The Swedish housing market from a low-income perspective
Introduction and institutional background:
The theme for this special issue is the development of social housing after the most recent financial crisis. From a Swedish perspective, this question is awkward for several reasons. The first reason is that social housing – defined as subsidized housing targeting low-income households – does not technically exist in Sweden. The municipal housing companies on the rental market are open to everyone, and apartments are typically allocated according to time spent on the waiting list, with everyone being able to queue for an apartment. The rent regulation system in Sweden, which is the same for private and municipal housing, means that the rent level primarily reflects the year the house was built and if there has been a major renovation or not. Location and demand do not affect the rent very much, so typically there are long queues for older apartments in central locations. A new law in 2011, following criticism from the property owners about illegal subsidies, clarified that the municipal housing companies should act in a “business-like way” (see Elsinga and Lind 2013).
The second reason why the question is awkward is that, even though there were strong initial effects from the financial crisis, the Swedish economy recovered quickly and there was no crash in the housing market, as in many other countries, for example.
However, behind the question about social housing and the financial crisis, there are fundamental questions that are important in all countries involving the housing situation of low income households. Many countries, including Sweden, have had increasing income differences and a central government where housing issues have not been high on the political agenda.
The rental sector:
In the early 1990s, after the financial crisis, there were vacancies in low-income suburbs even though the rent was low. However, even then there were long queues for older apartments in the parts of the city popular among higher-income groups, e.g. central Stockholm. Rent regulation kept rents below the market level in these areas, but a study shows that even at that time the rent controlled apartments in the popular central areas primarily housed middle-class households (Lind & Hellström 2006).
The municipalities’ right to determine land use:
Another questions that has been discussed is whether the municipalities have the right incentives when it comes to making land-use plans and create building rights. The current residents might, for a number of reasons, oppose land-use plans, especially if the plan contains rental housing aimed at low-income groups. In metropolitan areas, where there are many municipalities, there can also be a game situation where no-one wants to take more responsibility for low-income housing than others – and the result might be that all municipalities only plan for higher-income developments. The largest developments in the biggest cities have been in centrally-located former harbor or industrial areas, where both development costs and market prices are high. Housing construction increased greatly during 2015 and 2016, but still only focuses on groups with incomes that are above average.
Conclusion:
Sweden currently has a weak Social Democrat and Green Party coalition government which does not have a majority in Parliament. Housing policy negotiations with the opposition broke down before the summer of 2016. The new anti-immigration party (the Swedish Democrats), with 15% of the seats in Parliament, also creates uncertainty. As there are also disagreements between and within the ruling parties, not much can be expected from the central government.
More things are happening on the municipal level, partly driven by rising costs for the social authorities caused by the housing shortage. The Gothenburg case with low rents in some apartments mentioned above is one example, but increased production of cheaper apartments is also on the agenda in some municipalities. However, the scale of these measures is very small, and as a time-consuming planning process is involved, we cannot expect any quick improvements in the affordability of housing. Compared with a few years ago, there is today much more discussion about the need for affordable housing and the problematic situation for low-income households on the housing market. Therefore, there might be reason to be more optimistic if we look ahead 5-10 years, perhaps with a combination of all the measures discussed above, both on the central and local level.
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