Priscilla Fialho
OECD Economic Surveys: Switzerland 2026
Abstract
Finding an affordable dwelling has been increasingly challenging, especially in large cities, urban agglomerations, and tourist destinations. High housing costs discourage essential workers from moving to dynamic regions, making it harder for firms to hire workers with the right skills. Challenges in housing affordability seem mostly driven by a slow responsiveness of housing supply to housing demand. To address bottlenecks in housing supply, the federal government could provide further support to cantons and municipalities to accelerate the adoption of the revised Spatial Planning Act. Increasing the share of mixed-use zoning would help addressing competing interests and local resistance to densification. Expanding the use of electronic processing and digital solutions would speed-up the granting of construction permits. More flexibility to adjust rents could boost housing supply in the rental market. Finally, broadening the base for immovable property taxes, capital gains taxes and land value incremental taxes would increase incentives to use the buildable land up to its full potential.
Finding an affordable dwelling has been increasingly challenging in Switzerland, especially in Zurich, Geneva and Basel, as well as the alpine regions. Young people looking for housing in urban centres and popular tourist destinations face particularly significant challenges to find housing and at affordable prices. High construction costs, complex legislation, a segmented rental market offering limited options for new tenants, and limited public support, have led to a slow adjustment of housing supply to demand and prices. This chapter discusses policy issues relating to housing supply constraints and housing affordability.
2.1.1. Many households face high and increasing housing costs
The Swiss housing market is characterised by a large share of tenants and a low share of homeownership (Figure 2.1). Low homeownership facilitates higher residential mobility and labour market dynamism, with positive repercussions on employment and productivity over time (OECD, 2021[1]). Switzerland has historically enjoyed among the highest residential and labour mobility rates in the OECD (Causa and Pichelmann, 2020[2]) (Causa, Luu and Abendschein, 2021[3]). The strong role of rental housing is partly driven by high house prices relative to rents and to household incomes, together with favourable taxation of savings held in pension funds and life insurances (Bolliger et al., 2025[4]).
Share of households in different tenure types, in percent, 2024 or latest available year
Source: OECD (2025), OECD Affordable Housing Database - indicator HM1.3 Housing tenures, https://oe.cd/ahd.
Real house prices in Switzerland have been increasing continuously, with a growth rate that outpaced the OECD average over the last years (Figure 2.2). The central bank now estimates that for the apartment segment, for example, prices could be 15 to 40% above the fundamental levels implied by some indicators (SNB, 2025[5]). Consequently, accumulating sufficient savings takes a long time for an average household (Figure 2.3, Panel A). The average age of a first-time buyer in Switzerland is high in international comparison (Figure 2.3, Panel B) and has increased over time (BWO, 2020[6]).
Housing costs have also been continuously increasing for renters. Renters at the bottom of the income distribution spend close to 40% of their disposable income on housing and the share of renters spending more than a third of their income on housing has increased over time (Figure 2.4). Based on the second wave of the OECD Survey on Drivers of Trust in Public Institutions, in 2023, 30% of the population in Switzerland named housing as one of the top three issues facing their country, above the 23% OECD average (OECD, forthcoming). Affordability concerns are concentrated in cities and urban areas, as well as the touristic alpine regions, with the cantons of Zurich, Zug, Schwyz, Nidwalden, Basel-Stadt and Geneva particularly affected. In fact, the difference between the percentage of the population living in households where total housing costs represent more than 40% of their disposable income in cities and rural areas is among the highest in the OECD (Figure 2.5).
Source: OECD (2025), OECD Affordable Housing Database - indicator HM1.2. Housing prices, https://oe.cd/ahd.
Source: OECD Housing Taxation in OECD Countries 2022; The European dream of owning a home – Swiss Life Group.
Rising housing costs for renters could limit the benefits of low homeownership rates for labour market dynamism. Increasingly high rents in urban areas could discourage young people from less affluent backgrounds from moving to economically dynamic regions. Essential workers like teachers and nurses may also reject jobs in major urban areas because they are priced out of the housing market. Data from the Federal Statistical Office shows that the residential turnover rate decreased since 2020 (BFS, 2025[7]). Lower housing mobility makes it harder for companies and public institutions to hire workers with the right skills, slowing labour market dynamism, productivity and growth.
The lack of affordable housing in urban areas may also delay important life decisions, such as parenthood (Fluchtmann, van Veen and Adema, 2023[8]). A study has been carried out recently in the canton of Zurich showing that young individuals are moving out of their parents’ home at an increasingly higher age, which cannot simply be explained by longer spells in education. The authors find that if the trend of the last five years continues, more than half of 25-year-olds will still be living with their parents in 2030 (Blapp, 2025[9]) (BFS, 2023[10]).
