Professional Documents
Culture Documents
Rent Control and Housing Reform in Sweden
Rent Control and Housing Reform in Sweden
Rent Control and Housing Reform in Sweden
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June 2014
Index
The mission and work of the
Housing Crisis Committee
4
Our message
6
1. Vision
9
2. and reality
15
3. Summary
31
Endnotes 37
From left to right: Olle, Barbro, Bjrn, Klas, Tor, Ulrika, Sonny. Inset: Hans
Our message:
Reform rent control, the zoning process and taxes
The crisis on the housing market is deep but it can be overcome. The
proposals we are laying out in this report result in approx. 10,000 more
new residential properties being built per year, tens of thousands of new
jobs being created and growth increasing, the housing waiting lists getting shorter, the black market getting smaller and public finances getting
stronger. Individuals will have an easier time finding housing.
The way to get there goes on two tracks: The mobility of the existing
housing stock must be increased and housing construction must pick up
in pace.
Only making proposals to increase construction is not enough. The
largest economic problems come from inefficient use of housing,
mobility being poor and chains of moves being blocked. This is why
mobility must be increased. We propose a rent control reform and
several tax changes that make it cheaper to move.
Only proposing re-regulating the rent setting policy is not enough
either. In areas with a housing shortage, the rents would risk being
driven up far too quickly and create social problems. We therefore
propose a series of simplification measures with respect to the zoning
procedure and advocate a limitation on municipalities use of their
zoning monopoly.
1. Vision...
10 VISION...
On such a market, there is housing of all types for all income levels. There are
rental flats, houses and tenant-owner flats with varying standards and sizes in
different locations. There are newly built luxury apartments with all service
imaginable as well as simple rental flats that allow you to enter the market and
for people with lower needs or who are looking for housing for a shorter period
of time. The differences in the price and rent reflect this and are therefore
greater than today.
No one needs to turn down jobs or studies any more due to being unable to
find suitable housing or because you dont want to break the law. There is a
large and diverse supply of housing with different forms of tenure including
more owner-occupied flats in growing regions. Generous and simple rules
for renting out individually owned residential properties make it easy to find
temporary housing for both short and long periods of time.
The market mechanisms on the housing market function better than today,
which means that supply, demand, prices and rents are in better accord with
one another. The prices are set based on individual negotiations, flat by flat
but whether or not the rent is reasonable can be reviewed, and once contracts
are entered into, the landlord cannot raise the rent faster than inflation during
the years after the agreement without cause. Re-negotiations are held in the
event of exchanges, new construction and at certain intervals. Housing in high
demand increases the most in price when exchanges or sales occur, which
creates drivers for increased construction in these segments. Conversely, the
prices will be lower where demand is falling.
VISION...
11
whatever their employer can arrange. A well-functioning rental market contributes to making it easier for Sweden to attract qualified foreign labour and
investments. It contributes to better dynamics and higher economic growth.
Unemployment goes down, since it is easier to move to where the jobs are.
On this ideal housing market, the process from construction idea to ready
to move into flat is also significantly faster. At present, it takes approximately
six years in the Stockholm Region; on a well-functioning market, the goal
should be a maximum of two years. One of the reasons it goes faster is simpler
regulatory systems, both with respect to zoning and construction. That and
a looser rent setting policy makes housing financing work better. Residential
properties are quite simply considered more attractive to finance than before.
Via better regional planning and coordination of housing construction and
infrastructure initiatives, the housing market functions better.
The illegal trade in leases in the big cities has disappeared, thanks to the
well-functioning market. The housing marketplaces rarely have long waiting
lists, since the rents are better adapted to households willingness to pay, and
since the supply of available housing matches demand well. Both long housing
waiting lists and black markets have thus been eliminated.
12 VISION...
the opportunity to trade up, even if they perhaps already have a pretty new
property. For families in a housing career it is also the case that those with
rising income will get the opportunity to get housing in a better location, if
they wish. Lots of residential properties are also sold to first-time buyers who
have saved up starting capital or receive financial assistance from parents or
relatives.
Many who live in an older property that has become too tight, too big or
perhaps is in a somewhat worse location also take the opportunity to trade up,
and thus leave behind an older but still good property. The available residential properties are taken over by families looking for better housing, but who
cannot afford or do not want to buy something brand new. They often leave
behind older and sometimes cheaper housing.
