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

Amanda Previdelli
Amanda Previdelli - [email protected]
EXPLAINED: What the new rent cap means for tenants in Austria
Apartments in Austria have rents governed by different regulations. Photo by Hervé Papaux on Unsplash

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.

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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.

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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. 

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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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