With the housing protection ordinance introduced in May 2022, Basel Stadt sought to curb the so-called “profit-driven renovations”. For five years after a renewal, landlords may only raise rents marginally; every modernization—from a new boiler to a dishwasher—requires approval from a nine-member commission, whose files for larger projects can run hundreds of pages. Three years later, the warnings long voiced by real estate economists have been confirmed: the supposed safety net has boomeranged. While Basel recorded around 1,000 building permit applications for rental housing in 2018, by 2023 the number had dropped to just 67. Housing construction has fallen to about one-third of its pre-rule level.
Institutional investors are turning away: projects are no longer profitable, procedures drag on, and legal uncertainty is high. As returns disappear, so do renovations. Applications for energy-efficient upgrades have collapsed, and even routine improvements are hardly worthwhile. Permits can take up to twelve months, and the commission can overturn mutually agreed solutions between landlords and tenants. The market’s front door is narrowing, and the back door is jammed: existing tenants remain in apartments that are too large or ill-suited, while young households compete for the thin remainder of available units or move to Basel Land—only to get stuck in commuter traffic. Urban development suffers as well: conversions of industrial sites stall because, under strict rent caps, developers cannot factor in reserves for site remediation and neighborhood improvements.
Protection becomes a burden
This is neither surprising nor unexpected. The pattern follows economic textbook logic:
- Firstly, a rent cap reduces supply. New constructions are put on hold, renovations are postponed, and capital seeks other uses. Since new buildings make up only a small share of the housing stock, the effects are not immediately visible—but become evident over time.
- Secondly, allocation worsens. Without price signals, chance or personal connections determine who gets an apartment. Housing is no longer goes to those who value it most.
- Thirdly, search and avoidance costs rise. Waiting lists, dubious buyout payments, and hours of online hunting further erode the apparent advantage of ‘affordable’ apartments.
Finally, existing tenants may pay lower nominal rents, but they also pay indirectly: their units age faster as investments are deferred. Adjusted for quality, rents still rise. The main burden, however, falls on the mobile, the young, and the divorced. Over time, social mixing erodes.
Basel is no role model
Add it all up and the social costs of such measures outweigh the benefits—even looking strictly from the tenants’ perspective and completely ignoring investors’ interests, which of course is reckless. In many cases, investors merely represent the interests of ordinary savers who are planning for their retirement. Even by the one-sided standard of their proponents, all forms of rent caps perform poorly. They are not designed for tenants in general, but only for a small subset of them.
Basel’s experience serves less as a role model than as a warning. Regulation that drives away cranes and slows renovations ultimately makes housing more expensive for everyone. If the goal is affordability, the answer is more supply, not less, faster permitting, and prices that reveal scarcity rather than hide it. Otherwise, well-intentioned housing protection risks turning into a permanent experiment where everyone ends up losing.
This article appeared in the special publication of the magazine ‘Schweizer Monat.’
