Why is living so expensive

Why has living in metropolitan areas become so expensive?

We are familiar with the discussions in cities like Munich, New York and London, where average earners can no longer afford to live in central locations. Increasingly, however, high rents are also becoming a problem in Vienna. A rental monitor from the Vienna University of Technology recently showed that private rents are becoming increasingly difficult to manage for average earners. And in Berlin, where the rent cap was recently overturned by the court, people are taking to the streets against the "rent madness". What went wrong in the metropolitan areas?

Experts are not surprised by the development. There was an affordability crisis on the housing market even before Corona. This is emphasized in a recent report by the international Housing Europe network. Already in 2019, almost ten percent of the population in the EU countries were heavily burdened by housing costs. The situation has worsened due to the pandemic and the waiting lists for social housing have become even longer. It is true that tenants are given short-term assistance in many countries. However, there is no long-term plan to invest more money in social housing.

Lots of privatizations

The problem is difficult to compare internationally, the markets function too differently. But the causes of the misery are similar, as the housing researcher Justin Kadi explains. He sees a problem in the neoliberal politics of the 1980s and 1990s. In England, social housing was sold to residents. Hundreds of thousands of social housing were sold in metropolitan areas in Germany. And in other countries, too, more emphasis was placed on the private housing market, where the interplay between supply and demand determines the price.

In addition, the laws were changed: "In many countries there has been a shift towards more power, influence and opportunities for landlords," said Kadi. A new tenancy law was introduced in Austria in 1994 as well. Since then, there have been guideline rents in old buildings, and location surcharges are possible in certain areas. This, according to Kadi, has brought this segment closer to the private market. "Internationally, it was relatively intense," says the housing researcher. In Germany, for example, there are no time limits that have become normal in Austria.

With the financialization of the housing market, a further development has taken place in many cities in recent years: "Apartments are viewed and traded more than before as a financial product," explains Kadi. This can also be seen in Vienna, where more and more houses under construction have recently been bought by investors and rented out for profit after completion. What many do not consider when criticizing it: Behind the large funds are often small investors who want to improve their pensions. According to Kadi, this can lead to paradoxical situations. For example, when people complain about rising rents in their house only to realize that it belongs to their pension fund.

Retirement property

While living elsewhere was discovered years ago as an investment, Germany and Austria were "late to the party" according to Kadi. In countries like England today there is a strong interlinking of the economic system and real estate. There property is held up as a provision for old age - and according to Kadi there are increasingly fault lines between old and young who can no longer afford property.

The corona crisis will deepen many fault lines. In Austria, too, tenant protection officials warn that many people are now affected by payment difficulties and evictions. "But the answer to that is likely to be an extremely individual one," says Kadi, because there are no opportunities for networking.

What to do? There will be no one solution. A lot can be regulated through the Tenancy Law. Rules on leeway for financial companies are important. "And not selling social housing is one of the best strategies," says Kadi. Because once the apartments are gone, they are subjected to the logic of the market, as is clear in England and Germany. The Berlin initiative "Expropriate Deutsche Wohnen & Co." is now calling for the largest real estate groups to be socialized. The once urban apartments are now part of their lucrative portfolios. 130,000 signatures have already been collected for this. (Franziska Zoidl, May 9, 2021)