Source: OECD (2025), OECD Affordable Housing Database - indicator HC1.1. Housing-related expenditure of households, https://oe.cd/ahd; OECD (2025), OECD Affordable Housing Database - indicator HC 1.2. Housing costs over income, https://oe.cd/ahd.
Note: In Panel B, data refers to the percentage difference of the population living in a household where total housing costs represent more than 40% of disposable income by degree of urbanisation.
Source: RealAdvisor, Eurostat (2025), Housing cost overburden rate by degree of urbanisation.
2.1.2. Unresponsive supply is at the core of Switzerland’s housing challenges
Deteriorating housing affordability seems to be mostly driven by persistent housing shortages. According to the Federal Office for Housing, a dwelling vacancy rate – calculated as the share of dwellings that are unoccupied and actively available for rental or sale in the market - below 1% defines a housing shortage. Switzerland’s vacancy rate declined to a comparatively low level of 1% in June 2025 (Figure 2.6). In major cities, the vacancy rate lies well below the 1% threshold, revealing acute housing shortages. Zurich, for example, has a vacancy rate of 0.1%, Bern of 0.5%, while Lausanne and Geneva saw a decrease in the vacancy rate to 0.6%.
Note: Share of dwellings that are unoccupied and available for rental or sale in the market.
Source: BFS/OFS/UST.
The definition used to compute the vacancy rate in official Swiss statistics differs significantly from the definition used in other countries or international databases, such as in the OECD Affordable Housing database. Usually, a dwelling is considered vacant if empty, regardless of being on offer in the rental market or for sale. In Switzerland, only empty dwellings that are on offer for sale or for a rental period of at least three months are considered vacant. Collecting additional data to obtain a more accurate estimate of the total number of empty houses and apartments – whether available for sale or rental, or not - would be a major step forward to analysing tensions in the housing market and to inform housing policy decisions. The Federal government should make sure that the statistical office and the Federal Office for Housing have sufficient resources to collect additional data on vacant dwellings that could feed into housing policy decision-making.
New residential construction has barely evolved in ten years despite increasing demand for housing (Figure 2.7). The Swiss Contractors’ Association warned that only about 42 000 new flats would be completed in 2025, whereas 50 000 would be needed according to the Federal Office for Housing. The number of apartments on offer in the rental market has been falling since 2015 (Figure 2.7). Rental offer has been constant in major centres but fell in small and medium-sized centres and in extended urban areas. The response of housing to demand changes has been slow, suggesting bottlenecks in housing construction, especially in the cantons of Basel-Stadt and Zurich, and in the municipality of Geneva (von Ehrlich, Schöni and Büchler, 2018[11]).
Demographic changes could also influence the shortage of housing in major cities and urban areas. Ageing and a rising number of single households have led to a decrease in the average size of a household. Official government statistics show that in Zurich, for example, the average number of individuals in a household decreased from 2.97 persons per flat in the 1960s to only 1.9 in 2024. Based on the OECD Affordable Housing database, the share of senior population living alone in an entire housing unit in Switzerland is high compared to the OECD average.
Source: Wuest Partner.
Without further policy action, housing demand will likely continue to outpace supply, further exacerbating housing affordability challenges. Switzerland strongly relies on the private market for the provision of housing, with state-provided social housing occupying a marginal role (Duyne Barenstein, Widmer and Rohner, 2025[12]). The responsibility for housing policy primarily lies with municipalities and cantons, with limited intervention from the federal government. In 2020, the federal government allocated an extra CHF 250 million over ten years for the revolving fund, from which housing cooperatives can get loans on favourable terms. The federal government also launched an action plan on housing shortages in February 2024, proposing more than 30 measures to increase the supply of housing and create more quality and affordable housing. Some of these measures have already been implemented, such as conducting an in-depth study on construction appeals and objections, developing a concept for two-phase building permits, and a guide on how to handle possible diverging interests. In addition, conditions to access financing from the revolving fund for non-profit housing have been eased and an additional allocation of CHF 150 million over three years has been granted by parliament on June 6, 2026. Housing cooperatives, organised by associations of non-profit housing developers, also play a role in providing affordable housing in some areas, although their market share remains small. Parliament recently decided to provide additional guarantees to support the development of housing cooperatives.
However, federal spending on housing has been on a clear downward trend from 2000 to 2025 (EFV/BWO, 2026[13]). Further policy action is therefore required to address the growing housing affordability constraint, which is gaining prominence in the public debate as evidenced by a popular initiative on a further tightening of rent control (see section 2.2.3), to be deposited in June 2026.
The slow response of housing supply to increasing demand and prices may be related to a number of factors including both natural constraints and policies. Among the latter, land-use regulations, regulatory hurdles in the construction sector, rental regulation, and the taxation of land can be obstacles to expanding the housing stock. Housing policy reforms have the potential to attenuate affordability challenges.
