If they rent it they pay income tax anyway (or rather the company that owns the place does). The "virtual rent" added to income is for people who own the place where they live.

Switzerland is not very home ownership friendly, at least there are very little tax incentives for it (personally I'd rather have people invest their wealth into productive things rather than real estate, so I find it good). In large cities most places are owned by banks/insurances/other real estate companies and rented out.