Simone Romano
OECD
OECD Economic Surveys: Austria 2026
Abstract
Austria’s housing model has long provided affordable homes, with rented limited-profit housing playing a major role, especially in larger cities. However, price-to-income ratios and rents have risen sharply over the past two decades, particularly in Vienna. Lowering the eligibility thresholds for limited-profit and social housing would help to better allocate it to those who need it. Reassessing regularly the financial situation of tenants in limited-profit housing and increasing rents for those who no longer satisfy the eligibility criteria would help support limited-profit housing supply and its price-dampening effect. Revising the property tax base would better reflect current values and improve market efficiency, while increasing taxes on unused land and vacant properties would help mobilise total supply. Streamlining and digitalising building permits and improving land use through better coordination would enhance supply efficiency. Greater efforts are needed to enhance the energy efficiency of the housing stock, which is old and characterised by high energy intensity and direct emissions.
Austria has consistently maintained a robust housing supply that compares favourably in international terms, with the dwelling-to-inhabitant ratio exceeding both EU and OECD averages and ranking among the highest within the OECD (Figure 3.1, Panel A). Renting plays a prominent role, with ownership occupation accounting for barely 50% of housing, more than 20 percentage points less than the OECD and EU averages (Figure 3.1, Panel B), and with renting reaching around 80% of tenure in Vienna (ONB, 2023), much of it in the limited-profit sector. Austria’s housing model has been successful in delivering a very good average quality of dwellings (IIBW, 2016), and in safeguarding affordability until recently, with housing expenditure as a proportion of disposable income in 2022 remaining aligned with the EU average and below the OECD average (Figure 3.1, Panel C).
2024 or latest available year
Note: The EU reflects the composition of the European Union as of 2020. The OECD aggregate is the unweighted average of OECD countries and, like the EU average, includes only countries for which all tenure types are available. In all panels, only a selection of countries is shown. Panel B: Tenants renting at subsidised rent are grouped with private renters in Austria and Denmark. Panel C: Data show the median mortgage burden (principal and interest) or rent burden (private and subsidised) as a share of household income. Housing costs include only mortgage and rental payments and are expressed as a share of household disposable income, including social transfers (e.g. housing allowances) and excluding taxes. Due to data limitations, gross income is used for Chile and the United States; net income is not adjusted for local council taxes and housing benefits in the United Kingdom, or for personal income taxes in Türkiye. Results are reported only for categories with at least 100 observations. Data refer to 2023 for Switzerland and the United States; 2022 for Canada, Chile and the United Kingdom; 2021 for Australia; 2020 for Türkiye; and 2017 for Israel and New Zealand. Data for Hungary are excluded as they are under revision.
Source: OECD Affordable Housing (database).
However, over the past two decades, price pressures have intensified. Between 2005 and 2023, house prices in Austria more than doubled (+163%), an increase that was almost three times as high as that of the euro area (60%) and of Austria’s Harmonised Index of Consumer Prices (HICP) (56%) (ONB, 2023), marking an increase in real terms of almost 70%. This has led the price-to-income ratio in Austria to become higher than OECD and euro area averages, with an increase over the past 25 years that has been one of the highest in the OECD (Figure 3.2, Panel A). Rents, which play a key role especially in big cities, have grown by more than 75% over the past 15 years, while in the euro area rental price increases over the same period averaged approximately 25% (Figure 3.2, Panel B). These dynamics have marked a sizeable deterioration in affordability (ONB, 2023).
Index, 2015 = 100
Note: Data are seasonally but not calendar adjusted. The Euro area aggregate corresponds to the 20 OECD members countries of the European Union minus Croatia, Cyprus and Malta. The OECD aggregate corresponds to the unweighted average of the OECD countries. Both averages only refer to countries with data for both periods.
Source: OECD Analytical house prices indicators (database).
Rents have increased by more than 55% across all regions over the past 15 years (Figure 3.3, Panel A). Although the increase in average rents has been broadly similar nationwide, substantial differences in housing and rental costs persist between regions and between major cities and other areas, with price pressures concentrated in the main urban centres as happens in many OECD countries. For instance, the average rent in Salzburg, Austria’s most expensive region, has consistently been around 60% higher than in the rural region of Burgenland (Figure 3.3, Panel A). The impact of higher demand on rental costs has partly been mitigated by the high share of rents that are not market-determined, with private rentals leading the increase in overall rental prices, especially those for new tenants, which have risen faster in the big cities amidst constraints on the supply of limited-profit and social housing. Residential property prices in Vienna have remained well above the national average throughout the past 15 years (Figure 3.3, Panel B).
