Since 1983, the law on the demolition, conversion and renovation of residential buildings in Geneva has rigorously controlled the housing market. The aim is to protect tenants, safeguard quality of life and curb speculation. Rents after conversions and renovations are capped by decree, and projects requiring approval are strictly regulated
The study by Ters (FHNW) and Kholodilin (DIW Berlin) is the first to dynamically analyze the effects of these interventions. The results show that housing rationing and rent controls significantly slow down new construction. Private and institutional investors are increasingly shifting capital into renovations. In the short term, expenditure on modernization is rising, while there is no real increase in living space. At the same time, vacancy rates are continuing to fall, occupancy rates are rising and the market is becoming even tighter. Entry costs are rising, especially for new tenants, while existing tenants benefit from stable, often low rents and long rental periods
New dynamics in the portfolio
Institutional investors are particularly hard hit. Project delays, falling residual values and complex approval procedures make new construction unattractive. The study shows that a regulatory shock reduces the volume of new investments by up to CHF 600 million. This corresponds to around 1% of Geneva’s total GDP. For the city’s housing stock, this primarily means that investments will primarily be made in short-term, compliance-driven upgrades instead of in-depth renovations or new units
Rent control works primarily through the price channel. It protects existing tenants from increases, but depresses returns for owners and puts a damper on new projects. Renovations become more attractive than new builds, which promotes modernization but hardly creates any new apartments
Lock-in effect and inequality of opportunity
An unexpected side effect of regulation is the so-called lock-in effect. Tenants stay in their homes for much longer for cost reasons, which restricts mobility and increases the maldistribution of housing. At the same time, rent differentials in the market are increasing. Newcomers pay high market rents, while long-term tenants benefit. The quality and condition of apartments often remain at a low level, as extensive renovations are difficult to carry out economically
Balance sought between protection and supply
The study shows that Geneva’s regulations protect tenants from price rises, but place a burden on new construction and thus exacerbate the housing shortage in the medium term. Investors are turning to the preservation of existing properties and selective modernization, while growth stimuli from new construction are failing to materialize. For politicians, this means that a sustainable balance between protection and market renewal is essential. New densification permits and differentiated rent regulation could provide a remedy.