2.2.1. Accelerating the implementation of the new Spatial Planning Act
Switzerland, with its mountains, lakes, and protected areas, has limited land available for construction. But it has not exhausted all its unused building zones reserves, nor has it fully exploited its potential for densification. Densification reduces pressures on undeveloped land and can -when implemented well- generate economic, environmental and social benefits. The Federal Office for Spatial Development found that unused reserves within existing building zones could supply housing for an additional 1.6 million persons. In some areas, more than 20% of existing building zones are still completely undeveloped (ARE, 2022[14]). Another study estimated that 32% of the built-up area in existing building zones had potential for densification, with some differences across cantons. In Basel, for example, that potential for densification has been estimated at only 18%, while in Zurich, it reaches 31%, and in Geneva, 32% (BSS Volkswirtschaftliche Beratung, 2011[15]). Moreover, almost 80% of the undeveloped buildable land in urban municipalities was classified as areas with a very good, good or average access to public transportation in 2022 (ARE, 2022[16]). The Federal Office for Spatial Development is currently working on updating these mappings and estimates to obtain up-to-date information on the potential for inward development and densification in every municipality. Results are expected to be published in late 2027 and will help guide the development of municipal land use, housing and spatial plans.
Federal spatial planning guidelines, whose implementation remains mostly in the competence of cantons and municipalities, were last updated in 2014. The revised Spatial Planning Act, approved by popular vote, was a response to growing concerns over the spread of urban sprawls. It restricted the expansion of built-up areas, clearly encouraging cantons and municipalities to exploit the above-mentioned unused reserves within existing building zones and densification. Additional land-use regulation, however, could have increased house prices by up to 8 % between 2000 and 2021 (Büchler et al., 2023[17]). Another recent study finds that tighter zoning regulations may have reduced the elasticity of housing supply to rents by 22% and the elasticity of housing supply to house prices by 15% (von Ehrlich, Schöni and Büchler, 2018[11]).
Moreover, challenges in the implementation of the revised Spatial Planning Act have created significant uncertainty, potentially discouraging new housing construction investment. Cantons and municipalities have had to progressively integrate the new guidelines in their strategic planning and zoning plans. A 2024 survey by the Federal Office for Spatial Development shows that only around 43% of the municipalities had adapted their land use plans to the new requirements and around 33% were in the process of being reviewed by the cantons. Large cities with particularly tight housing markets are among the most advanced ones in the implementation process. Yet, a lack of human resources and technical knowledge, low social acceptance, and the difficult balancing of competing interests, are the most cited reasons to justify the slow adoption particularly affecting suburbs and peripheries (ARE, 2024[18]).
To accelerate the implementation of the revised Spatial Planning Act and reduce uncertainty, the federal government could provide further support to cantons and municipalities. This support could come in the form of technical expertise to complete an inventory of underused municipal land, or to streamline urban design standards such as height restrictions and visual character requirements, for example. Specific experiences of municipalities and cantons who have already adopted the new guidelines could help those that have not, potentially delivered through workshops to promote best practices. The Federal Office for Spatial Development initiated such a programme in 2013 that was recently rebranded as “Impulse inward development” and that could restart as early as 2027.
Increasing housing supply responsiveness while complying with the revised Spatial Planning Act will also require addressing obstacles to higher density. Building density is still low in some cantons. Comparing urban areas, density in Zurich and Geneva still have scope to increase compared to Basel-Stadt, for example (Salvi and Schnell, 2023[19]). Densification projects often provoke local opposition by specific interest groups. Given Swiss residents’ right to object to local projects as well as the country’s direct democratic mechanisms, this opposition often stands in the way of urban densification (Wehr et al., 2025[20]). Most resistance comes from apprehensions over lost neighbourhood amenities, loss of identity, housing affordability or ecological concerns. Thus, rather than rejecting densification in principle, residents condition their support on whether key amenities are protected, including green infrastructure (Herdt and Jonkman, 2023[21]).
Government officials and spatial planning authorities need to provide ample opportunities for public participation at all stages of the planning process to gather the support of local interest groups (Wicki, 2025[22]). One way to counter local opposition would be to increase communication efforts on the benefits of urban densification, from reducing travel needs and costs, lowering the environmental impact, and helping to preserve housing affordability. Effective mechanisms to balance diverging interests is also central in land use planning. The Federal Office for Housing has developed a guide to help understand the method of balancing interests and to implement it correctly, intended for municipal authorities, project owners, investors, and specialists (FOH, 2025[23]).
