Increasing rent regulation in cities: The big picture
December 11, 2023
Topics
Although government intervention to regulate the Swiss housing market has always been an issue, calls for it have recently become louder. In the past, the focus was on providing and promoting affordable housing through an active land policy, subsidized loans and subsidies, and mandatory forms. New initiatives and approaches are now aimed at direct regulations for rents in new builds, replacement new builds, conversions, or following renovations. As a result, property owners are increasingly confronted with rent regulations, especially in cities. These corresponding laws have been in place for longer periods in some major cities (such as Geneva) and shorter periods in others (Lausanne, Basel, Bern, and Zurich). A large number of new regulations are now in force or already planned, an overview of which can be found below.
Increasing market intervention in small and medium cities
Rent regulation for new buildings – and increasingly for renovations and extensions, as has long been the case in French-speaking Switzerland – is now also gaining ground in German-speaking Switzerland. A prominent example in 2023 is the city of Zug, where, following the recent adoption of a popular initiative in densely populated areas, a minimum proportion of 40% of newly built apartments must be in the affordable segment. There are also rumblings in the canton of Zurich: the ongoing housing protection initiative would allow municipalities to introduce a permit requirement for demolitions, conversions, and renovations, accompanied by (temporary) rent regulations. Existing properties are therefore also likely to become the focus of new regulations.
The wrong direction for housing construction
There has been a further extension of state intervention across the board and an increase in small and medium-sized towns. Interest in investment, which is already dampened by rising interest rates, higher construction costs, increased objections, and stricter building laws, is likely to weaken further as a result. The renewal and expansion of housing stock in cities will come under increasing pressure, as will the condition of this stock. Above all, however, the majority of housing demand is being misdirected to areas that are less well-developed and supplied than the cities. This is a problematic development from a spatial planning and economic perspective.
Overview of all Swiss cities with more than 20,000 inhabitants
Zurich
While rent regulation has so far played a subordinate role in Zurich, the city has long pursued an active housing policy and invests in land and properties itself to provide affordable housing. This approach was further strengthened with the establishment of a 300-million housing fund in 2023. Rental regulations are currently applied to site developments that claim the 10% utilization bonus: half of the bonus (5 percentage points) must be built as low-cost housing.
Still pending:
- Cantonal housing protection initiative: Municipalities must be authorized to make renovations and conversions, demolitions, and replacement new builds subject to approval. Rent ceilings can then be set (up to a maximum of 10 years).
- The cantonal initiative "More affordable housing in the canton of Zurich" provides a right of first refusal for the municipalities.
Geneva
Geneva also pursues an active housing and land policy and already has a right of first refusal for properties. The Geneva laws LDTR (Loi sur les démolitions, transformations et rénovations de maisons d'habitation) and LEn (Loi sur l'énergie) provide for rent caps following renovation work. The LEn sets heat consumption limits for building renovations. In the case of extensive renovations, rents are limited to a maximum of CHF 3,528 per room and year, including ancillary costs (but excluding heating costs), whereby the kitchen also counts as a room in the canton of Geneva. Projects in the zone de développement are regulated via housing mix, rents, construction costs, and net yield, and are subject to a right of first refusal by the City of Geneva. Geneva also has an Airbnb regulation: apartments may only be rented out to short-term tenants for a maximum of 90 days.
Basel
The current version of the Basel Housing Promotion Act (WRFG) has been in force since 2022. If the vacancy rate is below 1.5%, there is an additional approval requirement for the renovation, conversion, or demolition of buildings, coupled with rent control for five years. According to the master plan, 33% of site developments that create new residential space must be affordable housing.
Still pending:
- The cantonal initiative "Basel builds the future" goes even further and demands that 50% of the usable gross floor area of transformation sites be rented out at cost rent. The cantonal government rejected this initiative, as it fears that residential construction on the Klybeckplus and Dreispitz development sites would be delayed or even prevented for years. It responded with a counter-proposal, which states that 33% of apartments on a conversion site earmarked for residential development must be rented at cost.
- A popular new initiative, launched in June 2023, aims to make it more difficult to demolish properties (known as the "suspension initiative").
Lausanne
The cantonal "Loi sur la préservation et la promotion du parc locatif" (LPPPL) intends to preserve residential space and also applies in Lausanne. It imposes a rent cap for renovation projects where the total costs exceed 20% of the building insurance value. This is regulated individually in the building permit. The LPPPL also introduced two new instruments for housing subsidies on 1/1/2018: A new housing category in the "Logement d'utilité publique" (LUP) with the "Logements à loyer abordable" (LLA) for the middle class (without cantonal subsidies) and the introduction of LUP quotas by municipalities in new zoning plans that allow a higher utilization rate. LUP apartments can also be built in existing zones, which allows a higher utilization rate. An apartment categorized as an LUP must meet the specified criteria (maximum rent, apartment size) for at least 25 years from the date of first letting. Since 2020, a right of first refusal has also been enshrined in law in the canton of Vaud in the event of a vacancy rate of less than 1.5% in the district. The city of Lausanne applies this on a regular basis.
