Why Do the Swiss Rent?

Article

Abstract

At less than 34%, Switzerland has the lowest home ownership rate in Western Europe. This may seem odd given the economic strength of the country. We use household survey data for five Swiss cantons to explore some possible reasons for this. We estimate a tenure choice equation that allows us to analyze the impacts of a number of key variables on the ownership rate. We pay particular attention to the relative cost of owning and renting, which is a function of house prices, rents, and the user cost of owning. The latter is a function of income tax policy and expected house price inflation, among other things. We also measure mortgage underwriting criteria and consider rent control and other policies affecting rental housing. By simulating a number of hypothetical changes to taxation and other policies, underwriting criteria, and price levels, we assess the importance of these variables in explaining the ownership rate. We conclude that high house prices—relative to household incomes and wealth—and the tax on imputed rent are the most important causes of Switzerland’s low ownership rate.

Keywords

Home ownership House prices Tax policy Switzerland 

References

  1. Aebersold, A. (1994). Miete oder Eigentum? Die ökonomische Entscheidung über den Wohnungsbesitz. Hallstadt, Switzerland: Rosch-Buch.Google Scholar
  2. Bourassa, S. C. (2000). Ethnicity, endogeneity, and housing tenure choice. Journal of Real Estate Finance and Economics, 20(3), 323–341. doi:10.1023/A:1007893310903.CrossRefGoogle Scholar
  3. Bourassa, S. C., & Grigsby, W. G. (2000). Income tax concessions for owner-occupied housing. Housing Policy Debate, 11(3), 521–546.Google Scholar
  4. Bourassa, S. C., & Yin, M. (2006). Housing tenure choice in Australia and the United States: impacts of alternative subsidy policies. Real Estate Economics, 34(2), 303–328. doi:10.1111/j.1540-6229.2006.00168.x.CrossRefGoogle Scholar
  5. Bourassa, S. C., & Yin, M. (2008). Tax deductions, tax credits, and the home ownership rate of young urban adults in the United States. Urban Studies, 45(5/6), 1141–1161. doi:10.1177/0042098008089981.CrossRefGoogle Scholar
  6. Bureau d’information fiscale. (2003). Les droits de mutation. Berne, Switzerland.Google Scholar
  7. Bureau d’information fiscale. (2005). Limpôt sur le revenu des personnes physiques. Berne, Switzerland.Google Scholar
  8. Bureau d’information fiscale. (2006a). Les impôts en vigueur de la Confédération, des cantons et des communes. Berne, Switzerland.Google Scholar
  9. Bureau d’information fiscale. (2006b). Limpôt sur la fortune des personnes physiques. Berne, Switzerland.Google Scholar
  10. Chiuri, M. C., & Jappelli, T. (2003). Financial market imperfections and home ownership: a comparative study. European Economic Review, 47(5), 857–875. doi:10.1016/S0014-2921(02)00273-8.CrossRefGoogle Scholar
  11. Commission intercantonale d’information fiscale. (1999). Limposition de la valeur locative. Berne, Switzerland.Google Scholar
  12. Commission intercantonale d’information fiscale. (2000). Limpôt sur les gains immobiliers. Berne, Switzerland.Google Scholar
  13. Credit Suisse. (2005). Real estate bubble in Switzerland? Economic Research Spotlight (December).Google Scholar
  14. Cuennet, S., Favarger, P., & Thalmann, P. (2002). La politique du logement. Lausanne, Switzerland: Presses polytechniques et universitaires romandes.Google Scholar
  15. Efron, B., & Tibshirani, R. J. (1993). An introduction to the bootstrap. New York: Chapman & Hall.Google Scholar
  16. Glaeser, E. L., & Gyourko, J. (2003). The impact of building restrictions on housing affordability. Economic Policy Review, 21–39, (June).Google Scholar