Note: The Euro area aggregate corresponds to the OECD countries of the euro area.
Source: Statistics Austria: Microcensus Housing 2024; Austrian National Bank, ECB.
The progressive erosion of housing affordability imposes burdens on households, constraining disposable income available for consumption and saving and lowering the quality of life. It also increases inequality and undermines social cohesion, as these price pressures disproportionately affect lower-income households, as it happens in many other OECD countries, while access to limited-profit housing is supply-constrained, with long waiting lists. While fewer than 5% of Austrian households spent over 40% of their disposable income on housing in 2024 (compared to an OECD average of above 9%), this proportion quadruples to 20% amongst households in the bottom income quintile (compared to an OECD average of around 29%) (OECD, 2024b).
This chapter examines how Austria can address the mounting challenge of declining housing affordability and increase the efficiency of its housing market. Section 3.2 investigates the obstacles that have increasingly restricted the supply of new limited-profit and social housing in recent years. Section 3.3 proposes reforms to the immovable property tax system, such as updating the tax base and increasing levies on unused land, aimed at enhancing supply and market efficiency. Section 3.4 explores policies to increase the total housing supply elasticity and efficiency, while favouring a better match between demand and supply, such as streamlining building permit procedures and improving land use. Section 3.5 assesses the challenge of improving energy efficiency.
Since 2002, Austria's population has grown by around 13%, driven partly by net migration, including refugee influxes during the Syrian crisis in 2015 and Russia’s war against Ukraine since 2022. The total number of dwellings increased by 30% since 2001, primarily due to a construction cycle that began in 2017 and peaked in 2021 (Figure 3.4, Panel A). This growth in total supply helped reduce the housing shortage, although the number of households increasing faster than the population with declining average household size and rising numbers of single-person households (Schneider, 2019). However, this construction cycle came to an abrupt halt since 2021 (Figure 3.4, Panel B).
Austria’s distinctive housing model relies heavily on the limited-profit and social housing sectors to maintain affordability and meet social objectives (Figure 3.5,Panel A), particularly in large cities. This approach has some similarities to the models in Denmark and the Netherlands. Dwellings delivered through this model have historically made an important contribution to overall increases in the housing stock and its quality. Most of these dwellings have been delivered through the limited-profit sector (LPHAs, see Box 3.1), which constitutes a distinctive third sector positioned between for-profit enterprises and public (municipal) housing provision (Figure 3.5, Panel B). This limited-profit sector has deep historical roots in Austria, tracing back to the 19th century and emerging from the broader cooperative movement.
Note: Panel B: The EU corresponds to the composition of European Union as of 2020. Data are seasonally and calendar adjusted.
Source: Statistics Austria; Eurostat.
Percentage, 2022 or latest year available
Note: The OECD aggregate is the unweighted average of OECD countries; the EU reflects the composition of the European Union as of 2020. A selection of countries is shown. Panel A: For the Netherlands, social housing is estimated from rent levels reported by the Ministry of the Interior and Kingdom Relations and includes below-market private rentals and housing association units, excluding market-rate units. For Norway, data cover only municipal dwellings (about 75% of total social housing). For the United States, social housing includes public housing, section 202 and 811 units, and income-restricted LIHTC units; figures are adjusted to avoid double-counting following OECD–HUD correspondence. Data are preliminary. Panel B: For Belgium, Canada, Denmark, France, Ireland, Luxembourg, Norway, Spain, and the United Kingdom (England), responses are based on previous QuASH rounds. Data for Germany are unavailable; social housing is mainly provided by municipalities, public institutions, and housing cooperatives, with private providers significant in some Länder. Data for Italy are under verification. Regional authorities include regional and municipal authorities and public agencies; national authorities include public agencies; for-profit refers to individual providers.
Source: OECD Affordable Housing (database).
Austria's system of limited-profit housing associations (LPHAs) represents a key institutional mechanism in the country’s social housing policy, with LPHAs growing in importance from 1950s and accounting for more than two-thirds of the social and affordable housing stock.
LPHAs are private, not-for-profit entities mandated to provide a long-term social housing stock at below-market cost rents. They comprise cooperatives and limited companies, with ownership structures including public authorities, charities, financial institutions, and private actors. They are subject to rigorous oversight through internal supervisory boards, a national audit association and also regional regulatory authorities. LPHAs are regulated by the Limited-Profit Housing Act of 1979 and operate according to some core principles:
Cost coverage: rents are calculated on a cost-recovery basis, including financing, maintenance, and refurbishment costs, and must not exceed nor be less than these costs.
