Is Switzerland repeating England’s housing mistakes?

Is housing construction on the brink? The sculpture on the new Tramdepot Hard housing estate. 15,000 applications were received for the flats built by the City of Zurich. Keystone / Michael Buholzer

Switzerland is on the verge of repeating England’s mistakes in housing construction, says Christian Hilber, a Swiss real estate economist at the London School of Economics, in an interview. There is only one point where he believes Switzerland is on the right track.

“We want to get the balance right with nature and the environment, but if it comes to a human being wanting to have a house for them and their family, that has to be the top priority.” These were the unusual and clear words of British Prime Minister Keir Starmer, addressing the housing crisis in England.

His Labour government recently presented a detailed plan on how it intends to correct the precarious property market situation. The ambitious goal: 370,000 new homes are to be approved each year, 87,000 in London alone. The last time there were so many new builds in England was in the 1970s.

Switzerland also has a housing crisis, with many parallels. Like England, it has strict restrictions on land use – since the last major revision of the Spatial Planning Act 11 years agoExternal link, no new building zones have been created. Like England, Switzerland wants to preserve natural areas and halt urban sprawl. And as in England, not enough houses are being built in Switzerland to meet labour migration and the correlated population growth.

Christian Hilber, Professor of Economic Geography. Courtesy image

Christian Hilber, real estate economist and professor of economic geography at the London School of Economics, is observing this development with growing concern. In 2024, he took up a part-time professorship at the University of Zurich, funded by Swiss bank UBS and consultancy firm Wüest Partner, among others. His task was to analyse the supply of housing in Switzerland. We met him for an interview.

SWI swissinfo.ch: There are hardly any vacant flats left in Switzerland, and house prices have risen to a level that four-fifths of the population can no longer afford. What’s going on?

Christian Hilber: What we’re seeing in Switzerland is a combination of strong demand for housing – for both owner-occupied and rented homes – and at the same time a supply trend that has become increasingly inflexible since around the mid-2010s.

SWI: Housing policy in Switzerland was reformed during this time and land use was restricted. Do you see this as the main reason for these developments?

C.H.: I must go into a little more detail here. Switzerland has a strong federalist structure. The combination of tax autonomy and spatial planning with extensive municipal autonomy has led to urban sprawl. For decades, the municipalities had strong incentives to zone land, especially to attract higher taxpayers. To put it simply: everyone wanted Roger Federer.

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However, the increasing urban sprawl also generated political pressure, which resulted in the second home initiative: in 2012 a narrow majority voted to restrict the construction of second homes in the mountains. This was followed in 2013 by the revision of the Spatial Planning Act, which saw the autonomy of the municipalities severely restricted in terms of land policy. 

SWI: This was also the political will of a majority in Switzerland. the revised Spatial Planning Act was adopted with more than 60% of votes in favour.

C.H.: Yes, but the ramifications were completely underestimated, and we’re only now beginning to see this. I would argue that, by and large, Switzerland doesn’t have a housing crisis at the moment.

SWI: The figures tell a different story: the vacancy rate is likely to fall below 1% throughout Switzerland this year, meaning that there is a nationwide housing shortage. An average detached house in the city of Zurich costs around CHF3.3 million ($4 million).

C.H: Nevertheless, the housing shortage is not comparable to that in the southeast of England or in London. It’s true that the prices of residential property are very high in Switzerland, but you need to consider this in relation not only to income, but also to the cost of credit. Home mortgage interest rates in Switzerland are low, which reduces the monthly burden. In England, you can barely get a mortgage for less than 4.5%.

Rents are also still very affordable compared to the UK, by which I mean average rents, not new rents. And I don’t mean in all areas either. Of course, certain attractive neighbourhoods such as Zurich’s Seefeld have become very expensive, where there is strong demand and limited supply.

Facts, figures and future prospects. Read our explainer on the Swiss housing shortage:

SWI: Switzerland is a country of short distance urban design and has well-developed public transport. Does that also make a difference?

C.H.: Commuters can travel 40 minutes out of Zurich and there is very affordable housing, especially for renters. That’s vastly different from London. Take me: I have a one-hour commute. And when I commute, I have to stand. I can’t possibly do any work. But I’m actually privileged. The neighbourhood I live in is unaffordable for most people.

But it’s not the traffic that makes the main difference. The main problem is on the supply side: it’s the lack of housing. Switzerland is moving in the same direction as England here, but it’s still about 20 years behind.

SWI: Looking back, what did England do wrong?

C.H.: England has a dysfunctional planning system. In Switzerland, you have defined building zones for housing or commercial use. That’s not the case in England. Every change of land use must be authorised by the local authorities.

