Supply Caps: What Scarcity Costs Residents

What did Switzerland's second-home cap cost its residents?#

The Swiss cap on new second homes lowered primary-home price growth and raised local unemployment growth, according to the main peer-reviewed measurement of it. The study is Hilber and Schöni, On the economic impacts of constraining second home investments, published in the Journal of Urban Economics, volume 118, in 2020. It treats the Swiss Second Home Initiative as a quasi-natural experiment. The authors find that the ban lowered price growth of primary homes, raised price growth of second homes and increased the unemployment growth rate in the affected areas. They conclude that the negative effect on local economies outweighed the amenity-preservation benefit.

The instrument is the Lex Weber, a quantity cap on a housing stock. The Lex Weber is the colloquial name of the rule adopted by Swiss voters and cantons on 11 March 2012, under which second homes may not exceed 20 percent of a municipality's dwellings, and of the Second Homes Act (ZWG) of 20 March 2015 that implements it. The act and its ordinance entered into force on 1 January 2016. In municipalities above 20 percent, no new second homes are permitted, with exceptions. The Federal Office for Spatial Development (ARE) updates the list of affected municipalities every year.

This note is the counter-ledger to a thesis Victaura Research has repeated often. Our earlier work argued that hard supply limits protect value, and scarcity as value protection sets out that case. The argument stands. It describes who gains from the limit. It is silent on who pays for it. A price that is protected by a rule is only as durable as the willingness of the people who carry the rule's cost to keep the rule in place.

The allocator should read the Swiss case as a stress test of the thesis. It is no verdict on it. Nothing in the evidence says that scarcity is a mistake. The question is narrower. When a cap fixes the supply behind a trophy price, which party funds that fix, and does that party vote? The sections below take that question to Switzerland, Italy and Bali, and then to the indicators that would show the answer early.

What does the Hilber and Schöni study actually measure?#

The study measures price growth and unemployment growth in municipalities exposed to the ban, set against municipalities that were not. The design is a quasi-natural experiment. Voters approved the initiative narrowly in March 2012, and the authors describe the ban as in force from 1 January 2013 in places where second homes made up 20 percent or more of the housing stock. Treatment is therefore set by a statutory threshold, and that is what gives the comparison its credibility.

The headline results are three signs, each with a stated mechanism. Primary-home price growth fell. Second-home price growth rose. Unemployment growth rose. The authors argue that primary and second homes are not close substitutes in these markets. Constraining the second-home segment therefore lifts the price of the capped asset and weakens the local economy that surrounds it. They warn that the policy may reinforce wealth inequality in seasonal tourist destinations.

The accepted manuscript gives the effect sizes, and they are large. In the authors' accepted version deposited at LSE Research Online (version of 26 May 2020), the preferred estimates suggest that the ban lowered price growth of primary homes in affected areas by 15 percent, increased the growth in local unemployment rates by 12 percent and increased price growth of second homes by 26 percent. The manuscript states that it may differ from the published version, so a principal who needs the final coefficients should check them against the Journal of Urban Economics text. The figures are effects on growth rates in treated Swiss municipalities.

The result is local, historical and tied to one design. The sample is Swiss municipalities in the years after 2012. It says nothing directly about Bali, Italy or the Gulf. What transfers is the mechanism, namely that a quantity cap on one segment reprices the neighbouring segment, and that the neighbouring segment is where residents live and work. We label that transfer as inference. It is not a measurement of any market outside Switzerland.

Why do second-home caps land on primary-home owners and workers?#

A cap on second homes does not remove second-home demand. It redirects the demand to the existing stock. If new supply is banned, buyers compete for what exists. The paper finds that second-home price growth rose after the ban, which is the pattern a binding quantity limit predicts. The price of the trophy asset is the price of a fixed quantity, and the fixed quantity is held by the incumbent owners of that stock.