Mixed-use zoning, where a land-use planning strategy allows for the development of residential, commercial, and green spaces within the same area or building, is one of the most effective ways to mitigate concerns about urban densification (Wicki, Wehr and Debrunner, 2024[24]). By integrating residential, commercial, and recreational spaces within close proximity, together with ecological corridors, cities can create vibrant and walkable neighbourhoods, preserving their aesthetic value. Moreover, mixed zoning can also address competing commercial and residential interests. In Switzerland, parcels are usually assigned to a single use. Mixed-use zoning represents only about 20% of the buildable land surface area. In some parts of the country, the price of undeveloped buildable land depends heavily on its type of use. In Zurich, for example, the median price of one meter square of unbuilt residential land was worth two to three times that of the same parcel for industrial use in 2019 (Salvi and Schnell, 2023[19]). Such stark price differences indicate that the type of use may not always adequately respond to demand. Increasing the share of mixed-use zoning would help increasing the allocation of land to housing developments and reducing such price differences. A tripartite conference including the federal government, cantons and the municipalities is currently carrying out a study about increasing the use of mixed zones, which aims to provide concrete recommendations to cantons and municipalities on how to proceed going forward.
2.2.2. Streamlining regulation and addressing skill shortages in construction
Construction costs in Switzerland have persistently been above those of other European countries, as highlighted in the 2009 survey (OECD, 2009[25]). Adding to the issue, and like many OECD countries, Switzerland has seen significant increases in construction costs since 2020 (Figure 2.8, Panel A). Consequently, construction costs in some parts of the country are now among the highest in the world (Figure 2.8, Panel B). Factors explaining rising construction costs are multiple. Some are common to other countries, while others are specific to Switzerland.
The COVID-19 pandemic contributed to increase construction costs globally. Lockdowns disrupted global supply chains, leading to increased construction material costs. Measures restricting the movement of people, on the other hand, led to a shortage of skilled labour in the construction sector in many countries, including Switzerland, adding pressure on wages (KOF, 2023[26]). Skill shortages have been exacerbated by policies in some European countries to support the return of emigrants. Finally, growing environmental standards in the last years, such as regulations regarding energy efficiency, while essential for ensuring sustainable construction, and beneficial in the long-term, have added additional costs to construction projects (Hu, 2022[27]).
Source : Office fédéral du logement OFL, Turner&Townsend, Global construction market intelligence 2025 - Global construction cost trends.
Turning to domestic factors, construction standards and the required furnishings of dwellings have been historically more demanding and onerous in Switzerland than in other countries (OECD, 2009[25]). Building vertically rather than horizontally, to comply with the Revised Spatial Planning Act of 2014, is expected to increase construction complexity and costs even further. In fact, building higher involves increased structural support, more advanced utility systems, specialised construction equipment, and often more expensive materials. Furthermore, although most cantons have joined a concordat harmonising some construction regulations, building standards and construction laws are still highly heterogeneous across cantons and municipalities. Such heterogeneity limits competition internally and reduces the scope for economies of scale in the construction sector. As a result, the construction sector is dominated by small and very small firms, characterised by low labour productivity (Salvi, 2025[28]). Swiss standards also differ from those applied in the European Union, acting as a barrier to foreign competition. These additional costs are often passed on to the final consumer, further adding to construction costs and house prices. Strengthening the harmonisation of building codes across cantons was recommended in previous OECD Economic Surveys of Switzerland (Table 2.1), as this would raise productivity in the construction sector and reduce construction costs (OECD, 2024[29]) (OECD, 2009[25]). Cross-cantonal standards could be set at the level of intergovernmental conferences, with inputs from private sector experts, as done in Canada, for example (Box 2.1).
Canada’s National Model Code development system, created in 2022, is a committee responsible for setting and harmonising construction codes and standards across the federal government, provinces and territories. The objective was to better respond to different priorities from jurisdictions, while also boosting trade in the internal market.
Representatives from the National Research Council of Canada also participate in the committee. Several working groups, made up of technical experts, provide support to the work of the committee, by proposing code changes for example. There is also an advisory council made up of industry representatives, regulators, emergency responders, and other organisations with an interest in the regulation of building construction and operation, to provide policy inputs and advice.
Source: (Government of Canada, 2022[30])
Construction permit procedures have been criticised for their complexity in some cantons, leading to long delays for granting construction permits (Figure 2.9). Cantonal authorities are de jure required to respond to a building application within a fixed period, typically of 90 days. However, this is not strictly enforced, and actual delays differ significantly in practice. At the national level, on average, 140 days elapse between the building application and the building permit. In the canton of Geneva, it can take up to 497 days to obtain a building permit. In Zurich and Basel-Landschaft, it takes 214 and 201 days, respectively. At the national level, delays have increased by 67% over the last decade. In the canton of Glarus, delays increased by 346% between 2010 and 2022. In Geneva, they increased by 134%, and in Zurich, by 103% (Salvi and Schnell, 2023[19]). In a welcome development, the action plan proposed by the federal government in February 2024 suggested that cantons should create a benchmark for the length of delivery of construction permits per canton.
Note: Average days.
