New referendum pushes for stricter rent controls in Switzerland

The Swiss Tenants’ Association (MV) have unveiled a new proposal that would tighten controls on the cost of renting a home in Switzerland. Here’s what the "Yes to Protection Against Excessive Rents” or Rental Cost Initiative would mean for you.

What are the rules for rents in Switzerland?

Technically speaking, Switzerland already has rules on how much a landlord can charge in rent. The law states that the price quoted in rental contracts must be based on the cost of the home in question, plus a “reasonable return” on the investment.

In 2020, the Federal Supreme Court in Lausanne ruled that this “reasonable return” should total 2 percent of the amount invested in the home, plus the reference interest rate, which, as it stands, would mean a return of 3,5 percent. This, in theory, should limit costs and make housing less attractive as a means for making money.

Rent protections not worth the paper they are written on, MV argues

However, speaking to Watson, Green National Councillor and MV vice president Michael Töngi noted that despite the rules, rental costs in Switzerland "only go in one direction, upward”. He argued that the current law is “purely a paper tiger” and that stricter rules are needed.

This is because if a tenant finds that their landlord is charging them an illegal rent, it is up to them to enforce the rules. Töngi noted that many renters are too afraid to pursue rent reductions and legal action, "especially because they don't want to ruin their relationship with their landlord".

Therefore, the MV estimates that on average, tenants are paying 360 francs a month too much in rent, with landlords collectively collecting illegal rents of 10 billion francs a year. They also claim that if the current rules were enforced properly, rental costs would be 32 percent lower than they are now. 

The latest data from the Federal Statistical Office tends to back up the claim. They found that rental costs have risen by an average of 25 percent in the last 20 years, and that housing is now the biggest expense for households.

Swiss rental costs could be capped thanks to new referendum

Faced with inaction in parliament, the MV has now launched the Rental Cost Initiative. If the referendum is passed, it would enshrine cost-based rents into law, and would require the government to conduct automatic and regular reviews of every tenant's rent, and provide systems where rents deemed to be unfair can be lowered quickly.

Tenants would also be able to request a rent review at any time. The referendum leaves it up to parliament to decide how the new rules will be enforced.

Association president and Social Democratic National Councillor Carlo Sommaruga told reporters that the “initiative not only puts an end to abusive rents, but also helps protect purchasing power and reduce property prices in the long term". She confirmed that they will start collecting signatures for the referendum from June 3.

Homeowners' Association calls rent control plan "absurd"

In response, the president of the Homeowners’ Association and Swiss People’s Party National Councillor Gregor Rutz told Watson that the “absurd” idea will do more harm than good. "If you're no longer allowed to generate returns, there will be no more investments. And if there are no more investments, no new housing can be created," he argued.

Rutz added that automatic rent control would lead to “enormous bureaucracy” that would see tenants waiting months if not years for their rents to be checked. "Every apartment would have to be regularly inspected for condition, standard of fit-out, and cost structure," he claimed, adding that to truly solve higher rental costs, the government should prioritise making it easier to build new homes instead.