Vienna is regularly cited as a model in housing1.2. Nearly 60% of tenants live there in subsidized housing, either administered by the City of Vienna (Gemeindebau 31%) or by NPOs (26%). But is housing more affordable? I started to do a little research. The results surprised me.
The author of these lines is of Viennese origin. I love Vienna. I have the chance to read German and to benefit from contacts in Vienna which were of great help to me in my little research.
Montreal more affordable?
Rent alone is not a good indicator of affordability. Subsidized rents in Vienna are subject to residency (generally two years), citizenship and family status requirements. In both subsidized and private housing, the maintenance costs are sometimes the responsibility of the tenant who must also, generally, put in their own funds (Eigenmittelbeitrag) calculated on the basis of land and construction costs which can amount to $50,000 per apartment.
The best indicator of affordability remains the share of income spent on housing. Fortunately, Statistik Austria and Statistics Canada publish similar data (2021 censuses).
In Montreal, 20% of households and 28% of renters spent more than 30% of their income on housing. While in Vienna, 25% of households spent more than 31% of their income on housing, 40% for tenants.
In short, the cost of housing is heavier in Vienna and compassion continues to favor Montreal where, unlike Vienna, the share has decreased (2016–2021). Surprising, right?
The times are changing
Generous public housing funds (however, exact figures are difficult to find) have enabled Vienna throughout history to produce the superb housing estates that have become the showcases of its housing policy, whose famous social housing from the heroic era of Rot Wien (Red Vienna) of my parents. This bequest also allowed him to inherit an impressive land reserve, a valuable tool for urban planning.
This feat owed much to the lack of population growth; the population has been stable since the First World War. However, the massive influx of immigrants from Eastern Europe and elsewhere is changing the situation. Construction is no longer keeping up with demand. Vienna will need 15,000 homes per year according to forecasts; the real figure is around 7500.
On May 16, the major Viennese daily Die Press headline: “Vienna faces a housing shortage”. The rental housing vacancy rate is now 2%, as in Montreal.
None Gemeindebau was built between 2004 and 2019, constrained by the costs of renovating old buildings. The new construction of subsidized housing is mainly driven by NPOs which, as in Montreal, are facing increases in construction and financing costs with foreseeable consequences for rents, established according to the principle of cost recovery, not to mention the private accommodation.
The most frequent criticism leveled at the Viennese model is that it is not a social housing policy. The eligibility ceiling (annual income) to access subsidized housing (two-person household) is currently at 79,500 euros, or approximately $105,000. The majority of Viennese therefore have access to it, with varying waiting periods. Households of different classes are in competition and allocation mechanisms are not always transparent. The poorest households (who meet specific criteria) are, it seems, better served than in Montreal thanks to expressways; we are talking about a month’s wait compared to sometimes years in Montreal. The fact remains that the majority of subsidized housing, generally of good architectural quality, is intended for a fairly well-to-do population. Note finally: a part of the market completely escapes rent control.
Replace the market or frame it
The central question remains. Why doesn’t Vienna do better than Montreal? The architects of the Viennese model wanted to replace the market, betting that the weight of public housing, whose prices are set by the state, will have a downward impact on the entire market. The downward impact on prices is real and confirmed by Austrian studies. However, Quebec has instead chosen to regulate the market through the intermediary of the Administrative Housing Tribunal (that’s the bet), without harming the proper functioning of the market. My own studies2 confirm a similar downward effect for Quebec cities, the weight of rent being systematically below that of the rest of Canada. The end result, as we have seen, is not very different from Vienna, even slightly better.
The Vienna-Montreal comparison teaches us two things: first of all, there is no miracle model and ours is ultimately not so bad. Next, whether housing is public or private does not change the reality of the costs and the need for supply to meet demand in time. Any policy must satisfy at least three conditions: to house the poorest, to protect all tenants and to ensure that supply is there. It’s not an easy equation.