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RENTING

EXPLAINED: How the Swiss Tenants Association wants to tackle the housing shortage

Rental prices in Switzerland have been soaring for years with no end in sight. Now the nation's association for protecting tenants has called on politicians to take action with a series of demands.

Flats in Zurich, Switzerland.
Flats in Zurich, Switzerland. Photo by Vincent Dörig on Unsplash

The vacancy rate for dwellings in Switzerland is currently 1.31 percent — well above the long-term national average of 1.07 percent, according to a study published on Thursday by Raiffeisen bank

However, these figures don’t show that the problem is geographical: the housing market has dried up in some parts of the country but not the others.

Vacancies will remain well below the average, meaning that housing will soon become significantly more expensive for more and more households, the bank reported.

Various solutions have been proposed by real estate experts and government officials to overcome Switzerland’s housing shortage.

The latest one, which comes from the Swiss Tenants Association, recommends limiting the living space allowed for each person, as is already the case in cooperatives and public housing.

This means that a single tenant would be entitled to a maximum of two rooms, thus making larger accommodations available for families. Though for larger apartments, too, restrictions are set to be introduced. At least four people should occupy a five-room apartment, for example.

READ MORE: Reader question: Can I sublet my rented apartment in Switzerland

Tenants disagree…

Many Swiss tenants, however, criticise the association’s suggestion that living space be limited per person. Instead, they argue that one’s living space is – perhaps rightfully – a private matter as long as the tenant can afford to pay the monthly rental cost.

Moreover, though some tenants – such as many older people who have lived the majority of their lives in the same large, cheap apartment – may be willing to downsize to smaller living arrangements, but they will struggle to find suitable housing at the same price. This is a problem even the association recognises and it therefore demands that tenants are able to swap their current, larger property for a smaller alternative on the same contractual terms as their existing rental agreement.

City and canton officials from all over Switzerland, as well as representatives of various associations from the construction and housing sectors, were due to meet with the Economy Minister Guy Parmelin to discuss this, and other possible solutions, to the shortage.

Rents and returns need to be monitored

The Swiss Tenants Association argues that the issue with the skyrocketing rents in Switzerland is that landlords, a fair chunk of which includes large corporations, listed businesses and insurance companies, are generating far too high rents that tenants – who are in a dependent position and fear speaking out against rent increases – need to be protected from.

The association says that as a direct result of the ever-increasing rents and returns – which though limited in accordance with Swiss law are not monitored – around 370 francs per household illegally landed in the pockets of real estate companies every month during 2021, amounting to 10.4 billion francs in (stolen) rent overall.

It is now calling for rents and returns to be monitored automatically on an institutional level and says that sanctions should be a viable option going forward.

READ ALSO: How Switzerland’s urban housing shortage is spreading to the countryside

Master plan for more affordable housing

The association is also requiring Swiss municipalities to provide it with so-called special zones for new and affordable living spaces to be built in their respective regions.

However, for this to be possible, the land – it says – must be owned by the public sector, not privately. Additionally, there must be a right of first refusal as well as a restriction on the sale of land that already belongs to the public sector.

At the same time, the organisation finds that the government needs to improve protection against the – sometimes biased – dismissal of prospective tenants. Both property managers and landlords in Switzerland are setting increasingly stricter criteria when allocating (already scarcely available) apartments, with some refusing to rent to couples with children.

Fabian Gloor, lawyer at the Swiss Tenants Association for the Deutschschweiz (German-speaking Switzerland), said that one way to avoid this unfair dismissal for tenants would be to introduce a minimum occupancy regulation which would reduce the chance that childless singles and couples would receive an apartment that is better suited for families.

This has, however, been met with contrasting views from Switzerland’s political parties.

The association also wants landlords to cease increasing rents as a result of renovation work while arguing that no tenant should face losing their home due to rising ancillary costs.