Profit limitation: housing associations should make profits, but these profits must be reinvested in the purchase of land, new construction or refurbishment of existing building stock. Only a very limited part of the profit may be distributed to shareholders.
Asset tie-up: Assets are locked into the social housing system. Sale of enterprises does not yield capital gains for owners.
Restricted scope of activity: LPHAs are limited to housing development, refurbishment, and management.
Obligation to build: any interruption in approved building activity requires the expressed permission of the respective regional government.
LPHAs’ financing model usually foresees that for each new project they need to cover 100% of land costs and around 10-20% of construction costs, meaning the increases in these prices pose a substantial challenge for LPHAs.
Most of the funding comes from both public and commercial loans, with public and commercial bank loans representing respectively around 36% and 39% of the funding sources. Tenants contribute to the financing of LPHAs’ activities (3-7% on average) by granting a quasi-loan to the association, in the form of a down payment, which does not exceed 12.5% of the total construction costs and may also cover a share of land costs. This amount is given back to tenants at the time of moving out depreciated by 1% for each year of occupation of the dwelling. Low-income households who cannot afford to pay such amount can get a public loan with 1% interest.
The Austrian social housing model of LPHA is designed as universalist, wherein access to subsidised housing is not confined to low-income households. Income thresholds for eligibility are set relatively high, effectively encompassing a broad segment of the population (in most provinces, LPHAs’ supply covers housing needs from very low income to around the 8th income decile). Moreover, income reassessments after allocation are generally not carried out, allowing households to remain in their homes as their financial situation improves. This is intended to avoid socio-economic segregation, geographic concentration of poverty and the stigmatisation of social housing tenants.
This approach also generates a significant overlap between the social and private rental sectors, leading to direct competition in terms of both rent levels and housing quality and allowing to strengthen the price-moderating effects of the social housing stock and extend it to private rental accommodations as well.
Source: (IIBW, 2016) (OECD, 2023).
Austria’s system of limited-profit and social housing has come under considerable strain in recent years, struggling to keep pace with demand, especially in main urban areas, mainly due to financing constraints. Public expenditure on social housing almost halved as a share of GDP between 2010 and 2022 (Figure 3.6, Panel A), while the costs of initiating and executing building development projects have substantially increased. Construction costs have risen in line with headline inflation and the European Union (EU) average, but more than GDP, growing by around 22% since the end of 2020 (Figure 3.6, Panel B). Average purchase prices for constructable land have grown much faster than inflation, increasing by roughly 90% between 2013 and 2023, meaning an increase in real terms that overcomes 40% (Figure 3.6, Panel C).
Note: Panel B: EU average data for 2024-25 is computed on available OECD-EU countries. Data are unadjusted (i.e. neither seasonally nor calendar adjusted). Panel B: The EU corresponds to the composition of European Union as of 2020.
Source: OECD Affordable housing (database), Statistics Austria, Eurostat.
These dynamics, combined with the increase in interest rates since 2022, have posed a key financing challenge to the limited-profit sector. The increasing difficulties to find the means to pre-finance the land and construction costs have contributed to shrinking the share of new housing developed by the limited-profit sector since 2021. In the 20 years preceding the pandemic, limited-profit associations accounted for most of the new housing production, expanding the limited-profit rental housing from 9% of Austria's total housing stock in 1971 to 17% by 2020 (WIFO, 2023). However, since 2021 this share has substantially decreased, reaching less than 30% in 2024 (GBV, 2025; Statistics Austria, 2025).
The progressive reduction of the share of supply developed by limited-profit associations has negatively affected overall affordability, especially in large cities. The for-profit segment has been leading the increase in rental prices registered in the past 15 years. In housing constructed newly from 2011 onwards, for-profit rents are 74 % above those of limited-profit dwellings, with the gap reaching 91% in Vienna; while for housing built before 2011, rents in the for-profit sector had been on average 49 % above the rents in the limited-profit sector (53 % in Vienna) (Figure 3.7). Empirical evidence confirms that limited-profit housing supply has historically generated a downward pressure on non-regulated rental prices, with these price-moderating effects extending beyond direct beneficiaries to encompass residents of private rental accommodation as well (WIFO, 2023).
Average net rent per sqm in Austria and Vienna for total market and new build since 2011, 2023
Note: Average net rent excludes service charges and up-front renters’ contributions (Finanzierungsbeitrag) for limited profit rent. Public rent refers to social housing directly provided by public authorities, mainly municipalities.
