The Austrian Government coalition has agreed on significant State interventions in the rental market.
It sees the Conservative Austrian People’s Party (ÖVP) effectively giving in to demands from its junior partner, the Social Democrats (SPÖ).
Today, Vice-Chancellor Andreas Babler (SPÖ) and economics minister Wolfgang Hattmansdorfer (ÖVP) presented the details of the new regulation in Vienna.
In a landmark change, landlords of residential properties will no longer be able to fully pass on inflation to their tenants. If yearly inflation surpasses 3 per cent, the rent may only be increased by half the general price increase.
For example, as of August inflation in Austria amounts to 4.2 per cent. Under the new law, rents could only be increased by 3.6 per cent (3 per cent plus half of 1.2 per cent), effectively decreasing rent in real economic terms.
Furthermore, the minimum duration for a rental contract will be increased from three years to five years, making it harder for landlords to offset their losses from the rent control through recurring new rental contracts.
The new regulation will apply to all types of residential properties except single and double family houses.
For apartments in buildings constructed before 1945 – which have been subject to very strict rent controls for decades – even tighter regulations will apply.
This year, rents for such apartments may not be increased at all. In 2026, they can rise by 1 per cent and in 2027 by a maximum of 2 per cent.
These rules apply to many apartments in historic buildings in central Vienna, as they are based solely on the year of construction, irrespective of the actual state of the apartment.
The rent for this type of apartment is already capped by law. In Vienna, for example, the maximum legal rent in buildings built before 1945 is €6.67 per square metre as of 2025. A complicated system of additions and deductions applies but in most cases the legally permissible rent barely surpasses €10 per square metre.
This rent cap has made it economically unattractive to rent out apartments built before 1945. Consequently, many historic buildings in Vienna have been torn down in the past decades and replaced with new builds – to which no rent caps applied until now.
Economists expect the new State interventions in the rental markets will not bring down rents but limit supply as they make property letting – already burdened by many regulations – even less attractive.
The end result, they say, might be a housing shortage as was the case in Berlin after the German capital introduced far-reaching rent controls.
Libertarian pundit Christian Ebner wrote on X today: “The government is killing off the rental business model. Hardly anyone will invest in rental properties anymore, and vacant flats will increasingly be sold rather than rented out.
“Anyone who can’t afford to buy is simply out of luck.”