The cost appears in the segment that residents hold. The authors report lower primary-home price growth and higher unemployment growth. One plausible channel, offered here as our inference and not as the authors' finding, is that the construction and service economy that lives on second-home investment contracts while the investors keep their appreciating assets. That reads as a transfer from the local labour market to the owners of the capped stock.

Tenure decides whether lower primary-home prices are a cost. A lower price path hurts an owner-resident and may help a first-time buyer. The unemployment result is harder to read in anyone's favour, because local workers who lose construction and service income bear the cost whatever their tenure. The wealth-inequality point in the paper arises where outside buyers hold the capped asset and locals hold the uncapped one. That configuration is worth testing in any resort market before the cap is underwritten as pure upside.

The environmental benefit is real and the paper does not deny it. The question is the net. The authors conclude that the negative effect on local economies dominated the positive amenity-preservation effect. For the case that environmental limits are an asset, see environmental constraints as an asset in resort property. That piece prices what the constraint protects. This one prices what the constraint costs the people who must keep it in place, and the two ledgers belong in the same underwriting file.

How binding is the Lex Weber in 2026, and has it been revised?#

As of the March 2026 ARE inventory, 331 Swiss municipalities exceed the 20 percent second-home share. The count was 337 in March 2025. Nine municipalities newly crossed the line, eight of them under ARE review, among them Seehof and Ligerz in Bern, Lostallo in Graubünden, Céligny in Geneva, Tenero-Contra and Muzzano in Ticino, Mauraz in Vaud and Moutier in Jura. Three fell below it, Schelten and Nods in Bern and Pleigne in Jura. The ARE publishes the inventories at the end of March each year.

The rule has been loosened at the margin, and the core cap stands. Since 1 October 2024, a revision that followed parliamentary initiative 20.456 lets owners of dwellings that existed before the 2012 vote demolish and rebuild them, and create additional dwellings within an extension of up to 30 percent, according to a Bär & Karrer note of 15 September 2024. Those dwellings may be used freely as first or second homes. The Federal Council announced the start date on 13 September 2024. The 20 percent cap itself is untouched.

In August 2026 the federal government eased the rule for victims of the Blatten rockslide. According to SRF, reporting on 20 August 2026, Federal Councillor Albert Rösti announced a broad interpretation of the law that treats the whole Lötschental as near the original location for rebuilding destroyed homes. Affected families may build a primary residence in a neighbouring municipality and later sell it as a second home. The Federal Councillor concerned estimated 10 to 30 cases. Municipalities received a veto to require permanent primary use, which is a direct guard against empty holiday apartments.

None of this is a repeal, and this note does not forecast one. As of 1 October 2026, the evidence is a sequence of exceptions, each justified by a local housing or hardship case. We read that as a sign that the rule is under maintenance pressure at its edges. We do not read it as a sign that the constitutional cap will change, which would require a vote of the people and the cantons.

Is a supply cap politically stable when residents carry the cost?#

A cap is stable while the people who bear its cost still prefer it to the alternative. The Swiss cap passed narrowly in March 2012, with 50.6 percent of the vote, which is a strong form of consent at national level. Hilber and Schöni report that permanent residents of the affected areas were more strongly opposed to it and were outvoted by voters in non-tourist areas. Consent is not static. When the cost lands on voters who rent, work locally or hold primary homes, the preferences that sustain the rule can drift. That drift would show in rule edits long before it showed in a repeal.

The Engadin shows the pressure inside the cap's own logic. SRF reported in February 2022 that St. Moritz property prices rose 16.9 percent during the pandemic and that property transfer and land-gains taxes exceeded CHF 35 million in 2021, more than double the 2019 figure. The same report describes tenants receiving notices as older buildings were renovated and converted, and Sils imposing a two-year planning zone to restrict conversions of primary to secondary residences. These are press-reported figures from one region and one period.