Source: Statistik Austria, Microcensus 2023.
Helping the limited-profit sector keeping pace with the overshooting demand would help to boost housing supply and protect overall affordability. In 2024, the Austrian federal government adopted a comprehensive housing package totalling around EUR 2.5 billion over the period 2024 to 2026 (0.4% of annual GDP) designed to restore housing affordability (Austrian Parliament, 2024). The allocation designates EUR 1 billion for constructing approximately 10 000 new rental and owner-occupied units in the limited-profit sector. An additional EUR 500 million provides federal states with resources to offer subsidised loans (up to EUR 200 thousand per application) to limited-profit developers at maximum interest rates of 1.5%. The remaining funds support energy renovation initiatives through subsidies and tax concessions, alongside demand-side interventions to lower the ancillary costs of purchasing a home for first-time homebuyers, such as waiving registry fees for ownership rights and lien fees in the case of loan financing.
However, more structural measures are needed to preserve the well-functioning of the housing model based on the limited- profit housing sector, allowing the latter to sustainably boost supply in contexts of heightened fiscal pressures (Chapter 1). Until the late 2000s, earmarked tax revenues transferred from the Federal government to Länder played an important role in financing housing subsidies. With the Financial Equalisation Act of 2007, the earmarking of these tax revenues was abolished and they became unconditional transfers from the federal government, making the financing of the housing subsidy schemes the full responsibility of the Länder (IIBW, 2024). Since then, despite revenues from outstanding loans to limited-profit developers having grown, local governments have faced difficulties in providing the same level of subsidies in real terms, negatively affecting the supply of social housing. The reintroduction of the earmarking of the federal transfers, which is in the programme of the government, would help secure a more stable financial support for the supply of affordable lodging.
Better targeting of publicly subsidised cost-based rental housing would allow to make more effective use of this housing stock in areas of high price pressure. On average, approximately 80% of the Austrian population is eligible for publicly subsidised cost-based rental housing, with the percentage being even higher in some municipalities (Housing Europe, 2021). A measured lowering of the income thresholds for eligibility, for example excluding those above the 7th income decils in areas experiencing the strongest price pressures, could help to prioritse the avaiable housing stock. This would align the model more closely with that of the Netherlands, where the threshold is slightly above the median income (OECD, 2025c), without substantially jeopardising the universalistic nature of the system, allowing the preservation of social mix and the limited-profit segment’s price-dampening effect.
Regularly reassessing the financial situation of tenants in limited-profit housing and increasing rents for those who no longer satisfy the eligibility criteria would help to sustainably finance LPHAs in the long run, allowing their supply to keep pace with rising demand despite increases in construction costs. Eligibility for non-market rentals is currently only assessed at the time the rental contract is signed, and therefore income improvements thereafter are not considered, allowing people to remain in publicly subsidised cost-based rental housing even if their income has risen well above the threshold. An increase in rent that maintains it below that of for-profit units would marginally increase the average rent in the short term, but would help LPHAs to continue providing an adequate share of total supply without further burdening the public finances, ultimately providing a structural dampening effect on rent prices. Considering rents in the for-profit sector have been on average around 50% above the rents in the limited-profit sector, there is space to make people with an income above the eligibility threshold contribute more to finance LPHAs’ supply while also maintaining for them the convenience to remain in limited-profit dwellings.
Many OECD countries, such as Ireland and France, revise rents of publicly subsidised cost-based rental housing for those whose financial situation has improved (OECD, 2024b). In the Austrian case, applying this approach to already-built limited-profit housing would also help to improve fairness. Rents in the limited-profit sector are calculated on a cost-recovery basis, creating a substantial inequality between old and new limited-profit housing tenants, as construction and land costs have increased significantly over the past 20 years. Allowing for a modest upward revision of rents for people whose financial situation has improved and live in older limited-profit buildings would contribute to intergenerational fairness without compromising social mix, as tenants would not be forced to leave their accommodation, as occurs for example in Belgium (OECD, 2024b), and this would preserve place-based social capital.
Revising the rules for limited-profit rent indexation could further contribute to reducing distortions in the housing market and generating additional income for the limited-profit sector. Currently, only a portion of limited-profit rents is indexed to general inflation through the consumer price index (CPI), specifically, the so-called "maintenance and improvement contribution" (Erhaltungs- und Verbesserungsbeitrag - EVB) (Housing Europe, 2021). While the maintenance and improvement contribution increases with the age of the building, from EUR 0.53 per square metre for new builds to EUR 2.13 per square metre for buildings older than 30 years (Housing Europe, 2021), this increase is offset by the a provision whereby, once the initial loans taken out by the LPHA have been fully repaid (usually after 30-40 years), LPHAs charge only a "base rent" of approximately EUR 2 per square metre (VOWG, 2025). Extending indexation to the entire rent would help LPHAs maintain their investment capacity in real terms over time without substantially worsening affordability, given that nominal salaries in Austria closely follow headline inflation, although this may require additional social support for low earners.
