AK against real estate industry

Experts argue: How does affordable housing work?

In the coming years, house hunters can expect even less favorable offers.

(Bild: Krone KREATIV/stock.adobe)

Is it necessary to intervene in the housing market, for example by imposing rent brakes and building plots only for social housing? Or would the supply collapse even more and only a relaxation of some regulations bring more affordable housing? An AK expert and the real estate chairman point out possibilities.

Experts agree that the housing sector is a huge construction site: high demand, increasing financial burdens for people, too little affordable supply. But then there isn't, and that's part of the problem. "Too many new apartments have even been built in recent years, but the wrong ones. Everything has been invested in concrete gold for investors, which has overheated land and construction prices and pushed non-profit housing out of the market," states Thomas Ritt, housing expert at the Chamber of Labor. "That is simply wrong," counters Gerhard Gollenz, chairman of the real estate trustees. "There is no such thing as wrong building. The investor apartments are also sold and rented, there are no vacancies."

"Non-profit organizations need to build more"
On the contrary, Gollenz is facing a huge shortage because far too little is being built. This year, the situation is still mild because new construction will "only" fall by 13 percent, "from 2025, completions will plummet by up to 80 percent," warns the real estate chairman. According to the industry's most recent estimate, 42,640 units are likely to be built this year, followed by just 31,800 in 2025 and 13,160 in 2026. In detail, according to this forecast, only under 3,500 affordable subsidized rental apartments will soon come onto the market instead of the current 11,000. The main reason for this is that non-profit housing developers are not active enough. "As commercial housing developers, we are already contributing the largest share of new builds, but that is actually wrong. It only works if the non-profit organizations also build a lot."

AK expert even detects "oversupply"
AK expert Ritt takes a much less dramatic view of the coming years: "Yes, the number of building permits has plummeted, but these are permits for houses that we don't need anyway. Professional investors are now moving away from concrete gold and prefer to buy government bonds again. However, many buildings that have already been approved are only now being completed, which means that the oversupply will even increase." It is also a good thing that the overheating of the construction industry is decreasing. "Construction prices have risen much more than the actual construction costs, which the economy always cites as the reason for high housing prices. There has been a huge gap since 2022; the prices charged have risen by 20 percentage points above the costs!"

AK housing specialist Thomas Ritt: "Private rents have risen by 55 percent between 2008 and 2022, purchase prices by as much as 135 percent."

(Bild: AK)

It is also a good thing that the overheating of the brewing industry is decreasing. "Construction prices have risen much more than the actual construction costs, which the economy cites as the reason for expensive housing. There has been a huge gap since 2022; the prices charged have climbed 20 percentage points above the costs!"

Bureaucracy as a price driver
Bureaucracy is partly to blame, according to the real estate industry. "The regulations are excessive and no longer affordable. We need standardization of building standards throughout Austria, but not more unnecessary standards. In Styria, for example, we have a new density regulation, which means that 140 m2 of rentable living space can be removed from an apartment building, which of course makes all other apartments more expensive," Gollenz gives a concrete example.

According to industry forecasts, completions will fall rapidly from next year.

(Bild: Krone KREATIV/stock.adobe)

AK specialist Ritt sees other levers: for example, the spiral of rising land prices must be stopped by the public sector passing on its land from ÖBB, barracks, hospitals etc. exclusively for subsidized buildings. "This would allow rents of around 8.5 euros per m2 with an option to buy." A cap on permitted rent increases of two percent per year is also justifiable. "This kind of restriction on homeowners' earnings has been seen in half of Europe."

Gerald Gollenz, Chairman of the Real Estate and Property Trustee Association: "Regulations are excessive and no longer affordable."

(Bild: WKO/Oliver Wolf)

The construction industry is losing orders
However, it is not only those looking for a home who are groaning under high rental and purchase prices; at the same time, the entire construction industry is losing orders. Dozens of companies are now urging the government to take swift action in a "More Homes" initiative. "This is also socially relevant, because the achievable dream of owning an apartment or house is a social cement that is now crumbling," warns Torsten Kreft, head of hagebau DIY stores, for example. At the same time, unemployment in the construction industry and building materials trade/manufacturing is growing rapidly. "If we lose these employees, they won't come back," adds Gunther Sames, Managing Director of building materials producer Ardex.

VAT exemption for consumers
They therefore have five specific demands for politicians. For example, consumers should be exempted from VAT for a few years for orders of up to EUR 100,000 for the renovation or creation of living space. "This has already been introduced for PV systems and immediately proved its worth," says Sames. Commercial builders needed a higher tax write-off option.

The second point is the earmarking of housing subsidies funded by employee taxes and their increase. Other concerns are the relaxation of lending guidelines and simplification of the jungle-like subsidy programs and building regulations, which must then apply uniformly to all federal states.

More pragmatic standards would also help. "If we can use a 30-brick instead of a 50-brick, the wall will cost 40 percent less," according to the experts. The industry is also working internally to make construction cheaper. For example, tilers can lay the wires for electric underfloor heating at the same time, and the electrician then only has to connect them.