A new report by the Office for Labour and Social Policy Studies (BASS) has found that renters in Switzerland have been overcharged by an average of 200 Swiss francs a month on their rent since 2006. Current laws to prevent excessive rent charges have been found to be ineffective, as over the last 16 years, all people renting a house or apartment in Switzerland paid 78 billion Swiss francs more than they should have.

Switzerland's rent cost laws appear to be ineffective

Switzerland’s constitution has clauses relating to how much landlords can charge in rental contracts. Called an “excessive return,” the law states that the net profit percentage from renting a house should not be more than the reference interest rate for mortgages, currently set at 1,25 percent. If the interest rate falls, tenants are allowed to request a rent reduction.

The report by BASS shows that rents in Switzerland have increased far more than the interest rate would allow. They estimated that tenants across the country paid 78 billion Swiss francs more than the “maximum theoretical rent” guided by law. 

This means that tenants have lost 200 Swiss francs a month on average over the last 16 years. “For the year 2021 alone, the cost over the maximum for the whole of Switzerland amounts to 10,4 billion francs,” the report said.

Landlords claim report does not take upgrades into account

In response, Markus Meier, Director of the Home Owners' Association, said that the report was full of “partisan expertise.” He criticised the fact that the report failed to include mitigating factors in justifying rent increases, such as maintenance costs and investments in green forms of energy. He claimed that these investments justified the heightened price in most cases.

As well as new investments, the association criticised the study for including new rental contracts signed during the 16 year period. They argued that this has skewed the data, as landlords are allowed to agree the price of each new rental agreement without having to consider what the rent was before. Increases might be justified if, in the interim between the two contracts, the value of the property had changed.

Tenants must be bolder in asking for rent reductions

Martin Neff, chief economist from the Raiffeisen Group, said that although the 78 billion Swiss franc estimate was an “upper limit”, “in principle, the calculations of the authors of the study are understandable and plausible.” He asserted that tenants do “pay billions too much every year,” and that the savings that a fall in interest rates provide are not adequately passed on to renters.

However, Neff clarified that he believes that it is the tenant’s hesitancy in appealing that is driving the high rents, noting, “[Tenants] have the legal means to challenge excessive rents. But most don't." Instead, he called on the government to make tenancy rights stronger and more accessible.