Austria imposes one of the lowest rates of recurrent immovable property tax within the OECD, and the tax base does not reflect the current market value of immovable properties (OECD, 2024c). Revenues from immovable property taxation in Austria were equivalent to approximately 0.6% of GDP in 2022, substantially below the OECD average of 1.8% of GDP (Figure 3.8). Real estate transaction taxes, with a progressive structure that reaches the 3.5% rate, are close to the OECD average (OECD, 2024c) (Business Service Portal, 2025). While a modest transaction tax may prevent speculation, this kind of levy is distortive and reduces housing market liquidity and efficiency, making it more costly to move and adding to price volatility (OECD, 2022a). The favourable tax treatment of housing due to the very low recurrent immovable property tax may encourage people to boost housing consumption and to invest their money in immovable property rather than other assets, boosting housing demand and thus inflating prices. This is regressive, given that wealthier households are more likely to own their homes and the undervaluation resulting from the current tax base can be expected to be particularly large for high-value properties (Böheim et al., 2010). Research has found that favourable tax treatment of immovable properties raises property prices and contributes to the instability of the housing market (Poghosyan, 2016).
Decomposition of tax revenue on property, Percentage of GDP, 2024 or latest year available
Note: The OECD aggregate is the unweighted average of the OECD countries. Data for OECD average, Australia and Greece refer to 2023.
Source: OECD Tax Revenue (database).
As recommended by the previous OECD Economic Survey of Austria (Table 3.1), transitioning the tax base for recurrent taxation from outdated cadastral housing values, which have remained unchanged for nearly five decades, to the market value of the property would improve the fairness and effectiveness of Austria's immovable property taxation system, enabling higher revenue collection (OECD, 2024c). An increase of the low tax rate could also be envisaged in the future. These additional revenues could potentially be used to financing limited-profit building projects. Implementation of this reform would require establishing regular property value updates consistent with practices in other OECD countries, such as Japan, Korea, New Zealand and the Netherlands, leveraging digital technologies to extract current market information from property advertising platforms or employing computer-assisted mass appraisal methodologies (OECD, 2024c). An amendment to tenancy law designed to prevent landlords from passing increased taxation fully onto tenants could be considered to ensure the reform does not worsen housing affordability.
Such a reform would have the additional benefit of addressing the root cause that brought the Austrian Constitutional Court to rule the inheritance tax to be unconstitutional in March 2007. The decision was due to the unequal treatment of financial and real estate assets that violated the constitutional principle of tax equality, as taxpayers with similar wealth faced different tax burdens depending on whether their assets were real estate or financial instruments. This was caused by the valuation of real estate assets being based on outdated values assessed decades ago while financial assets were being assessed more contemporaneously. The proposed reform would establish a greater alignment between the valuation of the two types of assets, solving the problem and enhancing the fairness and constitutionality of the system.
The introduction of recurrent taxes on vacant dwellings, together with the deep revision of the existing levy on constructable land, could further foster affordability. This is now possible because of the constitutional amendment enacted through the 2024 housing package which extended the opportunities for Landers to impose recurrent levies on vacant dwellings. Taxes of this kind rank among the least distortionary and growth-inhibiting fiscal instruments (OECD, 2022a; Akgun et al., 2017)), and would enhance supply efficiency by creating disincentives against land and property hoarding, effectively stimulating and mobilising total supply. Moreover, although modest, the revenues generated by these new levies could potentially contribute to the limited-profit and municipal housing development.
Empirical evidence suggests that increasing levies on vacant land tends to have a positive effect on total supply and housing density, whilst being progressive as they particularly impact higher-income households (Wassmer, 2016). The existing “Building land mobilisation levy” (Bodenwertabgabe) is very low, with many exceptions and geographical limitations, and with total revenue in 2024 barely reaching EUR 7 million in 2024. Its revision could follow the example of Ireland or Korea. Ireland’s Residential Zoned Land Tax (RZLT) targets owners of undeveloped land that is zoned for residential use and applies an annual rate of 3% on the market value of such land. In Korea, the tax rate on vacant land increases progressively over the period a zoned plot remains vacant, starting from 2% and reaching 10% in the tenth year (Haas and Kopanyi, 2017). Pursuing such a reform would necessitate establishing a national registry of unused or underutilised land and assessing housing density relative to densities permitted under official urban planning frameworks, similarly to what Luxembourg is currently implementing (OECD, 2025). For this approach to be effective, it requires ensuring that urban density regulations align with national housing policy objectives.