By adjusting the prices of these residential properties to consumers willingness to pay, there will be a balanced supply of both new and used residential
properties. No one needs to wait on a waiting list, if they dont have special
preferences and therefore voluntarily choose to wait.
Social protection
The housing market is in many respects a market like others where buyers and
sellers meet and the price is set so that demand matches supply. But a residential property is a commodity that is especially important perhaps the most
important of all for many people. You would be hard pressed to neglect it if
you want to live a normal life.
Even on a functioning market, the buyer or tenant tends to be the weaker
party, for precisely this reason. Even on a future ideal housing market, strong
consumer protection is therefore required when renting or buying housing.
There will also continue to be a regulatory system that provides strong security
of tenure. Contracts on the rental market will also be subject to judicial review
in the future. And for tenants that have entered into a rental agreement, the
landlord cannot raise the rent whenever he/she wants.
The housing policy enables the state and the municipalities to balance
different interests in the future as well, such as the flexibility preferences of
the builder and the landlord with the safety and predictability needs of the
residents. They provide public assistance for finding housing to the weakest
groups. The supply of residential properties for students and senior citizens
matches demand.
On a future housing market with strong social protection, the present
segregation can be reduced. The present housing policy tends to increase the
difference between areas via rigid pricing, rent control and lock-in effects. A
VISION...
13
2. and reality
The Swedish housing market is currently far from the ideal vision sketched
out in the previous chapter. Construction has been low for several years, and
a high proportion of Swedens municipalities are reporting housing shortages.
The existing housing stock is being used inefficiently. The shortage of rental
flats is particularly large, which contributes to the prices of houses and tenant-owner flats in attractive areas being pressed up. Household debt is increasing. The housing waiting lists are long. Many young people have trouble even
getting into the housing market, and Swedish companies have trouble getting
housing for foreign experts and employees only living in our country temporarily. It is expensive and a hassle to create functioning chains on the housing
market. The black market is extensive, although difficult to quantify.
All of this creates problems and difficulties for individual households but
also reduces Swedens economic dynamics. The development of growing
regions is being slowed down and the result is slower growth in incomes and
jobs. Employment is brought down. The social economic costs are substantial
and they will be even worse if the dysfunctional system continues during an
economic upswing when the pressure on the housing market increases.
120 000
In blocks of flats
In single-family homes
100 000
80 000
60 000
40 000
20 000
1958
1963
1968
1973
1978
1983
1988
1993
1998
2003
2008
2013
Putting an exact number to the shortage is not that easy. Surveys can exaggerate the problems, while more strict financial definitions can be designed in
different ways.
The Swedish National Board of Housing, Building and Planning (Boverket)
has investigated the housing crisis in economic terms. The housing crisis is
defined as the shortage of housing in proportion to demand with purchasing
power, i.e. not how many residential properties citizens, municipalities and
companies would like to have in general. More specifically, the housing deficit
is defined as the difference between todays housing stock and what would be
required to eliminate excessive housing prices. Excessive price in turn means
price increases exceeding the price increases caused by population growth. By
this definition, the housing shortage would therefore be the shortage that is not
dependent on population increase per se. Instead, it would be the shortage due
to the housing stock not increasing in proportion to increased incomes, low
interest rates, urbanisation and changed preferences.
Calculated in this manner, the 2012 housing shortage totalled 156,000
residential properties, with just over half, approximately 86,000 in the three
metropolitan areas. There were excesses of a total of 7,000 residential properties in some of the depopulating municipalities. The important point here
is that there is a big shortage, even in narrower economic terms, and that it
is not limited to the biggest cities. In addition, the housing shortage is rising
17
100 000
Housing construction
Population increase
80 000
60 000
40 000
20 000
1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011
19
Figure 3. Change in the proportion of rental flats in blocks of flats in Greater Stockholm
1990-2012, in thousands
100
50
-50
New construction
Reconstruction
Conversions
Demolitions
2012
2011
2010
2009
2007
2008
2006
2005
2004
2003
2001
2002
2000
1999
1998
1997
1996
1995
1994
1992
1993
-150
1991
-100
Accumulated change
Source: The Swedish National Board of Housing, Building and Planning, Market Report May 2014:
Lst lge p Bostadsmarknaden [Deadlock on the Housing Market]
The young and the old dominate among those living in rental flats. The rental
flat is in other words still an important path into the housing market for younger
households. Over 50 percent of people aged 25 to 34 rent, after that the proportion of renters falls rapidly as incomes rise and children enter the scene.
