For the second time within three months a proposal to boost Swiss home ownership by granting tax breaks is going to a nationwide vote. A first plan was thrown out by a 56 per cent majority of voters back in March.
Sponsored by the Home Owners’ Association, the latest initiative facing voters on June 17 seeks to encourage the purchase of so-called first homes for taxpayers as Switzerland’s rate of home ownership is below average compared with other European countries.
Up to SFr10,000 ($11,016) per person could be set aside as tax deductible for a period of ten years with tax-free interests on the accumulated capital, according to the text of the initiative.
Supporters argue home ownership is not only high on the list of people’s personal goals but its promotion is also enshrined in the constitution.
Jean-François Rime, a parliamentarian for the rightwing Swiss People’s Party and a prominent businessman, says Switzerland still has to catch up with other European countries.
He adds that the promotion of home ownership has been successfully introduced in one of the 26 cantons of Switzerland – in Basel Country. But this assertion is questioned by Carlo Sommaruga, parliamentarian for the centre-left Social Democrats and secretary-general of a tenants’ association in western Switzerland.
For the rich
Parties to the left and the centre, as well as the government, have come out against the initiative saying it interferes with the autonomy of cantons and only helps the well-off to acquire property and save taxes.
“Only the rich can benefit from the initiative. Those who can afford to buy property will be allowed to save tens of thousands of francs on top of everything,” says Sommaruga.
He says there are enough other fiscal incentives available to promote ownership, notably the possibility of investing money from two official social security schemes, including the occupational benefit fund.
“The really wealthy are most likely already home owners. But the example of canton Basel Country shows that middle class earners between SFr60,000 and SFr80,000 have benefited,” counters Rime.
He also discounts allegations that as a result of the savings plan the tax breaks would lead to a substantial drop in revenue for the state.
While Sommaruga warns that lower revenue would make the situation for public finances all the more worse at a time of an economic crisis and tight budgets, Rima downplays the financial impact.
Officials estimate revenue will slump by more SFr370 million annually for the federal as well as the cantonal and local authorities.
Disagreement
Switzerland has been a country with a comparatively low rate of home ownership and several details in the political discussions ahead of the vote have stood out.
The government decided to have separate votes within three months on largely identical proposals. In another rather unusual move, both chambers of parliament could not agree on a clear recommendation for the electorate.
“The cabinet decided to call separate votes to avoid possible contradictions in case both proposals were accepted at the ballot box,” says Ursula Eggenberger of the Federal Chancellery.
The first initiative, put forward by another group and voted on last March, included the promotion of eco-friendly renovations, set a 50 per cent higher tax-free amount and wanted to leave the introduction of the scheme up to individual cantons.
The traditionally modest percentage rate of home ownership in Switzerland (see chart) might come as a surprise to some.
But experts say the main reasons for it are the good returns over the long term offered to investors on the rental market and the reasonable value for tenants with average rents – coming in at 20 per cent of a household’s income before tax.
In addition observers point out real estate prices are very high as a result of the limited land available and the growing population with a hunger for more spacious homes and apartments.
Evolution of Swiss home ownership as a percentage of the population:
1950: ca. 37%
1960: 33,7%
1970: 28,5%
1980: 30,1%
1990: 31,3%
2000: 34,6 %
2011: 40 % (estimate)
Source: Federal Housing Office