Similarly, a tax on vacant dwellings would promote more efficient utilisation of the housing stock in selected areas. With a share of vacant dwellings and seasonaly residences of around 15% of the total housing supply, Austria ranks high amongst OECD countries. The share is lower than OECD countries where seasonal holiday homes are widespread, such as Portugal and Spain, but still higher than other European countries such as Germany (8.2%), UK (6%) or The Nethrlands (below 3%) (OECD, 2024b). However, often these vacant dwellings in Austria tend to be in areas of low housing demand.
Recurrent taxes on vacant dwellings are conventionally structured as annual levies on residential properties that remain unoccupied for minimum durations within specified periods. Successful precedents, including Vancouver's "Empty Homes Tax" and the "Taxe sur les logements vacants" implemented by numerous French municipalities, demonstrate that well-designed recurrent taxes on vacant dwellings incentivise property owners to return these units to rental or housing markets, thereby enhancing supply efficiency (OECD, 2022a). The French “Taxe sur les logements vacants” applies only to municipalities with more than 50,000 inhabitants or with difficult access to lodging, allowing exemption of properties in areas where housing supply clearly exceeds demand and ensuring to better target vacant dwellings in high-cost pressure areas. Levies of this kind exhibit strong progressive characteristics, as they target owners of secondary real estate properties, who are typically concentrated within upper income and wealth distributions. However, the implementation of such a tax would require the availability for the federal government of reliable nationwide data on actual vacancy rates.
While overall housing supply in Austria has been adequate, the balance of supply and demand has deteriorated recently, and substantial regional disparities persist. Vienna and other Austrian cities have experienced substantial increases in housing prices and rents over the past decade due to strong demand and constrained supply, whilst many rural regions face population stagnation or decline, resulting in a housing stock that exceeds demand and difficulties maintaining local services and infrastructure (Schneider, 2019). Allowing supply to better respond to demand across regions and zones would be beneficial for affordability, as would creating the condition for demand to move away from high price pressure areas. To this end, a more responsive and flexible permitting system, more coherent and effective land use decisions and a strategic infrastructure development would help.
3.4.1. Enhancing land use
Land-use decisions directly impact housing supply and, consequently, house prices and rental costs (Buchler et al., 2024). Decision-making responsibility is shared across all three government levels (national, state, and municipal), with Austria scoring worse than the OECD average in the land-use governance indicator, reflecting fragmented decision-making and overlapping responsibilities between government levels (OECD, 2019). Despite Austrian municipalities being among the OECD's smallest, with an average population of around 4,000 inhabitants (compared to the OECD average of more than 10,000) (OECD, 2025d), they hold substantial responsibilities for land-use plan preparation within their territories (OECD, 2017a). This structure means that poor coordination between municipalities and not-in-my-backyard attitudes may create conflicting objectives and regional imbalances. While these dynamics have not significantly constrained total housing supply so far, coherent and sustainable land development strategies that transcend municipal boundaries, and are coordinated at higher levels of government, are also essential to addressing growing urban-rural imbalances, as is the concerted development of infrastructure and services.
Regarding spatial planning, the Austrian Conference on Spatial Planning (Österreichische Raumordnungskonferenz, ÖROK) was set up in 1971 with the aim of coordinating spatial planning policies amongst the three levels of government. While ÖROK has enhanced coordination and improved spatial planning effectiveness, its recommendations lack legal enforceability and constitute only voluntary agreements. Strengthening ÖROK's monitoring and enforcement powers would reinforce higher-level oversight and increase effectiveness by ensuring different government levels implement agreed decisions, thereby improving land planning efficiency. Making ÖROK’s decisions fully binding in a way that overrides Länder/municipal autonomy would require a constitutional change. However, conditioning federal or EU grants and financing to the conformity and timely implementation of decision jointly agreed within the OROK framework could represent a viable solution and create incentives for local authorities to act in alignment with national priorities and common objectives. Additionally, establishing clear, universal time limits for land development following zoning designation would enhance supply responsiveness (OECD, 2017b).
