Promoting home ownership: why more purchase aid can raise prices
The Federal Council warns of a paradoxical effect: extra purchase aid can fizzle out in higher property prices when supply is tight.
Access to home ownership has become harder in Switzerland. Even so, the Federal Council considers a broad new purchase aid scheme the wrong approach. Its report, published on 18 September, reaches a seemingly contradictory conclusion: more state money for buyers could make flats and houses even more expensive if supply does not grow at the same pace.
The home ownership rate stood at 35.7 percent in 2024 and was slightly declining. According to the Federal Council, buying is particularly difficult for young families without an inheritance or an early inheritance payout. The diagnosis is clear. What remains contested is which instrument actually helps.
Why purchase aid can vanish into the price
The central mechanism is simple: if many households receive additional loans, contributions or tax breaks, they can pay higher purchase prices. If little additional housing is created at the same time, more money competes for the same scarce supply. Sellers can skim off part of the subsidy through higher prices.
The state would thus increase individual households' financing power, but not necessarily their chance of securing a property. Part of the aid is capitalised into the property price. This risk is especially large in conurbations, where building land is scarce and supply responds only slowly because of planning, construction time and topography.
One billion francs for 1000 purchases a year
The report also makes the scale of direct support visible. If the Confederation supported 1000 owner-occupied properties a year with loans averaging 100,000 francs, roughly one billion francs of federal funds would be tied up in the long term. Measured against the entire market, the number of supported households would still be small.
There is also the problem of targeting. Subsidy money can go to households that would have managed the purchase without state help. Such deadweight effects make a programme expensive without raising the ownership rate accordingly. An effective scheme would therefore have to reach the households that narrowly fail on equity or affordability, but would be able to carry interest, maintenance and amortisation over the long term.
Supply remains the bottleneck
The Federal Council's argument does not mean that home ownership policy must be ineffective. But it shifts the focus from pure purchasing power to supply. The Federal Office for Housing still describes the market as tense in 2026. In many regions the growth of the housing stock is not keeping pace with demand; the vacancy rate has been declining since 2021.
Anyone who wants to widen access must therefore also consider denser construction, faster procedures, the use of existing land and a suitable supply of smaller owner-occupied properties. These measures take effect more slowly than a purchase subsidy, but they attack the cause of high prices more directly.
What the Confederation has already changed
The Federal Council points to two indirect changes whose effect cannot yet be fully assessed. The system change in the taxation of home ownership, with the abolition of imputed rental value, is due to enter into force at the beginning of 2029. In addition, since 2026 retroactive contributions to pillar 3a have been possible. Both rules change households' financial situation, but do not automatically resolve the shortage of available properties.
Targeted improvements in rural areas are being pursued further. Today, both the Swiss Foundation for the Promotion of Home Ownership and structural aid from the Federal Office for Agriculture can grant loans for housing. The Federal Council wants to remove this duplication and make support more effective.
The distribution question remains
The report offers no comfortable promise for young families. Rather, it shows a conflict of objectives: support should help people without large family assets, but must not drive prices further and should use land and living space sparingly.
The precise design is therefore decisive. Narrowly limited, repayable and regionally adapted instruments can have a different effect than blanket grants. Their effect would have to be measured in additional owner households, not in the sum of subsidy money paid out. Without more supply, however, any purchase aid remains vulnerable to ending up mainly raising the market price.