Upon retirement, only just over 20 percent rent their flat. However, older pensioners without live-at-home children, but with a need for service, often live in
a rental flat. For the 85+ category, the proportion of renters has risen to nearly
50 percent.
In other words, the rental flat has important characteristics that make it
attractive for different categories of residents. The rental flat is also still important in the big cities, where over one third rent their housing. In smaller cities,
the proportion of renters is only one fourth.
21
waiting list to be on the safe side without actually needing housing now. But
even if you only count those who are active, the statistics show that there are
few rental flats in proportion to demand.
The average waiting time for the housing waiting list in the City of
Stockholm has increased sharply in recent years. In 2009, the average waiting
time at the Stockholm Housing Service was just under five years; in 2013 it
was over eight years. In the city centre Sdermalm, Kungsholmen and in
Vasastan the waiting time is 1617 years. The Stockholm Housing Service
finds so few flats for people on the housing waiting list in stermalm, another
attractive city centre district in Stockholm, that it does not even present any
statistics.
Waiting times have risen in the suburbs as well. In Tensta, a Stockholm
suburb from the Million Programme, the average waiting time in 2009 was
just over three years. In 2013, it had risen to nearly six years. In Vaxholm, a
small municipality north of Stockholm, the waiting time rose from under three
to nearly seven years in 2013. In central Sundbyberg, a popular municipality
close to Stockholm, the waiting time is 20 years. The average waiting time for
all of Stockholm County is 7.7 years.10
The waiting time is substantial in Gothenburg as well. Boplats Gteborg is a
marketplace where those looking for housing and those who are offering housing are to be able to find each other. The registered number of people looking
for housing is nearly 200,000. The pressure on the rental market can be illustrated by the fact that over 900 applicants went to each flat among the 8,000
listed in 2012. The average waiting time was three years in the city centre and
between one and two years in the suburbs. The waiting time for a student flat
was approximately three years.11 There are however large variations; the median registration time in the most attractive areas can be over seven years, while
the waiting time in less attractive areas can be under one year.12
In 2013, approximately 39,000 people were registered on the waiting list of
Boplats Syd, a housing service for Malm. The waiting time is an average of
two years, which is shorter than in Gothenburg and Stockholm.
idential property in question. With rising housing prices, low-income households and young people without wealthy parents have therefore had a tougher
and tougher time getting into the home ownership market. On the other
hand, there is price control on the rental market the negotiated use value
(bruksvrde) of the flat determines the rent, not the willingness to pay.
The idea of this price control is that everyone should be able to afford to
rent even the attractive rental flats. But if the housing supply (such as in the
city centre of a growing region) is insufficient for the entire demand, the housing must still be rationed divided up in some other way besides willingness
to pay.
One common mechanism is rental waiting lists via the housing service.
When this is insufficient, other channels become important, such as contact
with relatives and friends, or the black market. The connections are obvious:
extremely long waiting times for attractive areas lead to many trying to get
around the waiting lists via contacts or buying past them via the black trade in
leases. People who do not have contacts or are unwilling to break the law are
stuck with the waiting lists. This creates segregation although in a different
way than free pricing.
Rent control is a blunt instrument for redistribution. The controlled rent
benefits everyone who gets a hold of a flat not just low-income households.
Several studies have analysed the effects of rent control on segregation, both
with respect to income and ethnicity. The conclusion is that rent control does
not stop segregation at all. Several years ago, people living in rental flats in
the stermalm district of Stockholm made just over twice as much as those
living in rental flats in the Sdermalm district, another city centre district
in Stockholm. The study found that segregation on the basis of income was
actually higher for rental flats than for tenant-owner flats. In the same manner,
there is a clear connection between origin and an attractive housing address
among the rental housing stock, while this does not apply to tenant-owner flats
to the same extent. Ones country of birth makes a bigger difference for where
one lives when living in a rental flat than when living in a tenant-owner flat.13
Economists at Uppsala University came to the same conclusion in a study
that attempted to analyse the effects of the use value system on segregation
among the rental housing stock: In essence, the results mean that the typical resident of a rental flat in Stockholm City Centre is highly educated, is a
native of Sweden, is old and has a pretty high income, while the population in
the suburbs consists to a greater degree of households with small children and
immigrants. This pattern is not as distinct on the tenant-owner flat market...