Unlike Switzerland, England is also very centralised, including in fiscal terms. This means that while there are strong incentives to zone land in Switzerland, this is not attractive in England. Zoning initially only costs money – you have to develop the infrastructure, but you only get a little money back and not until later. So, there are no incentives to encourage construction. And the local population doesn’t want construction activity either. Most people are homeowners. They are NIMBYs – not in my back yard. Nobody wants building works near to them. And the local politicians do what the local population wants.

SWI: What is the impact of heritage building and nature conservation?

C.H.: In England, all large cities are surrounded by generous green belts where no building is allowed. In addition, there are building height restrictions in large cities and very well-developed monument protection. This means that cities can’t grow outwards, they can’t grow upwards, and many buildings can’t be replaced, i.e. they can’t be densified. Around 70% of buildings in central London are protected. All of this makes property unaffordable for most people and has contributed to the current crisis.

SWI: What does this mean for people?

C.H.: The people affected are the same as those affected in Switzerland: those with low incomes and the young. There’s a generational divide. Older people bought a long time ago and benefit from the increase in value. Young people can no longer afford to own property and have to enter the rental market, which is extremely expensive in England.

Many young people spend more than 50% of their income on renting a flat. Others live with their parents or in shared flats for a long time. Many immigrants share housing. Sometimes there are a dozen people living in a small flat.

In Switzerland, four-fifths of the younger generations can no longer afford to buy a home. Read more about this:

SWI: In the major Swiss centres such as Zurich, the trend in the lowest-income quintile is moving in a similar direction.

C.H.: Yes, this is happening more and more in Switzerland. But rents are regulated here. Anyone who already has a flat is protected. The situation is more difficult for young people and immigrants or those who are forced to move.

SWI: How do you rate Swiss tenancy law comparatively?

C.H.: In England, there is social housing but no regulation of the private rental market, as in many Anglo-Saxon countries. Tenants are completely unprotected, which is why nobody wants to rent. My assessment is that Switzerland has actually done a good job of regulating the rental market.

Elsewhere, for example in Germany, there are regulations that are counterproductive and mean that landlords no longer have any incentive to build or renovate. Switzerland has found the sweet spot of rent regulation; it protects tenants but doesn’t overdo it.

SWI: Is Switzerland better or worse off than England in terms of new construction activity?

C.H.: In terms of population, Switzerland is still building more than twice as much as England. But yes, the pressure is growing. What many people have yet to realise is that the Spatial Planning Act has made the market inflexible on the supply side. There is no simple solution to this unless spatial planning is fundamentally reformed.

SWI: Instead, Swiss policy is focusing on inner densification – with moderate success. 

C.H.: Inner densification is a good goal, but there are too many objections. The Swiss are also NIMBYs. If inner densification were easy to implement, the revision of spatial planning would have worked.

The city of Zurich has also failed to achieve inner densification, with spectacular consequences. Read more about this:

SWI: Is there no solution to this?

C.H.: If residents benefit from a share in the added value of denser development – for example by adding storeys – inner densification can work.

SWI: Swiss cities prefer to socialise the added value by stipulating a proportion of social housing.

C.H.: This model also exists in England and has created extreme uncertainty for property developers. Social housing sounds good, but it doesn’t solve the problem. There are always insiders and outsiders. The insiders are homeowners and co-operative members, those who are lucky enough to have such a flat.

The outsiders are those who were not so lucky. In England, it’s often not those who need it most who get the social housing but those who understand how to use the system to their advantage. This leads to an even more dramatically two-tier society. England has social housing but also one of the highest rates of homelessness in the world.

SWI: What should be done instead?

C.H.: If you really want to tackle the problem, there is only one way: you must build more, and in the right places.

SWI: The British government is now planning major reforms to multiply the new build quota and release land in the green belts for this purpose. Do you think this move away from nature conservation is the right approach? 

C.H.: Of course you have to protect certain green spaces and certain buildings and look at how to promote inner densification. But the green belts around Oxford and London, for example, don’t have much of an ecological impact. They are cultivated land, and many people have to live outside these green belts and commute long distances into the city, which is not at all ecological.

SWI: And in Switzerland, do we need a building-friendly reform of spatial planning?

C.H.: Looking back, Switzerland has done a lot of things right. And I say this as someone who has researched England and the US and analysed the housing policies of various countries. However, with the tightening of spatial planning in 2013, Switzerland has created a long-term affordability crisis. At the moment, there isn’t widespread hardship, mainly thanks to the rental market, which is still functioning well. There is no visible homelessness.

If it comes to that, the question will be whether direct democracy will counteract this. There is much to indicate that between 2030 and 2035 there will be initiatives to make housing more accessible again. But it will be difficult to reverse spatial planning. I expect the problems to become even more acute over the next ten to 20 years.

Translated from German by Katherine Price/ts