How much state and how much market? Comparing social housing in Berlin and Vienna

Overview of the Study

The article “How Much State and How Much Market? Comparing Social Housing in Berlin and Vienna” appears in German Politics (Vol 32, No 2, 2023) and is authored by Susanne Marquardt, a guest researcher at the WZB Berlin Social Science Center, and Daniel Glaser, an architect and housing expert employed by the Vienna City Administration’s Department for Housing Promotion. The paper analyses the differing social‑housing systems of Berlin, Germany and Vienna, Austria, examining how state involvement and market mechanisms shape housing affordability and market outcomes.

Institutional Context

Both cities operate within comparable welfare‑state frameworks and share similar economic conditions, yet their housing policies diverge sharply. Berlin follows a market‑oriented approach with diminishing public subsidies, while Vienna maintains a strong, permanent state presence through a limited‑profit sector and a housing tax that finances extensive social‑housing programmes. The authors situate these differences within a neo‑institutionalist perspective that stresses the role of institutional arrangements in market performance.

Key Quantitative Findings

• Share of social housing: Berlin 5.9 % of total housing stock versus Vienna 43.1 %.
• Population (2018): Berlin 3.72 million; Vienna 1.89 million.
• New construction (2018): Berlin 12,814 units; Vienna 10,005 units.
• Social‑housing output 2014‑2018: Berlin 1,754 units; Vienna 19,630 units.
• Subsidy per unit: Berlin up to €90,000 (≈ €1,300 /m²); Vienna €40‑60 000 (≈ €850 /m²).
• Rent levels (average €/m²): Berlin private 10.80, social 6.40; Vienna private 11.00, social 4.65.
• Over‑burdened households: 14.5 % in Germany vs 7.1 % in Austria (Eurostat, 2018).

Policy Mechanisms in Berlin

Berlin’s system relies on temporary capital subsidies, means‑tested revenue subsidies and a retreat of the state from active housing provision since the 1980s. Public funding shifted from federal to municipal sources after 2006, and recent programmes offer short‑term rent controls lasting up to thirty years. The limited‑profit sector was largely dismantled in 1990, reducing the incentive to retain affordable rent levels.

Policy Mechanisms in Vienna

Vienna’s model combines a dedicated housing tax (≈ 1 % of wages) with a robust limited‑profit housing association (LPHA) sector. LPHAs must reinvest profits, adhere to cost‑based rent calculations, and maintain rent control indefinitely. Subsidies are lower per unit, but the framework ensures permanent affordability and higher construction efficiency (approximately 20 % lower costs than commercial developers). The city also employs land‑use tools, such as mandatory social‑housing quotas in rezoned areas.

Institutional Embedding and Outcomes

The authors argue that Vienna’s embedded institutional architecture—tax incentives, legal protections for limited‑profit housing, and coordinated land‑policy—creates a self‑reinforcing cycle of affordable supply. Berlin’s fragmented, ad‑hoc measures lack such reinforcement, leading to a declining social‑housing stock (a 70 % reduction in subsidised units since the 1990s) and rents that sometimes exceed private‑market levels.

Comparative Implications

The analysis concludes that Vienna’s permanent state involvement yields higher social‑housing shares, lower rents, and a more equitable burden on households. Berlin’s reliance on temporary market‑oriented subsidies results in insufficient supply, higher over‑burdening, and limited long‑term impact. The authors suggest that for Berlin to improve affordability, it would need to adopt more permanent financing mechanisms, possibly reviving limited‑profit legislation or securing long‑term land‑rights.

Relevance for Sustainable Housing in Europe

For a pan‑European audience, the study highlights how durable institutional designs can deliver sustainable, affordable housing at scale. Key take‑aways include the importance of stable public financing, legal frameworks that bind private actors to long‑term affordability, and coordinated land‑use policies. The stark contrast between Berlin and Vienna offers a evidence‑based reference for policymakers seeking to balance state intervention with market participation to achieve sustainable urban housing outcomes.