Source: (Salvi and Schnell, 2023[19]) La réalité des loyers: Huit mythes sur le marché du logement en Suisse.
Even after the construction permit is obtained, legal appeals to oppose to construction projects can still be logged and delay the start of the construction works. A recent study estimates that around 10% of construction projects have not yet been realised although they hold a building permit (Kubli and Rappl, 2023[31]). Small construction firms with few projects are particularly vulnerable to unexpected delays as they cannot easily redirect their human and financial resources to another construction, meaning that if they don’t merge or associate with other smaller firms, delays can have a considerable impact on costs and profit margins. Uncertainty surrounding potential legal appeals can affect budgeting and bidding for projects, inflating construction costs more generally.
Legal appeals have increased considerably over time (Brütsch, Huser and Zimmerli, 2025[32]). A decision by the Federal Court of Justice in 2016 enlarging the scope of potential opponents to construction projects based on noise protection regulation may have contributed to this upward trend. In a welcome development, the federal government has since reacted to criticism from contractors and weakened some of the noise protection rules that were overly burdensome. The federal government is currently considering limiting the grounds for appeal and the admissible grievances concerning proceedings before the Federal Supreme Court. It is also considering requiring cantons to take measures to make objectors bear the procedural costs in cases of manifestly abusive objections with the sole purpose of preventing or delaying a project (Federal Council, 2026[33]). To limit legal oppositions, cantons could introduce a mediation and conciliation instance before any appeal is submitted to court. Only cases that failed to reach a consensus would proceed to court, helping to reduce the administrative and judicial backlog and processing times. Reducing the number and length of legal proceedings and instances could also be considered.
Finally, greater efforts should be made to expedite the permitting process. This could be achieved with a more widespread use of electronic processing, and the development of Artificial Intelligence (AI) solutions to process information and data, following the example of California (Box 2.2). AI chatbots could also help handling information requests, helping to navigate the complexity of overlapping and disjoint departments, gathering information from multiple sources and route inquiries to the appropriate agency.
In April 2025, California introduced an AI-powered “e-check” tool to expedite the building permit approval process in Los Angeles, aiming to accelerate the recovery from the Eaton and Palisades wildfires, for example. The tool instantly assesses building designs against local zoning and building codes and enables property developers to pre-check their plans before submission. The tool is provided free of charge to local governments and residents through a partnership between the state and philanthropic organizations. By automating routine compliance checks, the software allows human reviewers to focus on more complex issues, thereby reducing the overall time required for permit approval. Additionally, the system’s transparency can help applicants understand the reasons for any rejections, leading to quicker revisions and resubmissions.
Access to human resources can also be a challenge. Previous OECD Economic Surveys of Switzerland have provided policy recommendations to address labour and skill shortages in key sectors of the economy, including construction. Simplifying permit rules and paths to full integration of skilled non-EU/EFTA migrants, for example, would improve Switzerland’s attractiveness for professionals with expertise in civil engineering and construction (OECD, 2024[29]). Offering more actively pre-VET education to immigrants to help them acquire needed core competencies, including language skills, so they can later enrol in VET programmes, would help better integrate migrant workers with lower skills. Such programmes, which have proven effective (OECD, 2025[34]), should have no age limit so they can benefit a larger group of migrants. Other schemes for young scholars and adults, such as the “Employment support programme” could also be strengthened. Simplifying the process of recognition of foreign vocational qualifications would also speed up their integration into the labour market (OECD, 2022[35]). Lengthening the working lives of older workers with relevant professional experience could be achieved through incentives within the pension system and the flexibility to combine retirement and work (OECD, 2024[29]).
2.2.3. Reforming tenancy law
In Switzerland, most rents are subject to rent control regulations. Rents for apartments that come onto the market for the first time can in principle be freely agreed by the parties but must not be abusive. Prospective tenants have the right to appeal in some cases and contest the proposed market rent to challenge whether it is abusive, although this rarely happens in practice as the underlying criteria are only vaguely defined, making abusedifficult to prove. As soon as the first lease has been signed, the rent can only be adjusted for inflation, the reference interest rate, general increases in running expenses, such as property management fees, taxes or insurances, and if the landlord has made value-enhancing investments in the property.
Regulation limiting rent increases for sitting tenants are meant to prevent landlords from excessively taking advantage of the fact that, over time, tenants become increasingly attached to the local area. Rent regulation can, however, lead to market distortions. Limiting rent increases in ongoing contracts could have led to faster market rents increases in new contracts over the last years (Figure 2.10). Therefore, long-term tenants have no incentives to move even if the quality and size of their current apartment diverge from their needs. These lock-in effects contribute to increased floor-space consumption per capita and exacerbate the housing shortage. Young, divorced, immigrants, and professionals with jobs requiring frequent reallocations are among the most disadvantaged, paying high entry rents.
