Renters who land a publicly owned flat in Zurich hit the jackpot

The Hardau 1 urban housing estate in Zurich is nearing completion. A 4.5-room flat here costs CHF1,860 - a bargain. Keystone / Christian Merz

Thousands of residents benefit from Zurich’s low-cost municipal housing. But not all tenants actually meet the city’s eligibility criteria. Zurich now wants to crack down on this while sparing large sections of the population.

A newly built four-and-a-half room flat in a central location for a bargain CHF1,860 ($2,332): in the overheated Zurich rental market, it sounds like a fake advertisement.

Yet this offer was placed not by a fraudster, but the city of Zurich itself. The apartment in question is located in the new Hardau 1 housing estate, which the city is offering at cost – what’s known as “cost-based rent” or rent to cover costs.

These low rents are possible because the city bought up the land in the 1960s and can price the units based on the purchase price at the time.

Land is the great inflator of prices in Zurich. Since the mid-1970s, the price of a square metreExternal link of land has increased twelvefold.

On the open market, such an apartment would cost three times the rent being asked for at Hardau 1. Over a period of 25 years, tenants in a municipal apartment can save CHF1 million – or CHF1.5 million, if calculated on the basis of a moderate interest rate.

The demand for these apartments is therefore high. So is the envy felt by those who don’t meet the eligibility criteria and who wonder if it is always the right people who benefit from this scheme.

The housing shortage in Zurich is serious, even in comparison with the world’s largest metropolises:

Case of multi-millionaire got the ball rolling

The question is more urgent now than ever. The city of Zurich is currently planning the biggest wave of evictions in its history. People who do not not meet the city’s eligibility criteria will no longer be entitled to these flats. The first corrective measures are due to be taken this year.

The call to action was first made in a newspaper article ten years ago. In 2014 the Zurich daily Tages–Anzeiger reportedExternal link that a wealthy Zurich municipal councillor belonging to the right-wing Swiss People’s Party was renting a low-cost city apartment as a secondary residence, on top of her suburban villa in a nearby town.

“Is it really the city’s responsibility to provide rental housing at cost price to multimillionaires?” some asked at the time. The debate was launched, fuelled by many similar cases that were later brought to light.

The outcome on the political scene was a whole new set of rules for renters. The city prescribed a minimum occupancy, defined official Zurich residency as obligatory, and set an upper limit on renters’ income.

The new rules took effect in 2019, but with a transition period of five years to implement them. Judicial appeals caused further delays. One woman who lived alone in a six-room house took her case to the highest court and lost. 

In 2024, the Federal Court ruledExternal link that the city of Zurich had a legitimate interest, given the lack of housing, to offer city-owned flats to renters based on socially just criteria.

Under-occupied flats

With the decision of the Federal Court, the city of Zurich could proceed with a review of all its rental contracts.

It later announced that, out of 7,400 apartments offered at cost, 1,100 are under-occupied – 150 of these markedly so.

The city plans to start by tackling these 150 rentals. It will also check around 100 flats to see if tenants meet the residency requirement. Then authorities will tackle all other cases of under-occupancy.  

The verification of tenant income will take longer. One reason for this is that the city, in making its calculation, looks at income tax declarations for three different years, all of them from the time following the transition period.

There is another reason for this sequence of measures: alternative homes have to be found for those affected, says Kornel Ringli, a spokesperson for the property management department of the city of Zurich.

For example, anyone who is renting a unit with too many rooms (only one room more than the number of occupants is allowed) should be offered two substitutes. Only if and when these are turned down is eviction possible.

“Eviction is for us the last resort”, says Ringli. “It is not the goal. We put a lot of time and effort into relocating tenants.”

There are generous exceptions allowed for hardship cases. For example, in case of relationship breakdowns, even a partner who has moved out is counted among the occupants until the children reach the age of majority.

Even high-income earners can keep their municipal flats

Limits to income are interpreted liberally as well. The rule is: at the time of first occupancy, taxable income may not amount to more than four times the cost of rent. Subsequently it cannot amount to more than six times that.

However, the city of Zurich turns a blind eye to up to 15% of its tenants.

Only when the proportion of those earning too much is higher does the city take action. The cases are then to be dealt with, starting with the highest income, until the 15% target is reached.

