Is the Lex Weber Second Homes Act contributing to the shortage of rental housing?

The current rental accom­mo­dation shortage is not only a problem in the densely populated Swiss plateau, but also in many tourist commu­nities. In desti­na­tions such as Zermatt, Scuol, Saanen, and Davos, for example, the number of rental properties on the market is below the current national average and even that of large cities such as Zurich and Geneva. Under these condi­tions, it has often become almost impos­sible to find adequate housing in a tourist area, both for the general population and for many seasonal workers.

The Lex Weber law and its impact on the rental market

Consid­ering the above, the question arises whether there is a link between the intro­duction of the Second Homes Act (known as Lex Weber or the Weber law) and the sharp decline in the supply of rental properties in tourist commu­nities. After the Second Homes Act was approved in March 2012, a provi­sional ordinance on second homes came into force on January 1, 2013, followed by the federal law itself on January 1, 2016. As a result, since the start of 2013, it is prohibited to build new conven­tional freehold second homes in munic­i­pal­ities whose total of second properties exceeds 20%.
It is possible that the Weber law has had an uninten­tional knock-on effect on rental housing construction. The reason for this is that before it came into effect, many munic­i­pal­ities (such as Sils or Crans-Montana) only allowed the construction of second homes if a percentage of new builds were sold or rented as primary residences. Such regula­tions encouraged new rental housing construction and, since second homes can sell for above-average prices (24–47% more than primary residences, in many Alpine commu­nities), they also attracted investors. The 2013 legal ban on second-home construction has made this type of cross-subsidization for rental properties impos­sible.

The evolution of rental construction activity

To measure the construction activity of new rental housing, the total number of building permits and building permit appli­ca­tions per 1000 inhab­i­tants between 2005 and 2021 were studied (Figure 1). The results enable the comparison of the evolution of munic­i­pal­ities subject to the law to those which are not.
Looking at the data, the number of appli­ca­tions for building permits and building autho­riza­tions peaked between mid-2012 and 2014, in direct corre­lation with the vote on the Second Homes Act. At the time, many devel­opers were hoping to obtain a building permit before the law came into force. This temporary increase was not taken into account in the empirical analysis so as not to bias the results. The detailed analysis now shows that building permit appli­ca­tions and autho­riza­tions for rental housing continue to increase in the years following the intro­duction of the law in the munic­i­pal­ities not affected by it, while they appear to stagnate in the affected regions.

Method and model

The difference-in-differences method enable measuring the effect of one action (in this case, the intro­duction of the Weber law) by comparing the evolution of the affected group (here, it’s munic­i­pal­ities with more than 20% of second homes) and the control group (munic­i­pal­ities with less than 20% of second homes) before and after the it occurred.
The regression model has the following form (where i refers to the munic­i­pality and t to the year): 

Yi,t= a + b1Webert + b2Mehr20ZweitWohni + b3(WeberttMehr20ZweitWohni) + ei,t

Yi,t repre­sents rental housing construction activity (number of building permit appli­ca­tions and autho­rized permits). Webert is a binary variable that takes the value 0 before the intro­duction of the Weber law (i.e., between 2005 and 2011) and the value 1 after (2015 to 2021). The years 2012 to 2014 were not included in the analysis due to their temporarily excep­tional devel­opment. Mehr20ZweitWohni (“more than 20% second homes”) is also a binary variable that takes the value 1 for munic­i­pal­ities with more than 20% second homes and the value 0 for other munic­i­pal­ities. Of particular interest to us is the inter­action between the Webert and Mehr20ZweitWohni variables, which allows us to measure the effects of the Weber law on the construction of rental housing in the munic­i­pal­ities affected by this law and those that are not.

Analysis and results

The regression results (Figure 2) indicate a signif­icant negative differ­ential effect of the Weber law on new construction in law-affected munic­i­pal­ities compared to non-affected ones. If we consider the number of rental units provided for in building permits, the coeffi­cient ‑0.871 means that the munic­i­pal­ities affected by the law autho­rized 0.871 fewer rental units per 1,000 inhab­i­tants after the intro­duction of the law than non-affected munic­i­pal­ities. This figure may seem low at first glance, but it should not be forgotten that the Swiss average of building permits for rental housing per 1,000 inhab­i­tants is 2.1. A difference of 0.871 therefore has a signif­icant impact; compared to the average, this corre­sponds to a drop of about 40% in building permits for rental housing in tourist commu­nities after the intro­duction of the law on secondary residences.

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