What your flat is allowed to yield: the federal government redefines permissible returns

What the revision is about

At the heart of the proposal is the net yield. It measures what flows back to the equity actually invested after all costs have been deducted. In recent years the Federal Supreme Court has repeatedly clarified which mark-up on the reference interest rate is still permissible and how the equity employed is to be revalued over time. This case law is now to be written into the ordinance and developed further. That makes visible what today can only be assessed by those who know the collection of judgments. Alongside this, the Federal Council also addresses gross yields and value-adding investments, because it is precisely their delimitation that triggers many disputes. Whether a new kitchen counts as a value-adding investment or as mere maintenance decides in practice whether a rent increase holds up or not.

Why this matters most to smaller landlords

Institutional owners have legal departments that follow such questions continuously. The majority of Swiss rental flats, however, belong to private individuals, communities of heirs or small companies. There, the rent is often simply carried forward as it was once set, and the return is never properly calculated. That works until a tenant challenges the initial rent or contests an increase. The owner then has to show how the rent is composed – retroactively, with figures that are often no longer available. Anyone who has properly documented the purchase price, the shares of equity and debt and the investments made over the years is in a considerably better position at that moment. It is exactly this documentation that gains importance under the new ordinance, because the calculation becomes more transparent and therefore also more verifiable.

The link to the reference interest rate

The permissible yield is tied to the mortgage reference interest rate, which has recently stood at a historically low level. A low reference rate arithmetically also means a lower absolute ceiling on returns. At the same time, ancillary costs, insurance premiums and tradespeople’s prices have risen markedly. This gap leads many landlords to feel subjectively that they are barely earning anything, while the formal calculation paints a different picture. The revision does not change this tension, but it makes it more visible. Anyone who acquired their property in recent years and is heavily debt-financed arrives at quite different figures from someone managing an object held for thirty years. Blanket statements about an appropriate return are therefore of little help.

What you can do now

The first step is unspectacular but effective: draw up an overview for each property recording the purchase price, the incidental costs of acquisition, the equity share, the mortgage debt and all larger investments with date and amount. Second, it is worth classifying investments as value-maintaining or value-adding – not only in the event of a dispute, but on an ongoing basis, because the same distinction reappears in property gains tax and in the maintenance deduction. Third, you should check whether your rent adjustments of recent years are comprehensibly justified. And fourth, since 1 October 2025 the form notifying the initial rent must in any case additionally state the reference interest rate and the inflation applied to the previous rent. Anyone who does not keep these records properly will later face a problem of proof.