Austrian government plans three-year rent cap for public housing

Austria’s government has announced plans for a three-year cap on the rise of public-owned housing rents from 2024 in an effort to dampen a spike in costs across the rental sector.

The plan will cap the rise of public housing rents to 5 per cent annually until the end of 2026.

“As far as rents go we will, as the state, intervene soon because rents are rising too quickly,” said chancellor Karl Nehammer of the centre-right People’s Party (ÖVP). The surprise move was agreed quickly with the ÖVP’s Green coalition partner head of a cost-of-living debate on Wednesday called by opposition parties in the Austrian parliament.

Given the measure requires a change to the constitution, it needs a two-thirds majority and cross-party support.

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Caught off guard, the opposition populist Freedom Party attacked what it called “sham measures”, while tenants’ organisations called it too little too late.

“The government has looked on for two years as many tenants slid into poverty,” said Elke Hanel-Torsch, head of a Vienna-based tenant organisation. “If they really wanted to do some good, 2 per cent would have been a good cap limit.”

Without the intervention on Wednesday, state-owned housing bodies were readying index-linked rent increases of up to 15 per cent next year. State statistics show inflation in Austria rose on average by 7.8 per cent in the year to July 2023, higher than the euro-area average of 5.2 per cent and above neighbouring Germany’s 6.2 per cent.

Green vice-chancellor Werner Kogler said that 1.2 million tenants – 75 per cent of Austrian renters – would benefit from the move.

Given the scale of Austria’s public housing sector, the hope is that the cap will, in turn, have a positive effect on rents in the much smaller private sector.

However, Mr Nehammer insisted on Wednesday that his government would not intervene in the private housing market.

As part of a wider cost-of-living package, the Austrian government has promised to freeze the cost of state services from autobahn tolls to passport fees and the so-called “climate ticket”, which allows holders travel anywhere in Austria by rail for €1,095 annually.

To keep these fees stable Vienna has promised federal states and municipalities €150 million annually to subsidise their rising costs.

As part of a broad cost-of-living debate, Mr Nehammer has warned that, unless energy prices fall, his government will intervene to impose additional taxes to skim off “windfall earnings” of utility companies.

[ Germany set to propose three-year rent freeze ]

Two years ago Berlin’s city-state government imposed a rent cap which was later struck down as unconstitutional because such measures are the preserve of federal government.

With that in mind, the ruling centre-left Social Democratic Party of chancellor Olaf Scholz this week floated a plan for a federal level rent cap. The SPD wants new legislation to limit rent increases by a maximum of 6 per cent in total over the coming three years. It remains unclear whether the measure will find support at cabinet. Both the federal finance and justice ministries, key for any such move, are controlled by the liberal Free Democratic Party which strictly opposes market interventions by the state.