The government began leasing the house in Braunau am Inn, a town near the German border, from its owner in 1972 and turned it into a centre for people with disabilities.
The arrangement for the use of the building came to an abrupt end five years ago, however, when the owner refused to grant permission for renovation works.
The government - which pays €4,800 a month to lease the 800 square metre house - had been in lengthy negotiations with the owner over finding new tenants but the two sides failed to reach an agreement and the owner refused to sell the property.
Authorities have long-feared the site becoming a pilgrimage spot for neo-Nazis but have been unable to come to an agreement over the best use of the property, which has stood empty since 2011.
Proposals to expropriate the building from the owner were suggested earlier this year and at the cabinet meeting this summer, the government gave the go ahead.
This means they will have control over what to do with the house in the future, although a commission of historians is currently deciding what might be an appropriate use of the building.
The issue has sparked heated debate among Braunau's 17,000 residents. Some want it to become a refugee centre, others a museum dedicated to Austria's liberation and others prefer its demolition.
Interior Minister Wolfgang Sobotka suggested earlier this year that the property should be demolished, arguing it would be the “cleanest solution”.
The head of the Documentation Centre of Austrian Resistance (DÖW), which documents far-right and fascist activities, Gerhard Baumgartner suggested to Die Presse that the site should be turned into something like a supermarket or fire station.
“You must completely depoliticise the place. You must put up something that no-one wants to be photographed in front of,” he said. “I don't think you have to tear down the old house.”