Limited-profit housing in Austria

The legal definition of the Limited-Profit Housing Act (WGG / Wohnungsgemeinnützigkeitsgesetz) describes limited-profit housing associations as enterprises whose activities are directly geared towards the fulfilment of the common good in the field of housing und residential matters, whose assets are dedicated to the fulfilment of such tasks and whose business operations can be regularly reviewed and monitored. These basic provisions already cover all primary principles of limited-profit housing: serving the common good, limitation of the scope of activities, limitation of the distribution of profit shares and the cost-covering principle, as well as the obligatory supervision.

Limited-profit housing associations involve the integration of private-sector economic activities for the fulfilment of tasks of existential provisioning in the public interest. However, regardless of this orientation towards the common good, limited-profit housing associations are nevertheless part of the private sector.

With 489 dwellings per 1.000 habitants, living space of 38 m2 per person and a housing cost share of domestic expenditure of 19 percent, Austria has a level of housing supply that need not shy from any international comparison. With a share of roughly 30 percent of the annual volume of newly built dwellings and a real estate management portfolio of 775.000 dwellings, the limited-profit housing associations – organised as co-operatives, limited liability companies and stock corporations – have contributed substantially to making the entitlement of the people to contemporary and affordable housing a reality.

Government promotion of housing in Austria

The objectives of housing promotion are to ensure a sufficient amount of good quality accommodation, to provide and ensure an adequate amount of investment capital for housing purposes and to reduce the burdens on end consumers caused by housing costs.

The necessity for a public system of housing promotion stems from the special importance placed on the markedly long-standing consumer commodity of accommodation, which expresses itself on the one hand in the significance of the commodity for meeting life’s needs and, on the other hand, in the high degree of external effects. The presence of special features, such as lengthy completion times, high construction costs, a distant financial planning horizon, a lack of substitute options, being tied to one site, low market transparency and high transaction costs lead to the basic phenomenon of market failure and the resulting need of regulatory action. Intervention in the form of planned, continual und direct public housing promotion is therefore necessary in order to restore the market equilibrium.

In Austria, the main focus of promotion for housing is on direct property promotion. All told, around € 2,96 billion was recently spent for all promotion measures, including indirect measures. This value is a stable parameter, corresponding to roughly 1,25 percent of the gross domestic product and is roughly on par with the average for comparable nations.

A distinction is also made between object-specific and subject-specific housing promotion. Subject-specific housing promotion measures can take the form of housing subsidies, housing benefits or equity replacement loans. The usual case in Austria is represented by object-specific housing promotion. In this respect, 76 percent of all promoted dwellings in multi-storey housing development and 45 percent of the promoted homes were built with object-specific housing promotion after 1945. In contrast, subject-specific housing promotion is of lesser importance and usually combined with object-specific promotion anyway.