Since the use value system generates a flat rent structure, this indirectly results
in a subsidy for those living in the city centre. This subsidy is geared toward
23
Black markets
Long housing waiting lists tempt many to go via the black market instead.
There are several studies of widespread abuse in this area. Numbers involving black trade are by definition uncertain, but various estimates still make a
strong case.
The Swedish National Board of Housing, Building and Planning divides the
black housing market into three parts: unauthorised subletting, trade in leases
and fraud.15 The unauthorised subletting probably occurs often in areas where
it is difficult to get a head lease; the harder it is, the less willing those who have
such a lease are to terminate it traditionally and allow the flat to go back to the
landlord. Instead, the person in question sublets it, sometimes at an excessive
rent. The Swedish National Board of Housing, Building and Planning has not
even tried to state how extensive this part of the black market is.
With respect to trade in leases, the Swedish National Board of Housing,
Building and Planning also neglects to try to quantify the extent. There are
no official statistics in this area. However, the Swedish Property Federation
has made an attempt with owners on the private rental market in Stockholm
via a survey. In 2006, it was estimated that the black trade in Stockholm City
Centre turned over approximately SEK 660 million. For three major municipalities in the Stockholm Region; Stockholm, Sundbyberg and Solna, it was
estimated that the total turnover of black leases amounted to SEK 1.2 billion.16
It should be underlined that the numbers of this study are very uncertain.
Figures from studies with the same methodology are unavailable for later
years. The Swedish Property Federations estimate is however that total turnover has increased. However, the number of leases entered into has decreased
due to low construction rates and conversion to tenant-owner flats. But the
price per lease has risen sharply.17 This data is also uncertain.
In Gothenburg, Boplats Gteborg has polled residents, with the results
indicating that the lock-in effects have increased, which results in fraudulent
exchanges and unauthorised subletting with illegal additional rent charges.18
The South Sweden Property Federation (Fastighetsgarna Syd) has conducted
a poll in Malm, which shows the same type of problem, with increasing trade
in black leases but with uncertain figures.19
In both of these parts of the black rental market unauthorised subletting
and trade in leases the parties involved, both the buyer and the seller, have
something to gain from the deal. That is why there is very rarely a report to
the rent tribunal or the police. There is also a third category in the Swedish
National Board of Housing, Building and Plannings analysis, which is pure
fraud. One example of this is when rental flats at attractive addresses put on
housing exchange forums on the Internet become an arena for fraudsters.
There are police reports and a variety of investigations here, but there is a
large number of unrecorded cases; we dont know how large a number of fraud
cases reach the surface.
In summary, there are no estimates of the extent of the black market that
are certain. However, the Swedish National Board of Housing, Building and
Planning believes that a reasonable conclusion is that it is affected by the
housing shortage and poor mobility on the housing market. The increasing
housing shortage can therefore be assumed to result in an increase in the
black market.
25
For newly started and fast growing companies, the housing shortage is a
significant impediment to growth. Two thirds of start-ups in Stockholm say
in a survey that the housing shortage causes problems for them; they have
trouble attracting people to Stockholm, and also have trouble retaining staff.
Stockholms housing problem is flagged as a serious international competitive
disadvantage for startups.21 If we look at already established companies, nearly
one third of the fast growing small businesses (599 employees) have at some
point had difficulties recruiting due to the housing shortage. Every fifth growing companies has failed to recruit staff due to the housing shortage. More
than one fourth report that it takes a longer time to recruit due to the housing
shortage which delays investments.22
These are the companies where most new jobs are created. In other words,
the housing shortage directly impacts employment and skills supply and thus
also growth and competitiveness for Sweden as a whole.
Quantifying the impact on employment is however difficult. One of the
few studies that was bold enough to take on this task came to the conclusion that unemployment for the country as a whole would be 0.3 percentage
points lower if job applicants moved to counties with more open positions,
but the housing shortage impedes moving there. Employment could simultaneously increase by three percent.23 However, the study only answers the
question of what greater mobility on the labour market means in light of the
jobs currently available. It does not say anything about the more long-term
effects on growth and job creation a better functioning housing market would
have which is significantly more important. The recent Social Democratic
Research Committee for Labour Market Reforms (Socialdemokratiska
Forskningskommissionen fr arbetsmarknadsreformer) is one of several commentators who asserts that a new housing policy including a reform of rent
control would be positive for employment in Sweden.24
This is something that has been pointed out in several international studies and
comparisons of Sweden in the past years. For example, the OECD underlines
the poorly functioning housing market as a threat to dynamics and growth
in its most recent review of the Swedish economy and recommends a series
of measures market rents, simplified construction regulations, intervention
against weak competition, tax changes, etc. to deal with these growing problems.25 The same is recommended by such diverse organisations as the EU26
and the World Bank.27
The risk is obvious that the problems will get even worse in the event of
a future economic upswing. Swedens economy has grown slower than usual over the past years. The main reason is the repercussions of the financial
crisis and a weak export market. Investments have been repressed and unem-
ployment is high. If problems on the housing market persist, this will delay
and obstruct the upturn expected in the coming two years according to most
economic commentators.
