Lock-in effect blocks the housing market
The gap between asking rents and existing rents is growing. Many tenants are staying in apartments that no longer suit their living situation for fear of higher costs. The phenomenon of the lock-in effect is slowing down mobility on the housing market and exacerbating structural problems.
While existing rents remain stable or even fall over the years, asking rents are rising sharply. A study by Zürcher Kantonalbank shows that anyone who moved into an apartment in the canton of Zurich in 2008 pays an average of 3.3 percent less today. New tenants, on the other hand, have to pay over 33 percent more. This so-called “stay bonus” means that moving is financially unattractive for many.
Lock-in effect paralyzes use of living space
The result is a distorted use of living space. Family apartments remain in place even after the children have moved out, and rooms in shared flats are not reallocated. The lock-in effect keeps older generations in apartments that are too large, while young families can hardly find adequate living space. Large cities are particularly affected, where regulations further exacerbate the effect.
Consequences for society and the economy
The stagnation of the rental market has far-reaching consequences. Younger households can hardly find larger apartments to start a family, while the older generation lives in oversized living spaces. At the same time, the problem hits low-income households particularly hard. If they were to move, a significant proportion of this group would have to pay more than 40 percent of their income on rent.
Solutions required
This could be remedied by increased construction activity, tax incentives for moving to smaller apartments and innovative housing and financing models. At municipal level, flexible framework conditions are needed to expand the supply. It is also crucial to design regulations in such a way that they do not unintentionally reinforce the lock-in effect and thus harm the very groups that are supposed to be protected.
The lock-in effect is a recent but increasingly dominant phenomenon in the rental market. It leads to inefficient use of living space, social imbalance and a loss of dynamism. Only with more new construction, creative market models and targeted political incentives can the blockade be broken and the housing market get moving again.