Exploring Swiss homeowners’ renovation decisions: A latent class analysis approach to inform policy

• Unique survey of 1 400 Swiss owners provides comprehensive evidence on renovations. • Latent class analysis uncovers unobserved heterogeneity in renovation behaviour. • Three distinct housing profiles identified, differing in renovation rates. • Plausible determinants include dwelling age, comfort, savings and transaction costs. • Policy implications include targeted subsidies, renovation funds, and one-stop shops. Decarbonising and reducing energy consumption in buildings are key priorities in many European countries. Switzerland, with an ageing building stock and continued reliance on fossil fuels, shares these objectives. Yet, with renovation rates stagnating at around 1% annually, current policy instruments appear insufficient, underlining the need for a better understanding of the determinants of renovation decisions and their policy implications. Using data from a custom-designed survey of 1 400 owner-occupiers in Switzerland, we apply a latent class analysis to segment homeowners based on their residential preferences. We identify three distinct profiles, which differ markedly in their renovation rates since moving in: ranging from 33% to 45% for heating systems and from 36% to 56% for building envelopes. These disparities are strongly linked to structural dwelling characteristics, suggesting that the need to preserve property condition and value is a key driver of energy-efficient renovations. Our analysis further reveals the influence of regulatory frameworks and transaction costs on renovation behaviour. Based on these findings, we derive several policy implications, including the introduction of regulatory renovation triggers, the creation of renovation reserves, and the expansion of one-stop shops for information and coordination support. While existing financial incentives are shown to be effective, we recommend that they be made conditional or targeted to reduce windfall effects and improve policy efficiency.