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

March 31, 2023

Plant, Tree, Architecture

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.

Find our latest analysis and outlook on the Swiss real estate market in the Immo-Monitoring winter update (German).

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