Protect the tenant, but do it properly!

A Wiener Art rental cover is not a role model, neither for the right nor for the left: it damages tenants above all.

Rainer Hank

ÖAustria leads the way, ”so the German AfD sounded when they presented their friends in the Austrian FPÖ as heroes. That was done after Ibiza Gate. “Austria leads the way” is not only a motto of the right, but also of the German left when it comes to how we can alleviate the housing shortage in the big German cities in this country.

What is meant is the so-called community housing in the traditionally red, i.e. SPÖ-ruled Vienna, whose centenary is currently being celebrated with great pomp. The Wiener Symphoniker kicked off last Sunday with an open-air anniversary concert (“Peter and the Wolf”) at Metzleinstaler Hof, the pioneer of social housing. The party went under a little in the face of the government crisis. The highlight is now to be a big festival in Vienna’s Karl-Marx-Hof on June 30th, with 14,000 apartments a showcase for good, socialist living.

The mayors of Berlin, Frankfurt and Munich are not only charmed by the idea of ​​municipal housing, but also by the consequent protection of tenants: The prices for housing are regulated by the state at six to seven euros per square meter. “Mietdeckel” is the magic word that German politicians now also love: It is intended to reassure all those homeowners who expect the worst, the expropriation of their apartments, and at the same time to signal to Germany, the tenants, that the dream of an affordable place to stay in Prenzlauer Berg will still work for everyone.

This only increases the housing shortage

In reality, things will only get worse when German cities use Vienna as a model for housing. The liberal Austrian economist Friedrich August von Hayek (1899 to 1992) analyzed the devastating consequences early on. In a lecture entitled “The Tenant Protection Problem”, given in 1928 to the Vienna Economic Society, the young Hayek demonstrates what happens when the market is suspended and other forms of allocation of goods are chosen instead of free prices.

Hayek is not at all interested in the worries of landlords, who miss out on profits due to rent restrictions, he would even accept that. Instead, he turns his attention to the blatant injustices that a rent cap can cause for tenants. Hayek is practically a lawyer for the tenant protection association. The same applies to living: what is politically well-intentioned can have bad consequences.

Why is the rental cover poison for tenants? Because it only makes the housing shortage worse. This is how it has to happen when you politically tamper with prices. Market prices, according to Hayek, serve to reduce demand to the extent of the available supply. The rent cap, however, sets the permitted rent below the price of the free market, which must necessarily lead to the fact that at the reduced prices there are even more apartments in demand than on offer. Because people who would move to Berlin’s suburbs at market prices are now also competing for cheaper apartments in Berlin Mitte. Prices send signals to market participants.