The literature showing the long-term negative effects of the induced distortions on housing supply and economic growth is extensive (Kholodilin, 2024[36]). Rent controls hold back new construction, eventually inducing higher rents and home prices, and thus offsetting the short-term benefits for tenants with regulated rents (ElFayoumi et al., 2021[37]) (Diamond, 2018[38]). By locking in tenants, those regulations in turn affect residential mobility and generate misallocation (OECD, 2021[1]) (Andrews, Caldera Sánchez and Johansson, 2011[39]). Easing such restrictions can yield positive effects on labour productivity and employment in the first years after implementation, with gains increasing gradually over time (OECD, 2026[40]).
Note: Data comes from a private provider and not from official statistical sources. The methodology used to obtain rental prices may include web scraping or screening public advertisement but might exclude private agreements between landlords and tenants. The methodology is also subject to change over time without little information provided on these possible changes.
Source: WuestPartner.
Some adjustments to rent regulations could be considered to better reflect market developments. In Germany, for example, rent in ongoing contracts can also be adjusted based on local average rents for new leases on comparable dwellings. This would probably require collecting more systematic and official market rent data to inform policy decisions. This would reduce the lock-in effect of the widening gap between market rents and regulated rents, while still protecting tenants against excessive rent increases. In the longer-term, Switzerland could follow the example of Finland, where rent controls on existing contracts have been fully abolished with the objective of boosting the construction of new apartments (Box 2.3). As a result, the supply of dwellings increased from 12% of the housing stock in 1990 to 17% in 2012, while it had been decreased in the twenty years prior to the reform (de Boer and Bitetti, 2014[41]). Closing the regulatory gap between ongoing and new rental contracts and harmonising rules concerning the updating of rents would be essential to reduce market distortions and potential lock-in effects for sitting tenants. Such a reform could be complemented by further clarifications on what defines an abusive rent, based on a quantifiable and objective criteria that could be easily verified and enforced.
Finland progressively deregulated rental markets during the 1990s. First, in 1993, rent controls were abolished for new rental contracts. Then, in 1995, rent controls were also abolished for ongoing rental agreements. Current legislation only stipulates that in the case of long-term rental contracts, the lease agreement should explicitly mention how often the rent will be updated and what will determine the size of the adjustment. Phasing out rent control was accompanied by complementary policies to minimise the impact on vulnerable households, such as targeted housing allowances.
Source: (OECD, 2021[1]).
2.2.4. Taxing under-utilised land
The share of under-occupied dwelling space in Switzerland is high compared to European countries (Figure 2.11). Under-occupancy, defined as rooms relative to occupants, is particularly frequent among older households. While households under the age of 44 manage with an average of just 0.9 surplus rooms, for the 45-to-64 years old, that figure increases to 1.5. For those aged between 65 and 79 years old, the average surplus increases to 2.1, and for households above 80, it reaches a peak of 2.2 (Hohgardt and Lehner, 2025[42]). Making the best use of the available stock of dwellings would help increasing housing supply and alleviate pressure on housing costs.
Taxing imputed rents is in principle one way to create incentives for renting out spare rooms when homeowners find themselves living in houses that exceed their needs. Another aim of taxing imputed rents is to achieve tax neutrality by treating owner-occupiers in the same way as owners who let for rental and avoid distortions in the housing market. Switzerland was one of the few OECD countries where the imputed rent of households living in their own home was taxed together with other sources of income. However, in September 2025, Swiss voters decided to abolish the tax on imputed rents. In fact, this tax was quite unpopular and difficult to explain as it is based on a notional income. Moreover, the tax had been weakened as the imputed rent had been set well below market rates (Vujanovic, 2016[43]), and the federal government and some cantons even applied a reduction for owners who did not utilise all rooms. Moreover, several deductible expenses, such as mortgage interest payments or maintenance costs, reduced the aggregate taxable income. Consequently, many home-owners paid little imputed rent tax, and those whose home served as mortgage collateral even ended-up benefiting from tax deductions, rendering this tax quite ineffective.
As the imputed rent tax is abolished, income tax deductions for mortgage interests will also be eliminated. Only first-time buyers, owner-occupiers, will be able to deduct a limited amount of mortgage interests for the first ten years. Deductions for maintenance costs, renovations, and energy-efficiency improvements will also be phased out at the federal level, but cantons will retain some flexibility to allow for deductions for energy-saving investments. The constitution will also be adjusted so that cantons can create a new special tax on secondary and vacant homes.
% of people living in under-occupied dwellings
Note: A dwelling is defined as under-occupied if the occupier has at its disposal more than the minimum number of rooms considered adequate, and equal to one room per couple, one room per each single person aged 18 or more, one room per pair of single people of the same gender between 12 and 17 years of age, one room for each single person between 12 and 17 years of age and not included in the previous category, and one room per pair of children under 12 years of age. Comparing data between 2015 and 2024 should be done with caution due to break in series.
