Why do the Swiss rent?

S. C. Bourassa, M. Hoesli

Research output: Contribution to journalArticle

39 Citations (Scopus)

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 mostimportant causes of Switzerland’s low ownership rate.
Original languageEnglish
Pages (from-to)286-309
Number of pages18
JournalThe Journal of Real Estate Finance and Economics
Volume40
Issue number3
Early online date5 Aug 2008
DOIs
Publication statusPublished - Apr 2010

Keywords

  • home ownership
  • house prices
  • tax policy
  • Switzerland

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