Rent increases through index clauses give landlords “excess profits”: AK calls for rent caps for affordable housing

Linz – Housing is a basic need – and is becoming more and more expensive. The highest inflation in 70 years means that many rents have risen and will continue to rise. The reason for this is the value retention clauses contained in many rental agreements. “Put an end to the fact that cold rents naturally increase with inflation! The government must act urgently now: A rent cap is intended to ensure that rents without heating can only be increased by a maximum of two percent once a year“, says AK President Andreas Stangl.

The value retention clauses (index clauses) in many rental contracts mean that the rent is adjusted to the inflation rate. The clauses in the rental agreement usually refer to the consumer price index (CPI) and provide for an adjustment in accordance with the CPI changes. In addition, homeowners have an additional opportunity to increase rents through fixed-term leases. In times of high inflation, many tenants face intolerable financial challenges. This is also shown by the new AK Housing Satisfaction Index, which only achieves a critical value of 63 (of 100 possible index points) in the “Affordability of Housing” area: A clear signal that there is a major and urgent political need for action in the area of affordable housing.

The current inflation crisis is fueling the problem, which has existed for years anyway: Since 2010, rents in the private real estate sector have risen by more than 50 percent without any higher costs being offset by this. Inflation over the same period, on the other hand, rose by only around 20 percent. The rising rents led to huge revenue growth and over profits in the real estate industry. While gross domestic product grew by 37 percent between 2008 and 2021, real estate industry revenues increased by a whopping 105 percent. If you add the year 2022, the increase is even 123 percent!

After all, tenants pay the price increases twice: “The tenants have already paid for the higher energy costs, such as electricity and heating costs, which are mainly responsible for the inflation. Now they are to be asked to pay for a second time through an index adjustment of the cold rent. This makes housing unaffordable for many“, says AK President Andreas Stangl.

Demands of the AK Upper Austria

Housing is a basic need. The index adjustment of the rents in the full amount of the CPI is not acceptable in this form with the current price increases. A Rental rate cap is intended to ensure that rents can only be increased by a maximum of two percent once a year.

One Increase in the annual new construction output in social housing in Upper Austria should guarantee long-term affordable rents with growing demand.

Tenants have no influence on the selection of the heating system in their apartment and the thermal quality of the building envelope. The AK therefore demands Rent reductions for apartments that are insufficiently insulated or heated with a fossil fuel.

Thermal renovation of old apartments means investments for landlords and landlords. Due to rent reductions in the case of insufficient thermal quality due to a lack of investment in the building envelope, the probability that apartments in old buildings will no longer be rented out increases. By a vacancy fee that is exactly what should be prevented.