Fight for living space: replacement new buildings endanger low rental prices!

Fight for living space: replacement new buildings endanger low rental prices!

The housing situation in Switzerland is becoming increasingly precarious. The increasing demand for rental apartments is met by stagnating construction activity, which has driven up rents significantly in recent years. In particular, in 2024, rents rose by a median of 4.5 percent, which represents the strongest increase in 20 years, according to the NZZ reported. This not only leads to an increased burden on tenants, but also to a dwindling supply of affordable housing.

Housing construction in Switzerland is stalling, which is further exacerbating the situation. While an average of 7.3 apartments per 1,000 residents were planned between 2004 and 2017, there are only 5.5 between 2020 and 2024. A total of around 49,000 new apartments were approved in 2024, which is 2.1 percent above the average of the last ten years, but remains insufficient given the need for around 50,000 units. Forecasts suggest that only 42,000 new homes will be built in 2025, while the population is increasing at the same time, with a projected number of 9.43 million by 2030 and 10.44 million by 2050.

Assessment of replacement new buildings

Replacement construction, in which existing houses are demolished and replaced with new ones, is controversial. These construction projects face resistance because they are not only associated with noise and dirt, but often also result in a significant loss of affordable housing. Smaller, older properties and single-family homes are particularly affected, but increasingly also buildings from the 1960s to 1980s. In the canton of Zurich, around 7,500 new apartments were built in 2022, while 2,100 were demolished, which can represent a significant loss, as the NZZ determines.

The high level of immigration contributes significantly to the housing shortage. In 2024, around 83,000 foreigners moved to Switzerland, primarily workers from the EU, while the national vacancy rate is already low at 1.08 percent. Zurich in particular has the lowest value in Switzerland and possibly in the Western world at 0.07 percent. This is leading to concerns about the availability of rental housing and protests when around 100 tenants in Zurich recently received notices of termination. Swissinfo points out that the situation will remain tense for the next five years.

Outlook and challenges

The political and public discussion about densifying existing residential areas is increasing, but such projects are often hindered by objections. The Spatial Planning Act of 2014 also inhibits new construction activity, as new building zones are hardly designated. Gentle forms of densification such as conversions and additions are often not sufficient to meet demand. However, the legal requirements require replacement new buildings in order to create new living space and thus avoid urban sprawl.

To improve the situation, a determination to encourage construction projects is needed, perhaps even through adjustments to financial incentives that could stimulate construction activity. With the possibility of negative interest rates in the future, there could be an opportunity here. Until then, there is a high probability that the housing shortage will remain a central issue in Switzerland.