Addressing Switzerland’s housing challenges

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Finding affordable housing has become more difficult in Switzerland. Recent OECD work has identified a number of policy reforms that could help ensure that housing supply grows in line with rising demand, and that existing residential areas and dwellings can be used more effectively.

by Priscilla Fialho, OECD Economics Department

Switzerland has one of the highest per-capita incomes of the OECD, but housing has increasingly become a source of concern for many Swiss households. Like elsewhere, urban centres have suffered a shortage of affordable housing. Housing has risen to the top of voters’ concerns and is starting to play an important role in the political debate. House prices have risen faster than in the OECD average in recent years, and the Swiss National Bank has estimated that prices may now be 15 to 40% above levels suggested by fundamental indicators. For an average household, saving enough to buy a property is a long exercise in patience: first-time home buyers in Switzerland are, on average, 47 years-old, compared to an average of 31 years-old in the European Union. Rents have also soared: For renters at the bottom of the income distribution, housing absorbs close to 40% of disposable income. For young people in particular, renting has become increasingly unaffordable and buying increasingly distant.

Switzerland’s housing problem is essentially a problem of supply

While housing demand has clearly increased over the years, that is only half of the story. The pertinent question is why supply has been so slow to respond. The number of apartments offered for rent has fallen since 2015, while residential construction has barely budged in the face of stronger demand. The result is predictable: rising housing costs. Without policy action, housing demand will likely continue to outpace supply, making affordable housing even harder to come by in the future.

Mountains, lakes and protected areas impose genuine physical constraints, but Switzerland has not yet used up its reserves of buildable land, nor has it exhausted its potential for denser development. Estimates suggest that unused reserves within existing building zones could supply housing for an additional 1.6 million people. In some areas, more than 20% of existing building zones are still completely undeveloped. Almost 80% of undeveloped buildable land in urban municipalities has at least average access to public transport, and 32% of the built-up area in existing building zones has potential for densification. The greatest potential for densification was found in larger cities, including Zurich and Geneva where the housing market is particularly strained.

Building in Switzerland is surprisingly complicated

The revised Spatial Planning Act of 2014 was designed to limit urban sprawl and encourage development within existing built-up areas, but its implementation has been slow. In 2024, only about 43% of municipalities had adapted their land-use plans to the new requirements. Challenges in the implementation of the revised Spatial Planning Act have created significant uncertainty, potentially discouraging new housing construction investment. Further support to cantons and municipalities in the form of technical expertise to complete an inventory of underused land, or to streamline urban design standards, could help.

Densification is hardly an easy sell anywhere. In Switzerland, where residents can challenge local projects and direct democracy is woven deeply into political life, it can be particularly complicated. Creating ample consensus for urban densification and addressing concerns will therefore be key for success, and this will require building ample opportunities for public participation into all stages of the planning process. Increasing the share of mixed-used zoning could also help to gather local support and reconcile different interests.

Switzerland’s construction costs have been persistently higher than in European neighbours. One reason is the country’s remarkable patchwork of diverse construction standards across cantons and municipalities. These complex local rules limit the scope for economies of scale and competition and may explain why the construction industry is dominated by small firms. Strengthening the harmonisation of building codes across cantons could reduce construction costs. Setting cross-cantonal standards could involve intergovernmental conferences, with inputs from private-sector experts.

Then comes the paperwork. On average, it takes 140 days to obtain a building permit. In Geneva, it takes 497 days and in Zurich, 214. Across Switzerland, permit delays have increased by 67% over the past decade. Even after the construction permit is obtained, legal appeals can still be lodged and delay the start of construction works. Around 10% of construction projects remain on hold despite having obtained a building permit. Delays can have a considerable impact on costs and profit margins. Uncertainty surrounding potential legal appeals can affect budgeting and bidding for projects, inflating construction costs. Switzerland could build on its high level of technological sophistication and make greater use of electronic permitting. California, for example, has experimented with an AI-powered system that checks building applications against zoning and construction codes. Automating routine checks allows officials to concentrate on cases that require human judgement.

Switzerland may have more unused housing reserves than meets the eye

The share of under-occupied dwelling space in Switzerland is high compared to European countries. Under-occupancy, defined by comparing the number of rooms to occupants, is particularly frequent among older households. Households above 65 have, on average, a surplus of two rooms. Making better use of the available dwelling stock would help increase housing supply and alleviate pressure on housing costs.

Rent controls are intended to make housing more affordable, but they could be generating a counter-productive side effect. Most rents are regulated once a tenancy begins. This protects sitting tenants from sharp increases, but it also creates a growing gap between the rents paid by existing tenants and those faced by households who sign new contracts. This gap can discourage people from moving, even when their current dwelling becomes larger than their needs. These lock-in effects contribute to increased floor-space consumption per capita and exacerbate the housing shortage, besides making it less attractive to build to rent. Closing the regulatory gap between ongoing and new rental contracts and harmonising rules concerning the updating of rents could be considered to reduce such distortions. For example, rents in ongoing contracts could be adjusted based on local average rents for new leases of comparable dwellings. Further clarifications on what defines an abusive rent, based on objective criteria, could also be helpful.

Tax policy can also play a role to create incentives for renting out available properties, renting out spare rooms, and building on available land. Switzerland could consider increasing recurrent taxes on immovable properties, which are low in international comparison. Such taxes create incentives for owners to use their housing space up to its maximum potential.

Switzerland has always been very good at making the most of its scarce resources. Addressing the country’s housing shortage should not be different. The current housing challenge is not so much about how to find new construction land but rather a question of making better use of existing residential areas.

Reference:

OECD (2026), OECD Economic Surveys: Switzerland 2026, OECD Publishing, Paris, https://doi.org/10.1787/48b03aff-en.