Why Swiss rents keep rising despite low mortgage rates

Swiss rents climbed 32.1% between 2005 and 2025, even as mortgage borrowing costs reached historic lows. The figures, released by the Swiss Tenants’ Association on International Tenants’ Day, capture a pressure felt across a country where renting is the norm rather than a temporary stage before home ownership. Around two thirds of Swiss households rent their homes, the highest proportion in Europe.\n\nThe mismatch between the mortgage reference rate and monthly rent bills has become a defining issue in the cost of living debate. The reference rate currently stands at 1.25%. Because Swiss rents are legally linked to this rate, tenants could have expected reductions when financing costs fell. The Tenants’ Association says that relief has not reached renters on the scale implied by the rate.\n\nThe burden falls most heavily on households with limited room in their budgets. People with gross incomes below CHF 4,000 spend an average 37.8% of their income on rent, according to the association. In cities such as Zurich, where available apartments are scarce, households often face a difficult choice between accepting higher costs, moving farther from work and services, or remaining in housing that consumes an increasing share of their income.

A 1.25% reference rate does not automatically translate into a lower rent. Swiss tenancy rules link rents to the mortgage reference rate, but the adjustment process depends on the individual tenancy, previous rent changes and the legal conditions governing increases or reductions. The association argues that many tenants have not received the full benefit of falling financing costs.\n\nThe housing market has also tightened. When apartments are in short supply, landlords can often find new tenants willing to pay more, particularly in economically strong areas. That creates pressure around apartment changes and new leases, even when existing tenants have legal grounds to request a rent reduction after a fall in the reference rate.\n\nThe result is a gap between the financial conditions faced by property owners and the monthly costs faced by renters. Lower borrowing costs can reduce financing expenses, while scarcity supports rents in the market. Property owners also face maintenance, energy and renovation costs, but the available figures show that the overall rent index continued upward during the period of exceptionally low mortgage rates. The Tenants’ Association says the system needs stronger enforcement of cost based rent, where charges reflect the actual costs and a permitted return rather than market scarcity alone.

Investment companies owned 44.4% of Swiss rental homes in 2024, up from 28.7% in 2000, according to the Tenants’ Association. Over the same period, the share owned by private individuals fell from 57.3% to 43.2%. The shift has changed who makes decisions about rental housing and how property income is assessed.\n\nLarge owners can bring professional management and capital for construction or refurbishment. They also operate portfolios that investors expect to generate returns. The association says investment companies have achieved high returns from the property sector, while tenants have continued to face rising costs and a shrinking supply of affordable homes.\n\nOwnership is only one part of the explanation for the rent increase. Land prices, construction costs, planning restrictions and population growth all affect the supply of homes. The source material does not assign a single cause to the 32.1% rise, but it identifies a market in which financial capital has gained a larger position while tenants remain exposed to local shortages.\n\nThe Tenants’ Association wants the federal government to strengthen the Lex Koller, which restricts certain purchases of Swiss residential property by foreign non residents and people without residency permits. It argues that tighter rules could curb the flow of financial capital into the housing market.

Rent takes 37.8% of gross income for households earning below CHF 4,000. That leaves less money for food, transport, healthcare, childcare and energy, while making it harder to absorb an unexpected bill. The pressure is particularly severe for people who cannot move easily because of work, school or family responsibilities.\n\nOECD data covering eight countries, including Switzerland, shows that one in two low income households in rented accommodation spends more than 40% of disposable income on rent. The measure uses disposable income rather than gross pay, so it describes an even tighter household budget after taxes and transfers.\n\nMiddle income tenants also face exposure when rents rise faster than wages or when a household loses an income. A rent increase at the time of moving can force people to search outside established communities or accept longer commutes. In Zurich and other high demand areas, the shortage of affordable apartments limits those choices.\n\nThe affordability problem therefore reaches beyond individual tenancy disputes. It affects labour mobility, household formation and the ability of workers to remain near jobs and public services. Switzerland’s unusually high share of renters means that changes in the housing market touch a large part of the population, not a narrow group of households.

The Tenants’ Association is calling for a policy change centred on cost based rent and more public interest housing. It also criticises the federal government’s indirect counter proposal to the association’s Rent Initiative, warning that the proposal could produce an “even sharper rise in rents”.\n\nPublic interest housing could expand the supply of apartments managed for affordability rather than maximum market return. The association has not presented the measure as a quick fix. Building homes requires land, financing, planning decisions and time. In the short term, tenants’ groups are pressing for clearer application of rent rules and stronger access to reductions when the reference rate falls.\n\nThe debate will also test the role of the federal government, cantons and municipalities. Local authorities control much of the planning environment and can support cooperative, municipal or nonprofit housing. Federal policy affects tenancy law, mortgage rate rules and restrictions on property purchases.\n\nFor tenants, the immediate benchmark is simple: whether monthly housing costs fall when the legal reference rate falls, and whether new supply includes homes that ordinary wages can support. With rents up 32.1% over two decades, that test will remain central to Switzerland’s cost of living politics.