In the long term, the task is even more important. The demographic projections indicate continuing rapid urbanisation. Stockholm County is expected
to grow from a population of 2.1 million to 2.5 million in 10 years and 2.8
million in 2030. A population increase of 100,000 is already expected for the
City of Gothenburg by 2020, and the City of Malm is expected to grow by
approximately 40,000 in the same period.28 Accommodating this population
increase with the present poorly functioning housing market will be a difficult
challenge. This will probably require wider regional commuting and costly
infrastructure investments. In the long term, completely new construction and
transport solutions are needed.29
Continuing low construction and a shrinking number of rental flats would
have strong negative effects in this context. The gap between population and
construction would be made even wider. Matching jobs and skills would be
made difficult. Therefore, the housing shortage in general and the rental flat
shortage in particular have clear negative effects on the labour market and
skills development.30
27
Until 30 years ago, housing policy played a central part in the development
of the welfare state in Sweden. Cheap and functional housing affordable for
everybody became a cornerstone in the building of the Swedish welfare state
Housing policy was dominated by cooperative ideology for a long time, where
the joint responsibility and savings of the residents played a key role. In the
post-war period, the cooperative approach was replaced by the state and the
municipalities taking greater responsibility. Rent control, housing assistance,
municipal public housing companies, environmental programmes, capital
market regulation and interest deductions became key words in the development of housing policy from cooperative and self-determination to a state
macro policy for housing construction and financial regulation.
In the Million Programme of the 1960s and 70s, the state directed the
nations savings to housing construction via regulations. Banks and insurance
companies were forced to buy prioritised housing bonds with low return on
investment, which was a form of cheap financing for construction. This subsidy policy culminated in the beginning of the 1980s as the domestic interest
rate and credit market regulations were combined with extensive subsidies
directly to residents: first mortgage loans at guaranteed interest rates and state
subsidised second mortgage loans. People who were lucky enough to participate in these support programmes literally got paid to live in their housing.
Property prices rose, driven by all the subsidies, while inflation and the right to
deduct interest impaired loans and loan instalments. And due to the extensive
subsidies, the market became less sensitive to poor construction quality and
unjustified construction price increases.
The system eventually became unsustainable. This created high economic
and budgetary costs, and distortions of resource-allocation, while it contributed to debt and counteracted savings. A grey, unregulated credit market
emerged alongside the credit market regulations.
A system shift therefore was pushed through in the second half of the
1980s. It occurred gradually, by governments with different political persuasions. First, domestic de-regulation of the credit market came in the mid
1980s, which pulled the rug out from under the state plan economy on the
credit market with a special position for the prioritised loans for housing
construction. In 1989, the currency regulations were abolished, which was a
pre-condition for control of the domestic credit market. Then the major 1990
tax reforms came along, as the value of the interest deductions fell radically.
Reduced subsidies for household loans followed. The public housing sector was
given tighter frameworks, given that it was forced to build up its own investment capital. EU membership additionally resulted in Sweden committing to
not re-regulate the credit market.
The financial risk of housing construction was thus privatised with the major
parties in agreement. It was moved from the state to the companies (housing
and construction companies) and households, as it is on most other markets
and in just about every country. It is now up to private companies to provide
consumers with the goods and services desired, without the state going in and
taking special financial responsibility for providing the service in question.
While this was happening, the macroeconomic conditions changed. Sweden
went from high to low inflation, which meant that high inflation no longer ate
up the real value of mortgages. This type of indirect subsidising of housing
thus also disappeared, with visible subsidies disappearing at the same time.
29
The combination of moving taxes, interest deductions and abolished property tax has perpetuated inefficient and uneven taxation of different forms of
housing, while mobility on the market has been limited.
