Austria’s housing market stands out in stark contrast to many of its European peers. While various European nations grapple with a supply crisis, Austria seems to have forged a different path. Could the UK learn a thing or two from Austria’s housing model? The Telegraph has some suggestions.
Austria’s Affordable Housing Phenomenon
Austria, especially its capital, Vienna, is often cited for its affordable rents. This is in part due to the 220,000 city-owned flats and another 200,000 subsidised flats available in Vienna. The eligibility criteria for these flats is not restrictive, with approximately 80% of all Austrian households qualifying to live in them.
Moreover, Vienna’s rich historical background as the capital of a once-massive European empire has meant that it has experienced lesser housing pressures. The decline of its empire led to decreased housing demand, which only started increasing in recent decades.
Nevertheless, Austria’s steady population growth and the persistent demand for housing, especially in urban centres like Vienna and Graz, continue to lure developers. Even though some have slowed down due to cost constraints, many remain optimistic about the future demand.
Pro-Tenant Policies
Historically, Austria has leaned in favour of tenants. The housing market, especially in Vienna, is described as being “pro-tenant”. Various regulations, including rent caps and restrictions, have been instrumental in ensuring this.
A notable example is how certain flats in historic buildings have rent caps of €4.47 per square metre per month. In comparison, market rates for similar properties can range between €14 to €16 per square metre. Additionally, state-backed rent subsidies can further decrease the burden on tenants. State-owned development companies, such as ARE and ARWA, prioritize affordable housing, indirectly pushing market rates down.
The Self-Build Culture
Austria stands out for its culture of self-building. Rather than resorting to mortgages, Austrians tend to sell existing properties, like apartments, and use the proceeds for their next home construction. Banks support this by allowing homeowners to use up to 80% of their apartment’s equity for their new home’s construction. The remaining 20% is reserved for contingencies.
Comparatively, in the UK, environmental concerns have hampered self-build initiatives. The “nutrient neutrality” rules, which relate to nitrogen emissions, are especially stringent in the UK. The UK government is, however, looking at easing these rules to facilitate more house construction.
Challenges in the Austrian Housing Market
It’s essential to note that Austria’s housing model isn’t without its challenges. For instance, recent regulations demand a 20% deposit from prospective buyers. This has led to the steepest fall in Austrian house prices in a decade, especially in the “second market” for older houses.
Moreover, regulations limit borrowing. In Vienna, buying a home would mean one can’t borrow more than 40% of their monthly net income. For many, this makes homeownership quite elusive. Banks are allowed some flexibility, but this too is capped at 10% of their total loan books.
The UK’s Takeaway
While Austria’s housing market is by no means perfect, its multi-pronged approach offers valuable lessons. Affordable housing initiatives, tenant protection policies, and a vibrant self-build culture are some aspects the UK could consider.
However, as experts like Mr. Breach from Centre for Cities point out, replicating Austria’s model in the UK is challenging. The federal nature of Austria allows different states to adopt diverse strategies. This would require a more localized governance model in the UK, encompassing devolved taxation and local governments.
Yet, amidst the challenges and differences, Austria’s housing blueprint provides an excellent starting point for the UK’s policymakers. The goal remains to create an inclusive housing market that caters to all citizens, and Austria’s approach offers some food for thought.