A people line up in a queue

Trying to find a flat in Switzerland? You may find long lines for viewings. Image: Pixabay

Parliament to make rental conditions more difficult for tenants

In the coming months, the Swiss parliament is set to discuss four legislative amendments which, according to the Swiss Tenants Association, would severely impact the legal situation for renters in Switzerland. The parliament will consider granting landlords more favourable conditions when terminating a rental contract for personal use, while making rent increases easier for landlords to enact.

Additionally, it will ponder a further restriction of the right to sublet and for tenants to have a more difficult time contesting their initially agreed upon rent in the future. 

READ ALSO: Zurich hit by affordable housing shortage amid record-high immigration 

The National Council has since spoken out in favour of two amendments to the tenancy law in favour of property owners, which are expected to be passed by parliament in autumn 2023. Once greenlit, landlords will have to explicitly agree to sublet their property in writing and are to be given an extraordinary right of termination in future if the tenant does not comply with the requirements for subletting.

The landlord should then also be able to refuse subletting if the subletting is planned to last for more than two years.

The National Council also approved a bill on the issue surrounding landlords or their family members wanting to use their privately owned rented property for personal use. Specifically, it should no longer be possible for the owner of the property to terminate the rental agreement for an urgent personal need, but rather they will have to assert a significant and current personal need based on an objective assessment. The proponents of this change hope that it will speed up procedures in the event of disputes.

The tenants association is strictly against the move and has announced a referendum – for which it will begin collecting signatures in the autumn of 2023 – should the parliament speak in favour of tightening the Swiss tenancy law.

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RENTING

EXPLAINED: Are you entitled to rent reduction in Switzerland right now?

The Swiss National Bank (SNB) announced on Thursday its second interest-rate cut of 2024. Does this mean some financial relief for tenants?

EXPLAINED: Are you entitled to rent reduction in Switzerland right now?

After cutting the interest rate in March from 1.75 to 1.50 percent, Switzerland’s central bank slashed the rate by another quarter percent to bring it down to 1.25. 

The law of economics, at least in Switzerland, dictates that when the rates are cut, rents will fall as well.

That is because most rents in Switzerland are based on the so-called reference interest rate, which is set by the Federal Housing Administration.

It is an average of all interest paid on mortgages in Switzerland. These, in turn, are based on the SNB’s key interest rate.

As a rule, if the reference rate falls by 0.25 percent — as is the case now —tenants are generally entitled to lower rents.

According to Freddy Hasenmaile, chief economist at Raiffeisen Bank, “the bottom line is that this should slow the growth of existing rents somewhat.” 

When will this rent reduction go into effect?

Unfortunately, this doesn’t happen overnight.

Since long-term fixed-rate mortgages are also included in the calculation, it takes time for the reference interest rate to fall.

When that happens however — likely within the next few months — tenants will be entitled to rent reductions, provided the landlord had raised their rents when reference rates increased in the past.

Be proactive

Ideally, when the rates fall and tenants are entitled to have their rents lowered, the landlord should do this automatically.

But that is not always the case.

That is why it behooves tenants to take this matter into their own hands.

In all, an estimated 2.2 million households in Switzerland can apply for a rent reduction.

To make this process easier, the Swiss Tenants Association has prepared a sample form which can be filled out and sent to the landlard or management company. 

Can the landlord refuse your request for rent reduction, despite lower interest rates?

Yes.

According to Comparis consumer platform, the landlord could refuse to reduce your rent on grounds including value-enhancing works done to the property, higher operating costs due to inflation, or general increases in running expenses.

He or she can also say (and must prove) that the current rents are within the range of other comparable properties in the area.

Can you dispute this decision?

If you have valid reasons to do so, then yes.

For instance, landlords are allowed to  charge a maximum of 0.5 percent of the net rent to cover increases in operating and maintenance costs. 

Also by law, property owners may only pass on to tenants up to 40 percent of the inflation accumulated since the last rent adjustment.

If you have prove that these figures are exceeded, then you can file a complaint with your local conciliation authority. 

READ ALSO: How to solve a dispute with your Swiss landlord 

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