Rent-based mobility lock-in under vacancy decontrol: (No) short-run evidence from Switzerland

Vacancy decontrol policies combine strict rent regulation within ongoing tenancies with market-clearing pricing for new contracts to mitigate investment incentive problems. At the same time, they reduce relocation incentives and potentially create a mobility lock-in for sitting tenants. This paper is the first to causally identify such a purely rent-based mobility lock-in, exploiting the three stepwise decreases in the national reference (mortgage) interest rate between 2013 and 2018 in Switzerland. These regulatory-triggered changes in the reference interest rate make tenants eligible to request a rent adjustment within ongoing contracts but leave new tenancy rents legally unaffected, thereby generating quasi-experimental variation in tenants’ short-term moving incentives. Using a rolling panel of rental units from the Swiss Rental Price Index and an event-study design, I estimate the dynamic responses of rents and relocation probabilities. While I provide evidence of the expected rental price effects, creating a reduction in relocation incentives, I find no statistically significant short- to medium-run effects on tenants’ relocation probability. These findings hold for the full sample as well as for subsets of objects from especially tight housing markets and from areas with a high likelihood of tenants actually receiving a rent reduction at the studied events. This suggests that either tenants’ reactions to these incentive changes are heavily or heterogeneously lagged and less abrupt than expected – or that the previously identified mobility effects of vacancy decontrol might mainly stem from rent-control-related eviction protection rather than behavioral responses to rental price incentives.