Vienna’s system of housing subsidisation ensures that many different income strata have access to affordable housing. Without housing subsidisation and the related cost thresholds for housing construction and rents, costs for tenants would be higher by one third.
The various subsidy schemes support the construction of new buildings as well as the refurbishment of older stock and also provide direct financial assistance to persons with low incomes.
In 2020 roughly 7,000 newly built apartments were funded by the public sector in Vienna. Similar results are expected for 2021.
The funding of social housing construction – both for rental flats and for subsidised owner-occupied units and single-family homes – is tied to a fixed portion of income tax, which corresponds to one percent of the combined income of both employees and employers (i.e. either group pays 0.5 percent), paid in the form of a housing construction contribution. On the basis of this national tax, Vienna receives an annual amount of approx. Euro 250 million for housing purposes. In all, Vienna spends around Euro 450 million per year on housing construction.
This funding via taxation creates a reliable basis for the planning of complex social housing programmes, which would be impossible under strictly market-dependent housing policies. In recent years, however, the increased demand for housing has forced the Vienna City Council to earmark additional, separate budget resources for housing purposes.
Direct and indirect funding
Austria’s federal constitution grants Vienna wide leeway to define its own criteria for housing subsidisation. Developers receive subsidies to enable them to keep fixed costs and rents at a lower level. A one-percent-interest loan is granted for a period of up to 40 years and covers roughly 35 percent of construction costs. The remainder is financed through bank loans, developer’s equity and, in some cases, through an equity contribution by tenants.
For the duration of repayment, rents are capped at cost rent. Contrary to benefits paid to individuals, these subsidies enable the municipal administration to directly influence housing production.