Older dwellings became the release valve, and the release valve is where locals feel it. Primary homes built or permitted before 2013 may still be converted into second homes, as Hilber and Schöni note, and SRF reported in February 2022 that tenants of an older building in St. Moritz Bad received notices as it was renovated and converted. The cap therefore bites on new supply while existing supply drifts toward the highest bidder. That is a mechanism reported in the press. Its extent is not measured in this note.

Local counter-measures are signals in their own right. NZZ reported plans in St. Moritz to build apartments for local residents, and Sils chose a temporary conversion restriction. Each local patch is a small admission that the national cap leaves a gap for residents. Where such patches multiply, the principal should treat the future of the rule as open. See also environmental constraints as an asset in resort property for the asset side of the same constraint.

What does Italy's CIN short-term rental register measure?#

*Italy's CIN is a national identification code for each unit offered as a short-term or tourist let. The Codice Identificativo Nazionale* is created by article 13-ter of Decree-Law 145/2023, converted by Law 191/2023. The Ministry of Tourism assigns it through the national database of accommodation structures, the BDSR. The code must be displayed outside the building that contains the unit and quoted in every listing. Sanctions for missing it range from EUR 800 to EUR 8,000 under the article and, as reported by Sky TG24, have applied since 2 January 2025.

The register is now large enough to serve as an instrument of measurement. As of 23 September 2025, 686,645 structures were registered in the BDSR and 610,686 CINs had been released, 88.94 percent of the total, according to Ministry of Tourism data as republished by trade press. The BDSR went operational nationally on 3 September 2024, and the Ministry reported more than 100,000 CINs within the first week.

A register does not cap anything, and it makes a cap measurable. The CIN is a registration device. It does not by itself limit the number of units. What it supplies is a denominator. Municipalities and regions can count registered units, set them against the resident housing stock and design limits on evidence. The allocator reads the register as a leading indicator of rules to come.

The Bank of Italy gives the directional link to residents. Its Italian Housing Market Survey for the first quarter of 2025, fielded from 4 April to 7 May 2025 among 1,486 real estate agents and published on 23 May 2025, says the short-term rental market is likely playing a role in reducing the supply of housing for sale, with upward pressure on both prices and rents. That is agent opinion. It is directional and it is not a causal estimate.

What do Bali's NIB regime and moratorium signal about consent?#

*Bali's NIB is the business identification number issued through Indonesia's Online Single Submission (OSS) system, and platforms are being asked to check it. NIB stands for Nomor Induk Berusaha*. Under the risk-based licensing regime it is the base identity of a business, and tourism accommodation needs further sector permits on top. A secondary summary of a Ministry of Tourism press release dated 8 December 2025 says the ministry has no plan to shut down online travel agencies and instead seeks their help in enforcing licensing. Victaura Research has not retrieved the primary text.

The moratorium history shows how quickly a stance can move. On 13 January 2025 Governor Wayan Koster said there was no need for a moratorium and that stricter control was what was needed, as reported by Bali Discovery. On 15 September 2025, after floods that killed at least 18 people, he announced a halt to the conversion of productive farmland for hotels, villas and restaurants, with existing projects unaffected, as reported by TravelMole. Eight months separated the two positions.

Bali is the case where scarcity was imposed by an event, and the cost question is open. The rule restricts conversion of farmland, which protects agricultural land and rainwater absorption. The people who carry the cost of such a restriction include landholders who expected to sell and workers in construction. This note has no measurement of either group. The earlier article on Bali's moratorium as scarcity by regulation covers the supply logic.

The share of listed villas with a verifiable NIB is the metric to watch. If it rises, the rule is being enforced and the grey stock is shrinking. If enforcement is episodic, the cap is soft and the rent it creates is unstable. As of 1 October 2026, Victaura Research found no published series for that share in a source it could verify.

Which indicators show the consensus behind a cap is weakening?#

The allocator needs three measured signals, and none of them is a price. The first is housing accessibility for residents. The second is the short-term rental register. The third is the rule-revision record. Prices are an outcome of the cap and are the wrong place to look for its cost, because the cap itself raises them.