The total demand for housing has risen via population growth and rising
incomes. But at the same time, the reduction in subsidies combined with rising
prices for tenant-owner flats and a lower number of rental flats has made it
increasingly difficult for low income households to find housing. The result is
a housing market that is characterised by both lacking mobility and too low
construction.
We are deeply critical of the lack of an overall perspective. Sweden no
longer has a coherent housing policy instead there is a muddle of inconsistent
measures, which are short-term, mutually contradictory and often driven by
special interests.
This is a broader approach than what is usually taken in the domestic housing
policy debate. However, external analysis from organisations such as the
EU, OECD and IMF have the same type of overall approach. It is striking
how international analyses of the Swedish housing market emphasise rental control, distorted taxes and complicated zoning provisions31 while the
domestic debate prefers to avoid tackling the very special Swedish version of
rent control.
We would like to underline that these various reforms are conditioned upon
one another:
If rents are adapted to market conditions without regulatory simplifications
and increased construction, there is a risk that the supply of housing will
respond too slowly; in that case, rents may be driven up quickly in much of
the market. Increased construction in growing regions in turn cannot take
place without expanded infrastructure and better functioning public transport. Property tax and capital taxation affect the relative prices between
different types of housing and have clear effects on household demand, as
well as the financing of construction. The tax system must therefore also be
overhauled as the regulatory systems are rearranged.
But it is not enough to only increase construction. The greatest economic
costs of the poorly functioning housing market comprise inefficient use of
the existing housing stock.32 Rent control creates lock-in effects in the rental
housing stock and high capital gains taxes do the same for owner-occupied
properties and tenant-owner flats. The chains are being blocked. Since
the housing stock includes over 100 times more residential properties than
what is built per year, it would take far too long to fix the problems just by
building new properties. It is also considerably more expensive to build new
properties than to implement measures to counteract the poorly functioning
housing market. Inefficient use of the housing stock therefore must also be
tackled. The bottled up chains must be opened.
This is our main conclusion of the analysis of the gap between reality and
vision. Different political areas must cooperate to together contribute to make
it possible for the vision of a well-functioning housing market to be achieved.
It is therefore not enough to just build more or just reform rent control. The
following chapters lay out our proposals (summarised in the next section) .
Summary
1. Vision
The Housing Crisis Committee strives for a housing market with housing of all
types and for all stages of life. Where there is mobility and where zoning processes go quickly. Where housing with different forms of tenure are available
for different wallets.
We want to see a housing market where residents have great freedom of choice
in terms of prices, locations and forms of tenure. We want to see functioning
chains of moves and more extensive housing construction. A market where
housing waiting lists and black markets have disappeared.
We want to see a housing market where housing is attractive to invest in and
where financing of construction functions well. Where the process from construction plans to move-in is fast and non-bureaucratic.
We want to see a market where residents have strong security of tenure. Where
leases on the rental market can be tried in court.
We want to see a housing market where segregation is lower than it is now.
Where municipalities and property owners cooperate to distribute social
priorities in a way that does not lead to heavy concentration in specific areas.
Where newly built areas are planned in such a way that they are available to
different types of households, with different incomes and preferences.
2. and reality
The Swedish housing market is currently far from the ideal image. The housing shortage is widespread, housing waiting lists are long and the rental market
is in crisis.
The shortage of rental flats for young people and low-income households is acute.
Housing is segregated. Young people have trouble beginning to climb the housing
ladder, and chains of moves are blocked. Black markets are far too common.
32 SUMMARY
These problems are not only due to low housing construction, but also to an
even greater extent to inefficient use of the existing housing stock.
The housing crisis is aggravated as the population increases and more people
move in to the cities, while bottlenecks on the housing market block employment, dynamics and growth, and harm all of Swedens economy. Without
reforms, the housing crisis will get even deeper.
One reason for todays problems is that public measures affecting the housing
market are not coherent. The state has abdicated its previous roll as planner
and financier. The financial risk has been shifted to construction companies,
property owners and residents. But the policy shift is inconsistent. While the
supply for housing rises, mobility is impeded by obstacles and distortions on
the supply side.
Rent control creates lock-in effects and shuts the door on those who do not
have contacts. High and perpetual capital gains taxes inhibit mobility on the
market for tenant-owner flats and houses. A complex and drawn-out zoning
process is costly and weakens competition. Joint planning between housing
construction and infrastructure is insufficient.
