A rental market in crisis

Fredrik Kopsch, researcher in Real Estate Science at Lund University

In a new SNS report, Fredrik Kopsch, senior lecturer and researcher in Real Estate Science, scrutinizes the Swedish rental market. He shows that housing construction has little effect on the housing queues, that people in the highest income percentiles gain access to the most attractive rental apartments and that sellers of illegal secondhand rental contracts welcome new legislation that criminalizes the buyers of such contracts.

According to Fredrik Kopsch, Swedish rent control is the underlying cause behind the observed housing shortage and illegal rental contract trade. Another aspect of the rent control problem is that many of the rental apartments have been converted into tenant-owned apartments. Using statistics regarding the housing queue as well as newly produced housing in Stockholm, Kopsch shows that there is no association between the length of the queue and the quantity of new housing. He also shows — with new data from the Stockholm Housing Agency — that rent control is a poor instrument to help households with low income, which is the weakest group on the housing market.

– In the Swedish housing debate, it is often argued that keeping rents low will enable poorer households to solve their housing situation. However, this has not been the case, says Fredrik Kopsch, senior lecturer and researcher in Real Estate Science at Lund University.

Through contacts, illegal trade and better opportunities while queuing, well-off households have gained access to the most attractive rental apartments. Then, these apartments are frequently turned into tenant-owned apartments.

– Concrete action is needed to solve the housing crisis in Sweden. We cannot keep on the same old track that has proven ineffective. I believe we have to abolish rent control. And at the same time, I think it’s important to safeguard the security of tenure via legislation. However, it is also important that policy makers consider targeted action for households with low income, so their housing situation does not become untenable, says Fredrik Kopsch.

In the report, Kopsch also presents interviews with buyers and sellers of illegal rental contracts. The take-home message is that sellers of such contracts welcome the suggested legislation that would criminalize the buyers. This is likely to make the deals less risky from the seller’s point of view because the likelihood of the buyer reporting the deal decreases when the buyers themselves risk criminal charges.

The report is part of the SNS research project on Sustainable Urban and Rural Planning.