Source: Eurostat (database).
Reductions in income tax deductions for interests are welcome as they generate several distortions and distributional effects. First, it promotes homeownership as a favourable investment, contributing to higher house prices. Second, households have a strong incentive to leverage their housing wealth, potentially exacerbating financial risks. In fact, Swiss households have one of the highest indebtedness rates in the OECD, despite low homeownership rates (OECD, 2022[35]). Finally, high-income and wealthy households benefit disproportionally as it is easier for them to raise gross debt and tax-deductible expenses. Evidence shows that mortgage interest deductibility primarily drives up house and land prices, exacerbates wealth inequality, without improving homeownership rates in the long-term (Damen and Goeyvaerts, 2026[44]) (Leodolter and Rutkowski, 2022[45]) (Bourassa et al., 2013[46]). Increasing taxes on vacant dwellings in areas with high demand would also encourage an efficient use of the housing stock and cantons with tight housing markets should use that possibility.
The changes will be implemented starting from 2029, and the fiscal impact is still uncertain as highly dependent on interest rates. Based on government estimates, if mortgage rates remain stable around 1.5%, fiscal revenues for the Confederation, cantons and communes would fall by CHF 1.8 billion, about 0.2% of GDP. If rates increase above 3%, revenues will increase instead. These projections exclude any proceeds from a possible second-home tax at the cantonal level. The distributional effects of these changes are more discernible. Homeowners who have already repaid or significantly amortised their mortgage will benefit from these changes as they will no longer pay any imputed rent tax. This concerns mostly older and wealthy households living in rural areas.
Other instruments to create incentives for renting out available properties, renting out spare rooms, and building on available land, could be considered. One possibility would be to increase recurrent taxes on immovable properties, as recommended in previous Economic Surveys (OECD, 2022[35]) (OECD, 2024[29]). Revenues from taxes on immovable properties are low in Switzerland compared to other OECD countries (Figure 2.12). Even if one considers total revenues from net wealth taxes, which only add to the cost of owning properties if wealth is owned in the form of real estate, Switzerland would still raise less revenues than other countries with low homeownership rates. By raising the cost of owning a property, such taxes create incentives for owners to use their housing space up to its maximum potential. Moreover, taxes on immovable properties have the advantage of being less distortive than most other taxes (Arnold et al., 2011[47]).
Several reasons explain low revenues from recurrent taxes on immovable properties. First, the cantons of Zurich, Schwyz, Glarus, Zug, Solothurn, Basel-Landschaft, and Aargau have eliminated the tax. Some of these cantons are precisely those where property prices are high and vacancy rates extremely low. Second, rates can be low, ranging from 0.1% to 0.3%. Finally, these taxes are based on the cadastral value of properties, which is only reviewed every 10 years in some cantons and does not necessarily reflect current market prices. Since cantons bear the costs of updating the cadastral system, many have fallen behind with periodic updates.
Cantons have their own tax laws and are generally free to choose their taxes, except if explicitly stated otherwise in the Constitution. The federal government is, however, responsible for the strategic management and supervision of the land cadastral system, which includes supervising cantonal surveying agencies and specifying minimum requirements for administration, organisation, data quality and processing. Property valuations could be updated every year and increasingly based on recent sales or rent data for similar properties, following the example of the Netherlands (Box 2.4). When property values are not updated for several years, substantial popular resistance against revaluations grows since it will likely increase tax obligations abruptly. Therefore, the more frequently property values are updated, the lower the public opposition to reevaluate them. The property valuation system should nonetheless remain simple to ensure enforceability and minimise administrative costs.
Fiscal revenues from recurrent taxes on immovable properties as a % of GDP, 2023
Note: There is surprisingly little evidence on the breakdown of wealth tax revenue by asset class, which can include real estate, but also pension assets and financial assets. Therefore, the first bar for Switzerland (CHE) does not include wealth taxes and taxes on imputed rents. The second bar for Switzerland (CHE*), includes all revenues from wealth taxes, without distinguishing those revenues that come from real estate or other asset classes, and still excludes taxes on imputed rents. Both bars therefore represent a lower bound and an upper bound estimate of recurrent taxes on immovable properties for Switzerland. Data for AUS and GRC is from 2022.
Source: OECD Revenue Statistics in OECD member countries - Comparative tax revenues dataset.
Like in Switzerland, the Dutch recurrent property tax system is decentralised. The central government is responsible for controlling and levelling the quality of the tax administration across the country, and local governments are responsible for the maintenance of fiscal cadastres, property valuation, tax collection and tax rate setting. Local governments have some autonomy on how these activities are performed. While in Switzerland, local authorities employ private firms for surveying land and properties, in the Netherlands, roughly half of the municipalities use civil servants, and the other half employ private firms.