There is therefore no longer a coherent housing policy. The policy is pursued
in silos, and mutual connections are not sufficiently taken into account.
An overall policy is required to solve these problems. Such a policy tackles
two main areas simultaneously: Mobility on the housing market and housing
construction must be increased.
Both of these tasks are necessary. It is not enough to only build more. The
biggest socio-economic costs comprise inefficient use of the existing housing
stock. This is why mobility must be increased. It is likewise not enough to
only adjust rents to market conditions. That would drive up rents far too
quickly for many households. This is why construction must be increased.
Our conclusion is that simultaneous and coordinated reforms of rent control, zoning processes and infrastructure must be made, as well as of taxes and financing.
SUMMARY
33
housing stock is used poorly, which has negative effects on the labour market
and growth.
Rent control scares off investments in rental properties and instead creates
strong driving forces to convert rental flats into tenant-owner flats. This control
that was intended to protect the tenant in reality risks depleting rental flats.
Rent control does not reduce segregation either. The spread of income among
residents of rental flats is just as large as for residents of tenant-owner flats.
Rental flats are actually more segregated with respect to origin probably
because contacts are required to move forward on the rental market.
Switching to completely free rent setting, without any control at all, is inappropriate. The right of tenure of the tenant must be protected. We propose a
gradual reform of the rent setting system, in two steps.
1. The Rent Negotiation Act (Hyresfrhandlingslagen) is to be amended so
that no party can be forced to sign collective rent negotiation agreements.
No party should be obliged to charge negotiation compensation on behalf of
the counterparty either.
A free right to negotiate is to be immediately applicable for newly built flats.
In older flats, the rent may be changed by a maximum of five percent per
year during an adjustment period until rents have been adapted to market
conditions. It is estimated that it will take approximately ten years or more
in Stockholm City Centre, and significantly less in Gothenburg and Malm.
In most medium and small cities, the adaptation will just take a year or so.
2. When adaptation of the rent level is complete, rents are set freely during
exchanges or new construction. Large rent hikes should be avoided between
the time a tenant moves in and moves out; changes should be gradual. In
old leases, rents in five-year phases may be changed at the pace of inflation;
greater increases are allowed in the event of renovation or reconstruction.
Tenants will continue to have strong security of tenure and unreasonable
rents will be able to be tried in court. Protection from irresponsible landlords should be increased.
When empowered by them, the Swedish Union of Tenants (Hyresgstfreningen)
can also represent a group of tenants in the future in negotiations under the
present model, if both parties have agreed to such a collective negotiation
agreement.
34 SUMMARY
SUMMARY
35
36 SUMMARY
Endnotes
1
SOU 2012:88: Att hyra frn en rtt fr alla till en mjlighet fr allt fler
www.hittabrf.se
Data in this and the next section taken from Boverket 2013: Bostadsmarknaden 2013-14
Stockholms Bostadsfrmedling
10
11 www.boplats.se
12
13
Hanna Fridell and Cecilia Brogren: Lyckas hyresregleringen motverka segregation i Stockholm?, Ekonomisk Debatt,
6/2007
14
Mats Wilhelmsson, Bo Sderberg and Cecilia Enstrm: Household allocation and spatial distribution in a market under
soft rent control, Uppsala Universitet. Citations from a debate article by the same authors in Bofast 9 September
2011.
15
16
17
18
Boplats Gteborg 2009: Slutsatser av Boplats underskningar om svarta lgenheter 2001-2003, 2006 och 2009
19
20
21
22
23
Georg Marthin 2012, Measuring mismatch in the Swedish labour market, Finanspolitiska rdet
24
25
26
European Commission, Occasional Papers 186, March 2014; Macroeconomic Imbalances, Sweden 2014,
se srskilt avsnitt 3.3
27
World Bank 2014: Swedens Business Climate. Opportunities for Entrepreneurs through Improved Regulations
28
29
A long term projection of the development in the Stockholm Region the coming 50 years is presented in SWECO:
www.stockholm2070.se
30
31
A good example is given by the European Commission in its latest analysis of the Swedish Economy: European
Commission, a.a
32
See e.g. Boverkets marknadsrapport, May 2014: Lst lge p bostadsmarknaden, och Boverkets marknadsrapport,
november 2013: Bostadsbristen och hyressttningssystemet ett kunskapsunderlag
B okriskommittn
an initiative by