Very interesting background. Thanks for sharing. Clearly, you're on top of your finances and probably don't spend a lot of time "worrying" about them (just managing.)
I'm stunned that anyone would actually own a rental unit with such long-lived rent controls. How is it possible to come out on a deal like that?
I'm aware in some areas, when rent controls are passed, rentals go down hill because owners can no longer afford to keep them up. I hope this is not your situation. But good for you in having found such a rent controlled apartment. That would certainly stabilize expenses to a degree.
I would think you are able to roam around Europe at your leisure. It sounds like a very good life. Enjoy!
Thanks for the good wishes, Koolau. And I'm honored to get a thumbs up from you in particular on my managing the financial pie here! We do travel quite a bit--Central Europe is ideally located for air and train travel. We take trains frequently. Budget carriers EasyJet and Ryanair operate throughout Europe. We pay the extra few francs for the exit row seats since I have long legs. Milan and Zurich are our "nearby" airports here in Lugano.
Here's the deal on the "rent control". First, it's universal for all renters by law. Swiss national law links allowable rent increases to average mortgage rates (across all of Switzerland). If mortgage rates rise above the established reference rate, then increases are possible according to a predetermined rate schedule that must be followed. I think it's a maximum of 3% for each .25% rise above the reference rate.
Also increases can be imposed, if the owner makes an improvement (not a replacement of worn out facilities) inside your rented property that demonstrably raises its value. This excludes common area improvements, such as roofs, heating systems, building coatings, etc., which are considered normal maintenance. Finally, the owner can make a case for an increase if inflation rises above a certain increment. Inflation continues to be extremely low (currently a third of a percent) since we moved here 16 years ago. So, that's not an issue for us.
We haven't had any significant improvements in our flat made by the owner. That said, we have ourselves (with approval) made such improvements and paid for them ourselves (new kitchen for example, A/C, and replacement of flooring with nicer wood). I've estimated that it will still cost less over the next 15 years for us to pay the expense now and avoid the expected monthly rent increases that would come with the improvements. We love our flat (it is lakeside with an incredible view and has a local transit stop across the street) and have no plans to leave.
Renters can formally dispute increases and request adjudication. It's a tough case to make however, as I understand. Cantons are allowed to impose further restrictions on rental rates--I believe Basel-Stadt and Geneva cantons do so.
Here's an interesting facet of the system: if mortgage rates fall below the official reference rate, the tenant can apply for a reduction in the contracted rental rate. Recent research shows that only about 20% of renters actually bother to do that! Many are thought to just be unaware of the possibility.
It's a complicated environment which tries to balance benefits and costs fairly among renters and owners through various levers. Nonetheless not everyone is satisfied of course. But as to your point about how landlords make out, they seem to do well. Besides opportunities to increase rents, they have the benefit of the extreme demand for housing here, which over time is reflected in the rising value of their property and the market.
-BB