Ensuring the conformity of land use decisions with national priorities would favour better and more balanced development across different geographical areas beyond eventual contrasting local objectives. Higher density in areas proximate to public transport infrastructure, if environmentally sustainable, should be pursued despite the possible existence of local resistance, as this allows more efficient use of land. Similarly, transport links should be enhanced through expanded public transport networks and improved road infrastructure. This would better connect rural and peri-urban areas with urban centres, thereby reducing commuting burdens and lowering the opportunity cost of living outside cities, ultimately reducing price pressures in major urban centres.
International experience confirms that well-designed inter-regional development projects, such as efficient transport links, have the potential to increase commuter numbers and balance house prices, raising them in lower-cost areas while reducing pressure in higher-cost locations. The opening in 2000 of the Øresund bridge connecting the southern, more rural Swedish region of Skåne to the Danish Capital Region through both railway and motorway provides a concrete example. It has rapidly brought commuters to rise roughly seven-fold and fuelled a housing boom on the Swedish side, where property prices were far lower, while lowering excessive demand in the region around Copenhagen, demonstrating the importance of shared land and infrastructure development (OECD, 2016).
The Vienna Urban Mobility Plan provides a further example of the importance of coordinating action beyond municipality’s boundaries. It contains measures pertaining to both spatial planning and infrastructure development to better handle and distribute the overshooting housing demand in the capital. Some of the key measures are: stepping up rail transport services in the near environs, extending cycling routes crossing the city limits, strategically developing multi-modal transportations through the right collocation of hubs, parking and new lines and discouraging dispersed settlement. However, effectively implementing all these measures cannot be done without a close cooperation within the entire Eastern Region, comprising the provinces of Burgenland and Lower Austria (Vienna City Administration, 2025).
3.4.2. Streamlining building permit procedures
A complicated permitting system constrains housing supply and drives up costs, for both private and limited-profit developers. Building permit processes in Austria are primarily regulated at the regional level but implemented by municipal councils, creating substantial disparities in operational efficiency and digitalisation across the country's 2000+ municipalities. This fragmentation generates considerable complexity, with varying requirements, procedures and documentation standards between municipalities that slow project implementation and prevent developers from achieving economies of scale. Austrian developers typically face ten procedures spanning 215 days at a cost of 0.9% of project value to secure construction permits, compared to top-performing countries like Denmark, where the same process takes one-third of the time (World Bank, 2023).
Digitalising the entire permitting process through advanced technology is key for improving effectiveness, as it typically delivers significant efficiency gains and reduces approval times (World Bank, 2020). However, whilst some Austrian municipalities already process submissions digitally, comprehensive end-to-end digital procedures remain rare exceptions. International experience demonstrates the transformative potential of digitalisation. Estonia's fully digitalised building permit system has reduced average waiting times to 100 days, half of Austria's duration (OECD, 2024a). Vienna's pioneering "Building Regulations Information for Submission Envolvement" (BRISE) project offers a potentially scalable solution for creating digital one-stop shops and improving building permit effectiveness nationwide (Box 3.2).
Introducing clear national statutory deadlines for building permits and implementing tacit approval mechanisms for simpler, lower-risk projects - which would be automatically approved if regulatory agencies do not respond within deadlines - could further enhance supply responsiveness. Bavaria's differentiated permitting approach, introduced in 1994, reserves full regulatory review for high-risk, complex projects, while allowing low-risk developments to proceed based solely on architect liability assumptions. This reform generated substantial cost savings for both developers and local authorities (World Bank, 2012). While streamlining permit procedures would allow to enhance supply efficiency and responsiveness, it is important this is pursued in a way that safeguards ecological standards, safety and individual rights.
The Building Regulations Information for Submission Envolvement (BRISE) project combined Building Information Modelling (BIM), artificial intelligence (AI), and augmented reality (AR) to create a comprehensive digital approval process.
BIM enables automated submission checks using three-dimensional models, while AI facilitates automated verification of legal compliance, document validation, and digital construction supervision support. AR provides intuitive project visualisation, allowing citizens to view three-dimensional models of proposed buildings virtually rather than deciphering traditional construction plans.
Prior to BRISE's implementation, building approvals required multi-stage, paper-based processes that generated approximately 200 tonnes of archived documents and averaged one year per application. The project's holistic digital approach has accelerated procedures by up to 50% while enhancing transparency, delivering time and cost savings for both applicants and city administration.
Source: OPSI, BRISE Vienna; Piloting the BRISE-Vienna results.
