With the cost of renting a house or apartment in Switzerland expected to rise by up to 15 percent in the short term, the Swiss government has finally decided to intervene. The Federal Council said they will look to soften rental cost rises in the future, but critics have branded the measures as too little, too late.

Tennants in Switzerland to face even higher rents

According to a report from Blick, people across Switzerland are due to face rising rents in the new year, largely as a result of an expected increase in the reference interest rate. The metric, used to calculate rent increases and decreases by estimating the average cost of a Swiss mortgage, is expected to rise to 1,75 percent from December, adding on to the previous rise recorded in June.

As a result, a majority of landlords will be entitled to raise rents by a further 3 percent on households, regardless of their rental contract. In June, the change affected roughly 50 percent of tennants in the alpine nation, so it can be assumed that even more people will be impacted by the new rise. It is also unclear when the reference rate will start to fall, allowing tennants to apply for a cut in rent.

What’s more, the government wrote in a press release that further increases in the reference interest rate are likely in the new year. Combined with inflation, they estimated that “in a relatively short period of time, this could result in rent increases of around 15 percent” before the reference rate falls again. As a result, on November 20 the Swiss Tennants’ Association wrote to the government, demanding that they immediately suspend the reference rate rise.

Swiss government aims to curb rising rents

On November 22, the Federal Council responded, confirming that while it would not stop the increase, it was looking to cushion the expected rent rises through measures that they described as “short-term”. In the statement, they said that they hoped to “achieve a certain rent-reducing effect” without “intervening excessively in contractual relationships, or even slowing down investments in the supply of housing.”

Under the plans, rental cost rises through the reference interest rate would no longer be applied to tenants across the board. Instead, individual landlords would have to calculate rental cost rises, though they will still apply. They also hope to make the notification form used by landlords more user-friendly, with clear indications of the initial rent and how much it will increase.

Full investigation to be launched into the Swiss rental market

In addition, those hoping to appeal against a rent rise will be able to take local conditions on the housing market into account when formulating their claim. Finally, new limits will be set on how much landlords may increase rents by using inflation as the reason. Instead of 40 percent of annual inflation, they will only be able to raise rents by 28 percent of the inflation rate.

The Department of Economics, Education and Research (WBF) will also be launching a full investigation into whether the current rental system is fit for purpose, with experts noting that the system is already 40 years old.

Critics of the rental reform say the measures are not enough

However, those hoping the measures will be quick to implement are in for a disappointment: the Federal Council will be sending the measures for a consultation, which should be concluded by next summer. Blick estimated that the plan will not be put into force until the end of next year.

In response to the government’s announcement, the president of the Swiss Tennants’ Association, Carlo Sommaruga, called the measures “completely unsuitable.” “If they were actually implemented, these proposals would only have a very marginal effect and would only take effect far too late, with no impact on the upcoming rent increases."

Instead, Sommaruga called on the government to “immediately temporarily suspend the passing on of the reference interest rate increase and to present proposals to prevent abusive rent rises.”

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