Setting the scene

Spiralling rent levels and house prices make it difficult for many to afford living in big cities such as London, as well as many other places in the United Kingdom. Still, the housing crisis is not only a British phenomenon; it has become a global problem, with people in urban areas of New Zealand, Japan, the Netherlands, the United States, and elsewhere suffering from ever-rising rent levels. 

The housing crisis is not only a financial problem for those paying far more than 30% of their monthly income for rent or mortgage. It also has implications for local communities and societies as a whole: high rent levels mean that those with lower incomes often need to move out of their old neighbourhoods, which implies long commutes to work that are long known to be bad for your health. 

It also means that neighbourhoods change, possibly leading to local communities losing diversity and character as gentrification pushes out owner-operated shops and local dining opportunities. The consequences are segregation, the hollowing out of city centres, and a loss of societal trust as basic needs, such as proper housing, seem to become unaffordable.  This is why we need more research to understand the drivers of high rent levels in the UK and elsewhere.

Vienna: a microscope for studying housing markets

Vienna, the vibrant capital of Austria in central Europe, has long been known for its stable housing market. A large share of ‘communal buildings’ is fully owned by the city, and there are various incentives for the development of rent-controlled flats owned by private investors or building cooperatives. However, the city is also evolving, and global trends impact Vienna just as they do other major cities. Therefore, Vienna serves as an ideal microscope into changing housing markets and the role housing policy plays in managing the development.

In a new study published in the scientific journal PLOS One, an international research team led by Dr Fabian Braesemann from the Oxford Internet Institute investigated how rental levels in Vienna responded to the COVID-19 pandemic. The pandemic is a highly relevant case study to understand housing markets, as it was an unexpected event that fundamentally changed how we live and work. New forms of remote and hybrid working have made it possible for people to reconsider their housing choices, which is why the pandemic is expected to have long-lasting effects on cities.

For the study, the researchers analysed data of more than 120,000 listings of one of the major online housing platforms in Austria, and they discovered signals in the data that are relevant far beyond the Austrian capital.

First, the pandemic altered the preferences of tenants for certain types of flats: while location and public transportation connectivity were among the most important factors of a flat before the pandemic, these have changed. Throughout the pandemic, flats suitable for working from home became increasingly important. Those with outdoor areas, such as balconies or terraces, multiple bathrooms, and more rooms overall saw their demand increase, as indicated by higher asking rents. 

Secondly, thanks to the specific spatial structure of Vienna, the city’s housing market could balance out the increased demand for they types of flats. Historically, Vienna is characterised by an inner city full of older buildings, often with beautiful Art Nouveau decorations, and a much larger outer part of the city where there are many parks and other green spaces, as well as space for new developments.

The researchers find that it was in the outer districts where rent levels grew much faster than in the historical inner city, which was shaped by higher rents prior to the pandemic. Increased demand for buildings in proximity to green spaces could be absorbed by the outer districts, underlining the importance of structurally diverse neighbourhoods for urban ecosystems to be more resilient to external shocks.

Thirdly, the study highlights the importance of real-time data analysis in actively managing housing markets. Observing rent levels alone is not enough: high-resolution data about housing preferences is needed to disentangle the price signal aggregated in average rent levels. The real-time data analysis conducted by the researchers shows that a spatially granular and real-time understanding of housing markets is possible; an insight that is equally relevant for Vienna as it is for Manchester, Bristol or London.

What we can learn from Vienna to solve the housing crisis

What can we learn from the case study of Vienna to solve the housing crisis in the UK, Europe and across the globe?  Most importantly, we need to understand that housing markets are a complex system. Rent levels are dynamically determined by the myriad decisions made by tenants, landlords, homebuyers, and owners, as well as by investors, companies, and local governments. 

If we want the market to develop sustainably, we need to identify the drivers of skyrocketing rent levels and intervene systematically in the market. In other words, we need to understand where the change is coming from and then support that aspect of the market development. For example, if changing tenant preferences are causing rising rents, we should focus on developing new flats with in-demand amenities and in locations suited for remote workers.

Additionally, we need to leverage the value of real-time locational and housing market data. Local governments need to build the competencies to process data that is already available in the public domain, and government agencies should partner with research institutions and platform companies to make real estate data available at a local level. 

Lastly, we need to develop appropriate means to support local communities that would be most affected by the segregation and gentrification effects that come with rising rent levels. Rent caps and direct interventions in the price-building mechanism are not the solution, as they blur the information signal that is captured in rental prices. Instead, lower-income households should receive other forms of support, such as fixed subsidies to help with their rent payments or energy bills. Additionally, social and community housing, as well as building cooperatives, should be supported in developing and providing affordable housing.

Read more about the study in Die Presse here.

Author: Dr Fabian Braesemann is Departmental Research Lecturer in AI & Work at the Oxford Internet Institute.  Find out more about his research interests.