  17. Goodman, A. C. (1990). Demographics of individual housing demand. Regional Science and Urban Economics, 20(1), 83–102. doi:10.1016/0166-0462(90)90026-Y.CrossRefGoogle Scholar
  18. Green, R. K., & Vandell, K. D. (1999). Giving households credit: how changes in the U.S. tax code could promote homeownership. Regional Science and Urban Economics, 29(4), 419–444. doi:10.1016/S0166-0462(99)00005-8.CrossRefGoogle Scholar
  19. Haurin, D. R., Hendershott, P. H., & Wachter, S. M. (1997). Borrowing constraints and the tenure choice of young households. Journal of Housing Research, 8(2), 137–154.Google Scholar
  20. Heckman, J. J. (1979). Sample selection bias as a specification error. Econometrica, 47(1), 153–161. doi:10.2307/1912352.CrossRefGoogle Scholar
  21. Hendershott, P. H., & Slemrod, J. (1983). Taxes and the user-cost of capital for owner-occupied housing. Journal of the American Real Estate and Urban Economics Association, 10(4), 375–393. doi:10.1111/1540-6229.00270.CrossRefGoogle Scholar
  22. Himmelberg, C., Mayer, C., & Sinai, T. (2005). Assessing high house prices: bubbles, fundamentals and misperceptions. Journal of Economic Perspectives, 19(4), 67–92. doi:10.1257/089533005775196769.CrossRefGoogle Scholar
  23. Linneman, P. (1985). An economic analysis of the homeownership decision. Journal of Urban Economics, 17(2), 230–246. doi:10.1016/0094-1190(85)90048-8.CrossRefGoogle Scholar
  24. Linneman, P., & Wachter, S. M. (1989). The impacts of borrowing constraints on homeownership. Journal of the American Real Estate and Urban Economics Association, 17(4), 389–402. doi:10.1111/1540-6229.00499.CrossRefGoogle Scholar
  25. Mooney, C. Z., & Duval, R. D. (1993). Bootstrapping: a nonparametric approach to statistical inference. Newbury Park, CA: Sage.Google Scholar
  26. Office fédéral de la statistique. (1999). Enquête sur les revenus et la consommation 1998: bases. Neuchâtel, Switzerland.Google Scholar
  27. Office fédéral du logement. (2004). Encouragement à la propriété du logement au moyen de la prévoyance professionnelle. Berne, Switzerland.Google Scholar
  28. Office fédéral de la statistique. (2007). Indice suisse des prix à la consommation: loyer du logement. Available at <http://www.statistik.admin.ch/> (March).
  29. Swiss National Bank. (2006a). Real estate price indices. Monthly Statistical Bulletin. Available at <http://www.snb.ch/> (June).
  30. Swiss National Bank. (2006b). Interest rates on bank deposits and mortgages. Monthly Statistical Bulletin. Available at <http://www.snb.ch/> (September).
  31. Thalmann, P. (1987). Explication empirique des loyers lausannois. Swiss Journal of Economics and Statistics, 123(1), 47–70.Google Scholar
  32. Thalmann, P. (1999). Which is the appropriate administrative level to promote home ownership. Swiss Journal of Economics and Statistics, 135(1), 3–20.Google Scholar
  33. Thalmann, P., & Favarger, P. (2002). Locataires ou propriétaires? Enjeux et mythes de laccession à la propriété en Suisse. Lausanne, Switzerland: Presses polytechniques et universitaires romandes.Google Scholar
  34. U.S. Census Bureau (2004). American Housing Survey for the United States, Current Housing Reports, Series H150/03. Washington, DC: U.S. Government Printing Office.Google Scholar
  35. Werczberger, E. (1997). Home ownership and rent control in Switzerland. Housing Studies, 12(3), 337–353. doi:10.1080/02673039708720900.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  1. 1.School of Urban and Public AffairsUniversity of LouisvilleLouisvilleUSA
  2. 2.CEREBEM, BEM Management SchoolTalence cedexFrance
  3. 3.HEC and SFIUniversity of GenevaGeneva 4Switzerland
  4. 4.University of Aberdeen Business SchoolAberdeenUK

Personalised recommendations