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Why Do the Swiss Rent?

  • Steven Bourassa


  • Martin Hoesli


At 34%, Switzerland has the lowest home ownership rate in Western Europe. This is a puzzle given the economic strength of the country. We use 1998 household survey data for five Swiss cantons to explore some possible reasons for this. We estimate a tenure choice equation that allows us to analyze the impacts of a number of key variables on the ownership rate. We pay particular attention to the relative cost of owning and renting, which is a function of house prices, rents, and the user cost of owning. The latter is a function of income tax policy and expected house price inflation, among other things. We also measure mortgage underwriting criteria and consider rent control and other policies affecting rental housing. By simulating a number of hypothetical changes to taxation and other policies, underwriting criteria, and price levels, we assess the importance of these variables in explaining the ownership rate. We conclude that high house prices—relative to rents and to household incomes and wealth—are by far the most important cause of Switzerland’s low ownership rate.

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Article provided by Springer in its journal The Journal of Real Estate Finance and Economics.

Volume (Year): 40 (2010)
Issue (Month): 3 (April)
Pages: 286-309

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Handle: RePEc:kap:jrefec:v:40:y:2010:i:3:p:286-309
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  1. Chiuri, Maria Concetta & Jappelli, Tullio, 2003. "Financial market imperfections and home ownership: A comparative study," European Economic Review, Elsevier, vol. 47(5), pages 857-875, October.
  2. Steven C. Bourassa & Ming Yin, 2006. "Housing Tenure Choice in Australia and the United States: Impacts of Alternative Subsidy Policies," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 34(2), pages 303-328, 06.
  3. Edward L. Glaeser & Joseph Gyourko, 2003. "The impact of building restrictions on housing affordability," Economic Policy Review, Federal Reserve Bank of New York, issue Jun, pages 21-39.
  4. Green, Richard K. & Vandell, Kerry D., 1999. "Giving households credit: How changes in the U.S. tax code could promote homeownership," Regional Science and Urban Economics, Elsevier, vol. 29(4), pages 419-444, July.
  5. Patric H. Hendershott & Joel Slemrod, 1982. "Taxes and the User Cost of Capital for Owner-Occupied Housing," NBER Working Papers 0929, National Bureau of Economic Research, Inc.
  6. Linneman, Peter, 1985. "An economic analysis of the homeownership decision," Journal of Urban Economics, Elsevier, vol. 17(2), pages 230-246, March.
  7. Peter Linneman & Susan Wachter, 1989. "The Impacts of Borrowing Constraints on Homeownership," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(4), pages 389-402.
  8. Goodman, Allen C., 1990. "Demographics of individual housing demand," Regional Science and Urban Economics, Elsevier, vol. 20(1), pages 83-102, June.
  9. Philippe Thalmann, 1999. "Which is the appropriate administrative level to promote home ownership?," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 135(I), pages 3-20, March.
  10. Donald R. Haurin & Patric H. Hendershott & Susan M. Wachter, 1996. "Borrowing Constraints and the Tenure Choice of Young Households," NBER Working Papers 5630, National Bureau of Economic Research, Inc.
  11. Philippe Thalmann, 1987. "Explication empirique des loyers lausannois," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 123(I), pages 47-70, March.
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