Rent Value Protection: Expert Warns of Long-Term Consequences for the Housing Market

The value adjustment, which has been partly questioned by Supreme Court rulings, is indispensable for the functioning of the housing market, not only for landlords but also for tenants, emphasized Wifo economist Michael Klien in an APA interview. Without value adjustment, no one would rent indefinitely anymore. At the same time, landlords would add the inflation of the coming years to the rent if there were no possibility to increase it during the rental period.

Value Adjustment for Rents Essential for Housing Market

The ability to adjust a contract to inflation is important for all contracts concluded for a long or indefinite period, Klien told the APA. The value adjustment clause also serves to protect tenants, ensuring that rents do not rise more than general inflation.

If, on the other hand, an indefinite rental apartment were frozen at the price level of 30 years ago, it would lead to hoarding of such affordable apartments, which in turn would increase vacancy and housing shortages, Klien said. Additionally, rental contracts can be difficult for landlords to terminate, and tenants are allowed to pass the apartments on within their family. In general, rents that deviate significantly from the market rent are not ideal for the housing market from an economic perspective.

Hoarding of Apartments Increases Vacancy and Housing Shortages

"It may seem like a success for tenants, but the negative long-term consequences are significant," concludes the expert, stating that the Supreme Court rulings are not suitable for redistribution from landlords to tenants. Rents below cost coverage would harm the entire housing sector and are not desirable. For this reason, social policy and housing policy should not be mixed. For people who cannot afford rent, other instruments than tenancy law are needed.

Curiously, legal uncertainty regarding rents could lead to an increase in the ownership rate. This could happen if landlords withdraw from the market and sell off their apartments, which could then lead to a shift towards owner-occupied apartments, according to Klien.

AK: Value Protection Clauses Not Automatically Invalid

The Chamber of Labour (AK), which is conducting several proceedings on ineffective value protection clauses, pointed out on Wednesday that the clauses are not automatically invalid. Although agreements that allow for an increase in rent within the first two months after the contract is concluded violate the Consumer Protection Act, there are also agreements where an increase within the first two months is not possible at all. In these cases, there is no need for an "explicit notice" in the contract that it does not apply within the first two months, emphasized the AK.

The case law on value protection clauses has been causing unrest in the housing sector for some time, also because it is unclear which statute of limitations - 3 or 30 years - should be applied. The government has announced that it will introduce a repair by autumn and regulate the statutes of limitations for rent claims anew.

(APA/Red)

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