Vienna's "Social Housing" Strategy Proves Expensive and Fictitious-Not a Model for Replication
Vienna, the Austrian capital, is known for its social housing policy, often hailed as a global success story. However, a closer look reveals a complex system with its share of controversies.
Newcomers to Vienna's social housing are required to pay hefty upfront costs, including an entry fee of approximately $38,000 for a typical 750-square-foot cooperative apartment. This high barrier to entry has raised concerns about the fairness of the system, particularly as it pertains to poorer and immigrant families who are often left with older municipal housing units that lack basics like central heating or private bathrooms.
Tobias Peter, a senior fellow and codirector of the American Enterprise Institute's Housing Center, has conducted research on social housing in Vienna and other cities, including Chicago. He suggests that the city's vision of facilitating social mixing through public housing is being undermined by wealthier tenants self-selecting into cooperatives, while less fortunate families are left with lower-quality municipal housing.
The benefits of Vienna's social-housing system are not evenly distributed. While base rents in social housing are low, tenants face significant additional costs, including utilities, repairs, and maintenance. Once these expenses are included, rents for new leases in Vienna, including social housing, are only marginally lower than those in major German cities.
Moreover, Viennese renters must cover these costs themselves, as rents in Vienna's social housing are taxed at 10%, while they are not taxed at all in Germany. This spending is financed by a 1% wage tax on all workers, including those who will never benefit from these programs.
The city's social housing model emerged from unique post-World War I circumstances and is becoming increasingly unsustainable due to disappearing conditions that allowed for cheap land and mass housing construction. In 2016, Vienna's public housing faced a shortfall 1.6 times its annual rental income, which forced delays in desperately needed maintenance.
Vienna is shifting from being a developer and landlord to exploiting its monopsony power, buying land cheaply and reselling it to public-private partnerships at hefty markups. This practice, combined with the high upfront costs for newcomers, has led to criticism that the city is prioritizing profits over social housing.
The international marketing department in Vienna promotes its social-housing policy as a global success story. However, the high costs, unequal distribution of benefits, and the city's recent practices have sparked debates about the fairness and sustainability of Vienna's social housing system.
As cities around the world grapple with housing affordability, the case of Vienna serves as a reminder of the complexities involved in creating and maintaining a successful social housing policy. The best path forward for cities like New York, according to experts, is to unleash housing supply by reforming restrictive zoning and reducing regulatory barriers.
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