Resident accessibility should be measured as a ratio against local income. Set local median household income against local median rent or purchase price. Add the vacancy rate for long-term lets and the share of dwellings registered as second homes. In Switzerland the ARE inventories give the second-home share by municipality. In Italy the CIN count can be set against the dwelling stock. For Bali, Victaura Research found no equivalent public series.

The register gives the supply side of the short-term market. Track registered units, the share holding a valid code (CIN in Italy, NIB in Bali), enforcement actions and delistings. Regulation (EU) 2024/1028 on data collection and sharing for short-term accommodation rentals applies from 20 May 2026 and standardises registration where registration exists. It caps nothing, and it will produce comparable data across member states.

The revision record is the earliest political signal. In Switzerland the sequence runs from the 2024 relaxation for pre-2012 dwellings to the 2026 Blatten decision. For each jurisdiction, note who proposed the change, whom it was meant to help, and whether the beneficiary was a resident or an owner. A cluster of resident-favouring exceptions suggests that the cost is being recognised and that the rule is being tuned to keep its consent.

Where does this counter-thesis break?#

The Swiss study covers one country, one policy and one period. The effect sizes do not transfer to Italy or Bali. The treated municipalities are alpine and lake destinations with a particular mix of resident and seasonal demand. Other markets may differ in how substitutable primary and second homes are, and that substitutability is the hinge of the mechanism.

We take the magnitudes from the accepted manuscript, not the published tables. The 15, 12 and 26 percent estimates come from the authors' accepted version, which may differ from the published article. A reader who relies on the magnitude should check the Journal of Urban Economics paper. The sign pattern and the authors' own reading of the net effect are what this note relies on.

Lower primary prices are ambiguous by tenure. A renter or first-time buyer may read slower price growth as relief. The case that residents pay rests on the unemployment result, on the wealth-inequality argument, and on the authors' net judgment. Victaura Research reads that judgment as credible and has not re-estimated it.

The Italy and Bali evidence is thin. The Bank of Italy statement is agent opinion. The Bali licensing details come from a secondary summary, and the moratorium reports come from the press. We have no causal estimate of what either regime costs residents. The Engadin figures are press-reported, from February 2022, and cover one region.

The counter-thesis can itself be overstated. The Swiss cap protects landscape, and the authors accept that the amenity benefit exists. We do not measure net welfare. A principal who reads this note as an argument against supply limits has read more into it than the evidence carries.

What should an allocator do with a cap that has a cost ledger?#

Scarcity protects value for as long as the consent that holds it up lasts. The Swiss record shows a cap that survived a narrow vote, a federal law, a relaxation for old dwellings and a hardship exception, and that still binds 331 municipalities as of March 2026. It also shows a cost that a peer-reviewed study places on residents. Both facts belong in the same file.

Underwrite the consent as well as the constraint. The principal should ask who pays for the cap, whether those people vote on the rule, and what the revision record says about their mood. Resident accessibility, the short-term rental register and the count of exceptions give three answers that can be measured today. They update faster than any price series.

The correct reading is not that caps fail, but that every cap carries a second ledger. The first ledger shows the value the limit protects, and our earlier notes on scarcity as value protection and on Bali's moratorium as scarcity by regulation keep that ledger. The second shows who funds the limit. An allocator who reads only the first is underwriting a price and ignoring the vote.

Skin in the game disclosure. Victaura, through its parent Greystone B.V. (Netherlands), develops projects on Lake Como (Italy), in Nungwi, Zanzibar (Tanzania), on Gili Air and in Uluwatu, Bali (Indonesia), and holds an off-plan capital position on Al Marjan Island, Ras Al Khaimah (UAE). Readers should assume commentary may be influenced by, or benefit, these positions. This document is classified as marketing material under MiFID II Article 24(3). It is not investment advice.