Switzerland is putting its housing crisis to a referendum

Fribourg Letter: 60% of Swiss residents are renters, due in part to good legal protections

A new housing development in Zurich. With rents in urban areas of Switzerland on the rise, voters in the country will decide in a referendum on a plan for affordable housing

A new housing development in Zurich. With rents in urban areas of Switzerland on the rise, voters in the country will decide in a referendum on a plan for affordable housing

 

Amid rising rental prices in urban areas, Swiss voters are being asked to decide on a proposal that will impose a 10 per cent minimum quota of social and affordable housing on new residential development nationwide. Six out of 10 Swiss residents live in rented accommodation.

The Swiss already have a constitutional right to “adequate housing on acceptable terms”, but if the initiative is passed on February 9th, the government will be forced to introduce a raft of new laws promoting non-profit owned housing. The current share of housing owned by co-operatives, foundations and associations is estimated at four per cent of the total housing stock.

Under the Swiss popular initiative system, campaigners who gather enough signatures (100,000 in 18 months) can submit their proposed legislation to a national vote. This “more affordable housing” initiative was brought by the Swiss Tenants’ Association with the backing of the Social Democratic Party and the Green Party.

Long-term rents

The reason so many people rent in Switzerland, in many cases for life, is because of the historical availability of good quality rental housing and good legal protections for tenants. Banks also require high minimum deposits from mortgage applicants making home ownership unaffordable for many.

Landlords are allowed to increase rent only when their costs go up, for example due to interest rate increases or renovation costs. Over time, this has meant that long-term tenants end up with relatively low rents while those entering the open market bear all the pricing pressure of rising demand.

The latest national statistics show that the average monthly rent in 2017 stood at 1,329 Swiss francs (about €1,200) per household, but a three-bedroom apartment on the open market cost 3,800 francs in Geneva, 3,073 francs in Zurich and 2,850 francs in Lausanne, according to a 2019 survey by the price comparison website comparis.ch.

Economist Marco Salvi of the think tank AvenirSuisse says that strain on the rental market is to be expected in the context of a flourishing economy and high immigration. Salvi agrees that a better system is needed to deal with the social costs of higher rents. “For me, it’s not by underpricing housing but by giving subsidies to households in need.”

As always, location is key. There has been a building boom over the past five years, mainly in smaller towns and commuter suburbs, and many of these apartments are lying empty. Between 2012 and 2019, the vacancy rate across the country increased from 0.95 to 1.66 per cent.

Investors

The popular initiative is partly a reaction to the growing presence of institutional investors in the Swiss residential market. Foreign firms are not allowed to invest in residential property in Switzerland but there are enough pension funds, insurance companies and other big investors in the Swiss market for them to play a major role, especially in prime locations.

Recent years have seen several high-profile cases of institutional landlords carrying out mass evictions in order to renovate apartment blocks or demolish and rebuild. Landlords have the legal right to terminate rental contracts if they carry out a total refurbishment.

Credit Suisse Pension Fund, owner of a complex of 405 apartments in the Brunau area of Zurich, is currently locked in a dispute with a group of tenants it wants to evict, some of whom have lived there since the early 1980s.

The UN special rapporteur for housing, Leilani Farha, got involved in the Brunau case when she went to visit the neighbourhood last summer. She was keen to raise awareness of what she calls the “financialisation” of the housing sector.

“That’s the bulky terminology I use but there’s isn’t a better way to describe the phenomenon at this point. Big financial institutional actors move in and try to extract profit from apartment buildings, particularly those with affordable units. Because where there’s affordability, those financial actors understand that there’s room for a better profit margin.”

Swiss political parties on the right and centre-right, representing the majority in parliament, are opposed to the initiative, as is the government. They argue that it is not the right instrument to tackle problems in the market when housing supply and ownership varies so much depending on location. A quarter of the rental housing in Zurich, for example, is already in non-profit ownership.

If voters reject the affordable housing initiative, the government has pledged an extra 25 millionfrancs per year over ten years for an existing fund which provides loans to housing co-operatives on favourable terms. Although public support for the initiative was initially strong, polls have shown the yes vote losing ground as the campaign progresses.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
GO BACK
Error Image
The account details entered are not currently associated with an Irish Times subscription. Please subscribe to sign in to comment.
Comment Sign In

Forgot password?
The Irish Times Logo
Thank you
You should receive instructions for resetting your password. When you have reset your password, you can Sign In.
The Irish Times Logo
Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.
Screen Name Selection

Hello

Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
Forgot Password
Please enter your email address so we can send you a link to reset your password.

Sign In

Your Comments
We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.