Authorities justify this level of tolerance by pointing to the need for “social diversity”, the aim being to avoid any ghettoisation of municipal housing.

This principle extends to the city offering good substitute housing even to high earners who have a taxable yearly income of up to CHF230,000.

The equivalent for a family would be an income of CHF300,000-CHF320,000, more than double the average income in the canton. 

Even people earning this kind of money are allowed to live in a subsidised municipal flat – in the interests of social diversity.

Tenants’ association unhappy with new compliance guidelines

Is this socially sustainable or fair? Walter Angst of the renters’ association in the city of Zurich does not have much to say against it.

Walter Angst of the renters’ association in the city of Zurich. Keystone / Ennio Leanza

His group was once critical of the rental regulations. Today they are in broad agreement with the way these are being implemented. “It was crucial for us that hardship cases were taken into account and that sensible alternatives were offered,” Angst says.

In 2019, at the time that the city council published the new rental directive (the basis for the regulations), Angst was an elected member of the left-leaning Alternative List. Now he limits his criticism to the compliance guidelines. “Little room for manoeuvre is allowed to property managers, in order to avoid suspicions of cronyism or favouritism,” he says. “But that may exist anyway.”

Several cases were brought to light in the past in which flats that were not advertised were handed out, including to politicians and administrative employees. The regulations therefore also specify recusal obligations.

Monitoring just how many politicians and city administrators are included in their population of renters is one thing the city government does not do, Ringli says.

Dominance of a small urban elite

Christian Hilber is a real estate economist at the University of Zurich and the London School of Economics. He sees the Zurich procedure as a system that protects vested rights and maintains privileges for a small, well-informed group.

Christian Hilber, Professor of Economic Geography. Courtesy image

“Government flats often go not to those who really need them, but to those who are better informed, better connected, or just persistent,” says Hilber. Public housing creates a system of insiders and outsiders, with completely different conditions, he adds.

There are examples of this in many countries, including Austria, France and Britain. “In the Netherlands, social housing is assigned through a waiting list, which can take years. This gives an advantage to the ‘clever ones’, who apply early on, sometimes even as teenagers,” Hilber says. In some countries there are points systems. Those who are familiar with the points can optimise their own application for a city-owned flat accordingly.

Hilber believes there are political and economic reasons behind why these systems are resistant to reform. He quotes the American economist Mancur Olson, who was able to show that small, well-organised groups with highly concentrated interests are disproportionately successful in exerting political influence.

The new rental regulations were approved by the Zurich city council in 2018 without a single dissenting vote. The city council, which includes many well-placed professionals, was, according to this theory, just protecting its own interests.

Hilber can also see ethical and welfare reasons for the Zurich approach. “Once you get possession of a flat,” he says, “there tends to be a view in society than you can’t then be deprived of it.”

The uncertainty caused by losing a home creates unease, even for those who are better off. On the other hand, the argument put forward by the city of Zurich about “social diversity” seems rather contrived.

What a system correction might look like

One possible way out of the problems in Zurich, according to Hilber, might be variable rents based on income. This would mean a shift in decision-making from the object (the property) to the subject (the person).

Unlike today, professional success, such as a promotion, would not further jeopardise the housing situation of the city’s tenants. At the same time, high earners would not benefit from low municipal rents.

The additional money that the city would collect could be used for specific purposes, such as financing rent reductions for those in need or for housing subsidies or land acquisition.

Such a system could be conceivable, says Ringli from Liegenschaften Stadt Zürich. This, however, is not the political mandate given to the city, and at the moment no discussions are taking place that go in this direction.

Angst of the renters’ association rejects the idea of a systemic change. He sees any deviation from cost-based rents as posing a risk that rental income could be used for the municipal budget, which is a demand among liberal circles.

“The one big curse here in Zurich is that people have become so envious, just because rents [on the open market] have gone up so much,” says Angst. “People are afraid that if they have to give up their flats, they won’t find anything else within their income.”

The renters’ association has now launched two people’s initiatives. The first calls for a system of government-led rent control for privately-owned real estate. The second calls for an expansion of state-run housing construction.

The association does not address the problem of insiders and outsiders in public housing.

The housing shortage has long affected the whole of Switzerland, here we take a look at the most important key figures:

Edited by Balz Rigendinger. Adapted from German by Terence MacNamee/gw