Austria has one of the OECD's oldest housing stocks, with over 60% constructed before 1979 (Figure 3.9, Panel A). This contributes to high energy intensity of the residential sector, which exceeds the OECD average and ranks amongst the highest in the OECD (Figure 3.9, Panel B). Combined with the use of fossil-fuel heating systems (heating oil and natural gas), which is declining but still widespread, this results in direct emissions from the residential sector that are above the OECD average. Indirect emissions instead remain below the OECD average due to Austria's increasing renewable energy share in the total energy mix (OECD, 2025b).
Residential heating in Austria is already subject to carbon pricing under the national emissions trading system (NEHG). Nonetheless, the forthcoming introduction of the EU Emissions Trading System for buildings and road transport (ETS2), scheduled now for 2028, is expected to influence emission dynamics significantly. While the NEHG has so far provided mainly price-based signals, the ETS2 will operate under a binding emissions cap with a linear reduction factor. This implies a shift from a price-based to a quantity-based framework, which will require emissions to fall at a predetermined rate, imposing a structural constraint on aggregate emissions. Consequently, emissions from the residential sector are expected to decline more rapidly once the ETS2 enters into force.
Various incentives and programmes have been implemented during the years through the Renovation Offensive (Sanierungsoffensive), a comprehensive policy package launched in 2009 to accelerate energy efficiency renovations for private individuals, businesses and associations. The "Away from Oil and Gas" (Raus aus Öl und Gas) programme, active in 2023-2024, combined federal and state funding to subsidise up to 75% of investment costs for switching to renewable heating, with support reaching 100% for low-income households. The programme processed more than 50,000 applications during the two years it was active, achieving an estimated 1.2 million tonnes of CO₂ emissions savings calculated over the lifecycle of the replaced heating systems (EEÖ, 2024). This was coupled with the Renewable Heat Act, which banned fossil fuel heating in new buildings and mandated replacement of broken oil and coal systems with renewables from 2023. The Renovation Offensive (Sanierungsoffensive) has been renewed in 2025, and it will be active in the period 2026-2030. It will provide EUR 360 million each year for two instruments: the incentive for boiler replacement with climate-friendly heating systems and the renovation bonus for thermal-energetic renovation (Austrian Government, 2025).
Note: Panel A: The EU corresponds to the composition of European Union as of 2020. Data for Slovenia refer to 2021. Panel B: The OECD aggregate corresponds to the unweighted average of the OECD countries shown in figure.
Source: EU Building Stock Observatory database; EU Commission and International Energy Agency (IEA).
Despite incentives, the percentage of residential buildings renovated annually in Austria stands at about 1.5% per year, half the 3% that would be needed to upgrade all thermally deficient housing by 2040 (Amann, 2021). Beyond re-introducing well-targeted incentives at a federal level, as partially happened in 2025, addressing this shortfall on the demand side requires avoiding multiple and uncoordinated schemes at different government levels (federal, regional, local), which can end up confusing beneficiaries and diluting their impact. Consolidating the different programmes and creating a digital, clear, user-friendly one-stop shop for applicants would increase the effectiveness of these programmes. New incentive schemes should prioritise deep renovations, which represent only a tiny fraction of current interventions and are declining over time (E3G and Renovate Europe, 2022). France’s Energy Efficiency Passport (Passeport Efficacité Énergétique) had positive effect on the rate and the depth of building renovation by providing a digital tool to guide homeowners through renovation processes, while helping them navigate financial incentives and identify optimal interventions. Moreover, Austria’s incentives programmes may have created barriers by requiring upfront payments, with grants paid only after completion. This particularly deters costly deep renovations and low-income households. Providing interest-free loans, following France's Éco-prêt à taux zéro model, could overcome upfront payment obstacles.
On the supply side, construction industry capacity must expand to achieve Austria's energy renovation and decarbonisation targets. Beyond obstacles like building product scarcity and supply chain bottlenecks, the shortage of well-trained workers for energy enhancing renovation represents a key barrier (BMIMI, 2021). The Ministry of Climate Action published the "Just Transition Action Plan on Training and Reskilling" in 2023 to meet skilled workforce demand in the context of a just transition by 2030. The plan distinguishes between short-, medium-, and long-term measures across four thematic fields (education, companies, framework conditions and communication), each containing concrete actions (OECD, 2024e). While this represents a significant, well-structured step requiring full implementation, further actions may be needed to address unfilled vacancies. The pace and breadth of upskilling could be expanded through strengthened communication campaigns raising awareness of green jobs, particularly for youth, and updated vocational training curricula to better align worker skills with growing demand (OECD, 2024e).
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