Vienna, during the last days of the Habsburgs, demonstrated its wealth in the form of impressive building façades.

But behind the façades was a grimmer reality: workers crowded 10 to a 300-sq.-foot flat. Many slept four to a bed. Some workers used their beds in shifts, hiring out sleeping space during the day while the principal tenant was at work — all to pay the usurious rents. Are we heading this way?

This Vienna was a city run by and for the landlords, wealthy owners of lands that had once been farms but now sprouted apartment buildings. Males of wealth, most of them landlords, were the only residents who could vote; they numbered 60,000 of Vienna’s two million residents at the dawn of the First World War.

....

The Viennese political left gained power with universal suffrage and the fall of the Austro-Hungarian Empire, and it retained this power until global economic constraints and the rise of Italian and German fascism led to a fascist takeover of the Austrian government in 1934. The relatively short period between 1917 and 1934 is called the “Red Vienna” period for the socialist leanings of its city leaders.

Significantly, elected and appointed officials during the Red Vienna period — unlike leftist parties in other parts of Europe — never set out to remove or even cripple capitalism by nationalizing property. Instead, they used a taxing strategy to meet their social ends and their most important achievement was providing decent housing for every resident.

How did they do it?

The city-developer

A number of policy and taxing policies made Vienna’s housing system possible.

Even before the Red Vienna period, a key policy was imposed that was crucial to the city’s later success: strict rent control. The government had imposed it to prevent war wives from being evicted while their husbands fought at the front. It was never repealed. The government outlawed raising rents beyond a minimal amount and, in the presence of extreme currency inflation, made it less profitable to build new rental stock.

Ordinarily, this would be a very bad thing for affordability, as rental stock is usually less expensive per month (in the short term at least) than home ownership. Thus, policies that impede the construction of rental housing are generally frowned upon. This is true here in Vancouver, where successive city governments have gone to herculean lengths to induce the private market to produce new rental stock — through subsidy, relaxed development taxes or density bonuses. The city has been nominally successful, reversing a decades’ long decline in purpose-built rental starts; but the monthly rents charged for these new market-rate units are unaffordable for all but the upper tier of renters.

Vienna provides an interesting counterpoint. Because rent control disincentivized the private development of rental buildings, landlords were, for a time, removed from the market for urban land. Consequently prices finally went down, allowing the city to buy land at a much reduced price; often it was the only buyer in the market. 

The city quickly became the dominant developer of new housing. Vienna had the wisdom to retain the city’s best architects and developers to design and build the new projects, employing experts who had honed their skills in service to the private sector to build non-market housing. 

A fifth of Vienna’s new housing built during the Red Vienna years was social housing for the poor and disabled. But the bulk of the new housing was for wage earners and their families, to be owned and managed by co-operatives or non-profit housing corporations. Non-profit housing corporations operate just like for-profit housing corporations, except that their profits are poured back into operations and they are obligated to keep rents in line with incomes. 

....