Berne
The municipal initiative "For affordable housing" has been in force since January 1, 2020. The initiative introduces a new Article 16b in the City of Bern's building regulations on affordable housing and non-profit housing developers. This includes an affordability obligation: in the case of rezoning and new zoning of residential zones (residential zone W, mixed residential zone WG, core zone K), at least one-third of the residential use should be built with affordable apartments or handed over to non-profit housing developers. The apartments are to be built and let at cost rent in accordance with the WFV. In addition, as part of a utilization bonus for new buildings and building conversions, the utilization ratio is to be increased by 20% if this is compatible with urban development and all apartments in the building are affordable or built by a non-profit organization (also at cost rent).
Winterthur
In July 2022, the municipal popular initiative "Housing for all" was declared valid. However, the city council then drew up a supporting counter-proposal. The municipal council shares the initiative's objectives but considers the target of 25% public rental housing by 2040 to be unrealistic. Instead, it proposes to create an average of 120 new public housing units per year until 2040. The decision rests with the city's parliament until July 3, 2024.
Still pending:
- Cantonal housing protection initiative (see Zurich)
- The cantonal initiative "More affordable housing in the canton of Zurich" provides municipalities with a right of first refusal.
Lucerne
The "Protect living space – regulate Airbnb" initiative was adopted in March 2023, stipulating that apartments may only be rented out to short-term residents for 90 days per year. It suggested regulating the restriction by amending the building and zoning regulations. The city council will now examine how this can be implemented and submit a proposal within a year.
Still pending:
- Lucerne will be subject to the "Law on the Preservation of Housing" in accordance with an urgent popular motion submitted to the city council in September 2023. The purpose is to preserve affordable housing. During the period of subordination, residential premises may only be demolished, converted, or withdrawn from their purpose with the approval of the municipal executive.
St. Gallen
No rent regulations known to date.
Lugano
Lex Airbnb: The so-called “Lex Airbnb” has been in force throughout Ticino since 2022. The cantonal building law now states that online tourist rentals of private apartments and buildings (with fewer than 4 apartments) for more than 90 days per calendar year are considered commercial rentals, and so the property must be converted accordingly (subject to authorization).
Biel/Bienne
The city of Biel aims to increase the proportion of non-profit housing to 20% of all apartments by 2035.
Neuenburg
Neuchâtel promotes low-cost housing construction, including through the Loi sur l'aide au logement, to promote social housing and affordable rental apartments.
Bellinzona
No rent regulations known to date.
Thun
With the local planning revision approved in 2022, a minimum of 25% of affordable housing will be prescribed when allocating or changing the use of residential zones (Article 6 of the building regulations).
Still pending:
- The "Initiative for affordable housing" (Thun Housing Initiative) aims for 15% of the city’s homes to be classed as affordable housing.
Coire
No rent regulations known to date.
Schaffhausen
A popular municipal initiative in Schaffhausen, which promotes non-profit housing with at least 10% of rented apartments owned by non-profit organizations, is still pending.
Fribourg
No rent regulations known to date.
La Chaux-de-Fonds
No rent regulations known to date.
Sion
No rent regulations known to date.
Zug
The "2000 apartments for Zug's middle class" initiative was narrowly passed in June 2023. It calls for a 40% share of additional housing built in densely populated areas to be low-cost, in accordance with the structure plan. In addition, the city of Zug must build affordable housing without delay and should actively buy up land. At least 20% of all apartments should also be affordable by 2040. However, following the 'Yes' vote, town planning procedures had to be stopped at once, as the initiative does not provide for a transitional period and comes into force immediately. Zug also has designated overlapping zones for affordable housing in its zoning plan. According to the building regulations, at least 50% of these are reserved for affordable housing. The associated ordinance regulates things like the upper limits for permissible net rents and sales prices, based on the type of apartment.
Yverdon-les-Bains
The cantonal laws LPPPL and LLA also apply in Yverdon-les-Bains (see Lausanne).
Rapperswil-Jona
No rent regulations are planned for the time being. However, there is an initiative for affordable housing in Rapperswil-Jona: a CHF 10 million fund, which has been accepted and is already in force.
Montreux
The cantonal laws LPPPL and LLA also apply in Montreux (see Lausanne).
Frauenfeld
No rent regulations known to date.
Wetzikon (ZH)
The "Affordable Housing in Wetzikon" initiative demands 20% of the city’s housing to be low-cost.
Still pending:
- Cantonal housing protection initiative (see Zurich).
- The cantonal initiative "More affordable housing in the canton of Zurich" provides for a right of first refusal for the municipalities.
Bulle
No rent regulations known to date.
Wil (SG)
No rent regulations known to date.
Kreuzlingen
No rent regulations known to date.
Aarau
The handling of a motion calling for rent transparency is still open; the municipality is to be given the right of first refusal.
Martigny
No rent regulations known to date.
If you have any questions or suggestions on the topics mentioned in this article, please do not hesitate to contact us.
You might also be interested in:
- Online panel: housing shortage (in German)
- Decline in residential vacancies: Cantonal developments and causes (in German)
- Advice on affordable housing (in German)