The particularity of the Dutch system is that properties are revalued every year by local governments. The national government oversees these activities through the National Valuation Board. The board also examines the uniformity of the valuations performed by local governments, to ensure that the values are comparable across jurisdictions.
Residential properties are valued through the sales comparison approach, operationalised using a computer-assisted mass appraisal system. This system uses data from real estate advertisements, aerial photo, and on-line street views, complemented by administrative data, information collected by municipalities, and self-reported property characteristics. Local governments share all the information collected and the resulting valuation between them.
Non-residential properties take the highest market value, estimated on the basis of rent prices and reproduction costs, i.e. actual costs of rebuilding the same property, using the latest techniques and building materials corrected by depreciation, aging, among other factors.
Source: (OECD, 2021[48]) (Swisstopo, 2017[49]).
Capital gain taxes are meant to partially return to the community some of the property value increase that may have resulted from public investments, such as infrastructure projects and urban development. These taxes can also create incentives for the optimal use of housing, with the aim of generating value from the real estate that can compensate for higher capital taxes. Taxes on capital gains from real estate are also collected by cantons, meaning that there are considerable differences in tax rates across the country. Homeowners do not pay tax on gains realised upon the sale of their primary property dwelling provided they have lived in it and that they use the proceeds of the sale to purchase or build a new main residence. This exception is meant to avoid lock-in effects and promote residential mobility.
Other deductions are more difficult to rationalise. For example, in the case of sales or transfers within the family, including gifts and inheritances, the tax on capital gains can be deferred in whole or in part. The tax can also be deferred if the proceeds of the disposal of a secondary home are reinvested in other property used as a main residence. In most cases, the longer the property has been owned, the lower the real estate capital gains tax, leading to lock-in effects. In the canton of Zurich, for example, the cantonal tax office grants a discount of 5% for sales after 5 years, 8% after 6 years, 11% after 7 years and 50% after 20 years or more. It also applies a surcharge of 50% for properties resold within one year and a surcharge of 25% for those resold within two years, with the objective of limiting speculative behaviour. However, taxing short-term capital gains can be counterproductive to tackle housing prices. In fact, it hinders the optimal reallocation of properties based on the changing preferences and needs of owners and buyers. Encouraging cantons to broaden the base of the capital gains tax would help increasing the responsiveness of housing supply to changes in demand and prices. In the United States, for example, capital gains on main residences are only exempt up to a certain threshold.
The recently introduced land-value incremental tax is meant to complement and front-load the tax on capital gains. Local spatial plans can have a considerable impact on the value of a private plot of land. For example, if a plot of agricultural land is rezoned as building land, or if an adjustment of the spatial plan allows for higher density and therefore higher potential rents from a property, landowners benefit considerably. Taxing this added value creates incentives for landowners to use plots of land up to their maximum potential, either with new construction or added floors. The land-value incremental tax has the advantage of applying even if the property is not sold, while the capital gain taxes would only be collected if there is a change in property ownership. The Spatial Planning Act has always required cantons to create appropriate compensation for significant advantages and disadvantages caused by planning. However, up until recently, most cantons had not yet introduced this compensation. The canton of Zurich was the last canton to implement this compensation in 2020. The revised Spatial Planning Act of 2014 established that cantons had a maximum of five years to develop the necessary regulation to introduce value-added compensation. According to an audit report from the Federal Office for Spatial Development, all cantons are now complying with the law (ARE, 2021[50]).
Since the land value incremental tax is still a relatively new instrument, it remains to be seen how much impact it will have in practice for housing developments. The added planning value is determined at the time of the spatial planning change by the local authorities based on expert opinions or appropriate valuation methods, but the levy is only collected when the added value is realised. This can be either at the time of the property sale or if the property owner exploits the change in spatial planning with a concrete construction project, such as a new construction or added floors. The risk with this collection rule is that it creates disincentives to build and exploit the opportunities offered by the spatial planning change. Moreover, the Spatial Planning Act mandates cantons to levy at least 20% and at most 50% of the added value in case of new zoning. In the case of rezoning or upzoning, however, it is up to the cantons to decide if the land value incremental tax applies. The federal government should reconsider expanding its mandatory application to cases of rezoning and upzoning. In fact, it will be difficult to gather political support and public acceptability for densification if voters do not perceive the added value from inner development in the form of higher tax collection.
Cantons also have some freedom to develop their own procedures for assessing and collecting the tax. There is no harmonised valuation method, for example. As there might be no comparable transactions at the time of the spatial planning change, it is difficult, in practice, to attribute a market price to the added value. Rules may also change from one canton to the other when it comes to the possibility of deducting part of the land value incremental tax to the property capital gains tax, potentially leading to a double tax burden on the same profit in some cases. Clarifying and harmonising rules and valuation methods across cantons would reduce uncertainty and minimise potential legal contests.
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