1982 and the end of February 1994 and are also linked to inflation, rose by 5.5 percent in August. And rents have increased fourfold in new buildings, where rental contracts are usually linked to inflation.

The increases put pressure on the Austrian government, which promised solutions and proposed a three-year rent brake to help curb the rising cost of housing.

This week, the Buildings Committee approved the government proposal, which should be approved by the National Council early next year.

The plan had points criticised by the Chamber of Labor (AK) and the Austrian Trade Union Federation (ÖGB), who say that the cap comes too late – especially as it does not reverse rent increases of the last few months and years. The cap will, therefore, not help people who can no longer afford their rent. 

The changes for tenants in old buildings

The rental brake will have a significant impact on tenants in the so-called “old building” (Altbau) in Austria (which is governed by stricter tenancy laws). 

READ ALSO: Altbau vs Neubau: What’s the difference and which should I rent in Austria?

For tenants of an Altbau and “category rents”, there can be no more rent increases until at least April 2025. After that, rent increases will also be capped at 5 percent – some types of buildings (governed by “category rental agreements”) could have higher increases if inflation climbed over the 5 percent mark.

From 2025, rents in old buildings will be adjusted for inflation once a year (instead of once every two years), always on April 1st.

Benefits for tenants of cooperative apartments

People who rent in buildings owned by non-profit developers (Genossenschaftswohnungen such as Sozialbau, for example) will benefit from the fact that their rent will not increase as much as inflation as of April 2024, as the 5 percent cap is also valid in most cases (buildings that are “fully financed”, or ausfinanzierten).

Non-profit associations in Austria have criticised the decision to limit the full benefit of the rent freeze to fully financed buildings, which are already the cheapest segment in cooperative apartments. 

READ ALSO: Can my landlord in Austria increase the rent whenever they want? 

Inflation average 

For old buildings, a new type of calculation will start in April 2027. Then, rents will no longer be increased based on the inflation of the year before but rather on the average of the previous three years. 

And there is another cap, according to the bill. If the average exceeds five percent, only half of the portion exceeding the five percentage points will be taken into account. So, if the average inflation were to be 10 percent, rents could increase by 7.5 percent only. 

What about people in the private sector?

The rental cap benefits mostly tenants in public buildings, cooperative apartments or older constructions with already strong government interference. For new, privately owned buildings, the rental cap will not apply. 

Some new buildings have linked a part of their operating costs to the Tenancy Act, connecting it to increases in category rents. Since these are now frozen until April 2025, operational costs in those buildings will also stay the same, real estate expert Clemens Limberg told a Der Standard report.

READ ALSO: EXPLAINED: Which documents do you need to rent a flat in Austria?

The report also stated that it “can be assumed that the interventions will end up before the constitutional judges” since the rent freeze interferes with existing contracts. The government tried to prevent lawsuits by connecting the rent cap to the constitution, but it failed to achieve a majority for that. 

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RENTING

IN NUMBERS: Where are rental prices rising most in Austria?

Offer prices for rental apartments in the Austrian state capitals have increased by up to 11 percent - where are the worst places?

IN NUMBERS: Where are rental prices rising most in Austria?

Rents in Austria have been on the rise, with prices soaring by 11 percent in the first quarter of 2024 compared to the same period last year. The inflation growth and the surge in interest in rental apartments, which has grown significantly, up to 35 percent, according to a new report by real estate agency ImmoScout 24, are the key factors behind this. 

Markus Dejmek, Head of ImmoScout24 Austria, points out the shift in the real estate market dynamics. He says: “While the pandemic initially sparked a surge in interest in property purchase, with many people wanting to move out into the countryside, the market has now taken a different turn.

“Rental apartments have been in high demand for a considerable period. The somewhat subdued property purchase market, due to rising interest rates, stricter lending guidelines, and economic uncertainty, is now exerting pressure on the rental market, leading to an increase in demand.”

The impact of the rising rental prices is particularly pronounced in the capital city of Vienna, where rental offers have become more expensive, with an increase of 11 percent in the first quarter of 2024 compared to the same period last year. The price per square metre is now € 18.7, a figure that is only surpassed by Salzburg and Innsbruck, according to the research. 

READ ALSO: Is it better to rent or buy in Austria right now?

The Tyrolean capital has the highest rents in Austria, at €23.4 per square meter, followed by Salzburg at €19.9. Thus, the already high-priced western provincial capitals have increased by 5 percent (Salzburg) and 9 percent (Innsbruck) compared to the previous year. 

With an increase of 10 percent, rental apartments on offer in Bregenz have now also exceeded the €18 mark.

Rental properties are particularly sought-after in Salzburg. Demand increased by 35 percent in the city in the first quarter of 2024. In Vienna and Innsbruck, interest in the rental market rose by a quarter. The real estate platform ImmoScout24 also recorded 33 percent more people looking to rent in St Pölten.

"Overall, we are seeing an increasingly tense situation for those looking to rent in the previously known hotspots of Vienna and the western provincial capitals due to increased prices and demand. In addition to boosting the purchase market, efforts to stimulate construction activity are very important in this context," said Markus Dejmek.

READ ALSO: The best commuter towns if you work in Vienna

The analysis carried out in April 2024 is based on 97,513 data points and around 286,788 inquiries from 2022 to 2024 from the offer data published on ImmoScout24.at. The basis is gross rents, i.e. the net rent plus operating costs and excluding heating and electricity costs.

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