[BirdieNZ]

Is this an imputed rent tax? That sounds like a good thing to me, not a bad thing. It has a similar effect to land value taxes or government-owned land leases, which are some of the most effective ways to reduce rampant property speculation and property value inflation.

[mamonster]

It's a good thing until you realize that the remainder of the system around it encourages speculation.

1) Fully tax deductible mortgage interest

2) Full value of mortgage goes against your assets, essentially removing wealth tax for most people.

3) Within any given year, you can either take a 10% * Imputed rental income deduction for maintenance or a specific fully itemized amount against your tax bill. Except that nothing prevents you from taking the 10% and not doing any renovations, and then slamming all the renovations in one year and removing the add on entirely.

4) The first 66% of the home collateral value are under an interest only mortgage, so if you were smart enough to get the 15yr fixed rate you basically be getting a huge loan for like 1% interest payment per year to control a house which you need to live in anyway.

5) Last but not least, local tax offices have a lot of discretion in most cantons to determine what the imputed rent is. The legal requirement is that the imputed rent must be at least 60% of market rent, but there is basically no consistency between cantons as to what number they shoot through, anywhere from like 65 to 90%.

The end result is that high bracket earners are super incentivized to lever up and get the biggest house they can, since they would essentially be investing into a growth asset that reduces their tax income. Since Switzerland is a small country and not a lot of space the end result is that eventually the high earners overbid normal houses.