What is social housing?

In Austria, there is no official definition of social housing but there are different forms of housing provision “beyond” the market. Municipal housing (or public housing) is rental housing provided by municipalities. Limited profit housing is rental and owner-occupied housing[1] provided on a non-profit basis by investors, which are regulated by the Non-Profit-Housing-Act and have access to public subsidies (Limited Profit Housing Associations). The Federal Provinces provide funding through the housing promotion schemes, which define the type of housing and providers, which can access funding as well as rent limits and income limits for (future) residents. The social housing stock currently represents about 23% of the total housing stock in the country.


Who provides social housing?

Out of the total social housing stock, 60 % is owned by municipalities and public companies, but municipalities have withdrawn from new construction over the last decade (their contribution to new construction of social housing was only 12% over the period 2001 – 2009). The main sector is currently the Limited-Profit sector, which includes cooperatives and companies (mainly limited companies). A smaller part of subsidized housing is provided by for-profit providers.


How is social housing financed?

Austria has a very structured system for financing provision of social housing. It combines long-term public loans at favourable conditions and grants defined at the level of federal provinces, with commercial loans raised via HCC Bonds[2] and developer/tenant equity. Promotion of social housing is also supported by municipal land policy. Rents are calculated on the basis of costs combined with rent limitation defined by the subsidy schemes. A typical project comprises the following elements of finance:

Who can access social housing?

All providers must apply income limits defined by the different Promotion Schemes of the federal provinces. Limited-Profit Providers also have to apply additional social criteria determining priority in the allocation of dwellings. Furthermore, Federal Provinces as well as public owners of housing companies can claim a certain number of dwellings to allocate them themselves.


Public housing promotion has undergone a substantial reform within the last three years. Until 2008 it was the central state which distributed a defined total out of the federal budget to the federal provinces for the purpose of housing promotion. From 2009, the central state withdrew from financing. The former budget dedicated for housing promotion is integrated in the overall budget of the provinces, and it is up to the provinces to decide how much of it to spend on housing promotion. Following the economic and financial crisis, the federal provinces have to face financial restrictions which will also affect housing. The number of housing units receiving public grants has decreased by 25% in 2010.

Also, the above mentioned system of covered bonds enjoying a preferential tax treatment has been affected by the crisis of the financial markets. Private and institutional investors are reluctant to buy these bonds even though there is no housing crisis in Austria.

Due to a high housing demand caused mainly by a comparatively high level of immigration to Austria – and especially to the big urban centres - it is doubtful whether the supply of affordable housing will be sufficient in the forthcoming years.


‘Without any doubt the system in Austria will require some adaptation in the future. A high housing demand together with high quality requirements on one hand and reduced public means on the other have to be matched. All actors and stakeholders involved need to contribute to this challenge. The non-profit housing providers need more room for accumulation of equity; housing promotion systems have to adapt the models of subsidisation and the capital market also has to seek for new solutions for long term housing financing. But however these solutions will be modelled – it should be born in mind that the basic features of the system (high proportion of rental housing, object related subsidies, non-profit providers) should be maintained as they proved to be rather resistant against real estate crisis’

[1] In new subsidized construction owner occupation has been partially replaced by rental dwellings with an option to buy after a 10-years-period.

[2] This is a special circuit of capital involving the sale of bonds via Housing Banks to channel investment into new affordable housing at favourable interest rates. Introduced in 1993, this model involves tax incentives (partial exemption from capital gain tax, income tax) for purchasers of Housing Construction Convertible Bonds (HCCB). Investment raised this way has to be used to finance housing projects (in case of rental housing with restricted rents) within 3 years. Several major banks have created subsidiaries called Housing Banks with preferential underwriting criteria allowing them operate with lower transaction costs.

[3] Bauer, Eva, communication with the authors (2011)

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