Rent increases: Rents pull wages away | Momentum Institute

2023-05-01 09:40:27

Vienna (OTS) – In May, benchmark rents across Austria will rise by 8.6 percent. 776,000 people in the country are affected. They have to pay an average of 500 euros per year in additional rental costs. Category rents will follow suit in June, and these rents will be increased by 5 percent. Since the end of 2021, rents have been outpacing wages, according to a new analysis by the eco-social Momentum Institute.

In the coming weeks, almost one million people in Austria will be affected by the increase in benchmark and category rents. As of May 1st, the benchmark rents will rise by 8.6 percent for almost 776,000 people. It is about apartments in old buildings under 130 square meters that were rented after 1994. Municipal housing is also affected, especially in Vienna. For the most part, they also depend on the benchmark rent. “On average, everyone who pays the reference rent has to pay around 500 euros more per year for the roof over their heads”, explains Joel Tölgyes, economist at the Momentum Institute. In 2022, benchmark rents rose by 5.8 percent. Indicative rents are thus 15 percent more expensive than just a year and a half ago.

In contrast, negotiated wages rose by just 11.3 percent over the same period. “Rents are rising much faster than wages. Not only the rent has to be paid from the wages, but also energy, food and all other necessary expenses”, says Toelgyes. This is becoming increasingly difficult, especially for households with lower incomes. They already spend almost half of their income on housing and energy.

Rent increases also in other rent categories

In June, category rents are increased by 5 percent. This affects another 230,000 people. The rent category includes apartments in old buildings that were rented before 1994. Category rents were increased by up to three times last year. “Today you pay almost a quarter more for an apartment with category rent than in December 2021”, continues Tölgyes. In Vienna, almost every third household is affected by the increase in standard and category rents.

The free rents are constantly being increased. These apartments are usually subject to a “value protection clause”. As soon as the consumer price index exceeds a threshold of 3 or 5 percent, for example, landlords are allowed to raise the “free” rent. Last year, the rent for many tenants rose up to three times. Since December 2021, free rents have increased by around 17 percent on average.

Housing allowance: A one-off payment is not enough

In order to slow down inflation, the Momentum Institute recommends a nationwide rental price brake for all rental contracts. Poorer people in particular would benefit from this: “The poorer half of Austrian households live almost entirely in rented accommodation. They would therefore benefit much more from a rental price cap than richer households, which mostly own their own homes., according to Toelgyes. In contrast to the planned housing cost subsidy, a rental price brake would also have a lasting effect. The effect of a one-off payment fizzles out after a few months. The rental price brake also has a dampening effect on future rent increases. “Today’s rent increases are the basis for tomorrow’s rent increases. With a rental price brake, we could curb this rental-price spiral‘ says Tölgyes in conclusion.