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Reinfeldt slams Stockholm rental 'market'

Published: 14 Feb 2011 11:26 GMT+01:00
Updated: 14 Feb 2011 11:26 GMT+01:00

Swedish Prime Minister Fredrik Reinfeldt has criticised the system for how rental apartments are apportioned in Stockholm, advocating that rental apartments in the Swedish capital be converted to tenant-owner apartments.

"Everyone who's been near Stockholm's inner city knows that the concept of secure-tenure rental apartments (hyresrätter) just doesn't work there," Reinfeldt told the Dagens Nyheter (DN) newspaper.

"You're supposed to hand over your secure-tenure contract to the next tenant, but in reality a black market has developed," he said.

He pointed out that many rental contracts end up being used in apartment swaps.

The comments come following several articles published in DN recently highlighting the growing social divisions in Stockholm that come as a result of the city's difficult housing market.

According to DN, people with higher incomes occupy an increasingly large percentage of downtown Stockholm's housing stock.

In the last two decades, the income difference between residents living in central Stockholm and those in the surrounding areas has jumped from 5 percent to 29 percent.

Stockholm's system of apportioning rental apartments through secure-tenure rental contracts was developed as a way to guarantee all residents the ability to find housing.

However, as demand to live in Stockholm's city centre has increased, the system currently doesn't function as originally intended, resulting in artificially low rents for inner-city flats and providing incentive for tenants who hold contracts not to relinquish them.

"What Reinfeldt is saying is that secure-tenure rental apartments aren't a part of the regular rental market, which had led to secure-tenure rental being dead in principle in the inner-city. But newly produced rental apartments with market-based rents exist. And there is a market for them," said Hans Lind, a real estate professor with the Royal Institute of Technology (KTH), to the TT news agency.

"If a rental market means having floating rents, then market-based rents are a pre-condition. If you look elsewhere in the world, there is a market for sublets in the downtown areas of major cities," he added.

In other cities, apartments that aren't used by the owner are often rented out to one or several tenants, often young people or students.

"So in other large cities in the world there is actually room for two rental markets in the inner-city," said Lind.

The problem in Sweden, according to Lind, is that owners of tenant-owner apartments (bostadsrätter) can't sublet their properties at market-based rents, while in other cities there is a market for expensive, luxury rental apartments as well as one for more modest sublets.

TT/The Local/dl (news@thelocal.se)

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Your comments about this article

12:08 February 14, 2011 by Ben5
It is the stupidest system I have seen, why they do not open the market like other European countries, so everybody can rent out their properties freely ?!!

I feel that it is impossible to rent an apartment in Stockholm, even with a fixed income, with all this endless queuing system...
12:37 February 14, 2011 by Puffin
So Reinfeldt is advocating NO rental apartments and selling off the entire rental housing stock?
13:13 February 14, 2011 by Plowbridge
Reinfeldt and the laughably named Moderates (should be called the copy cat conservatives) are rankled by the housing market, as not all the stock is in control of the profiteers. Recent law changes have seen housing association properties in central Stockholm raise annual rents well in excess of rural maximums: and this is serving to force the less well off out of the cities leaving way for the wealthiest to benefit.

The two tiering of have's and have not's is growing rapidly is this quasi socialist country and the lack of a competent and innovative opposition political party is allowing most of this to go unchallenged.
13:47 February 14, 2011 by Borilla
We missed having a large, expensive and debilitating housing bubble the last time around. Maybe, if we try hard, we can sell all the publicly subsidized housing to real estate tycoons who can then flip them and make a windfall at the public's expense and drive the market up. Perhaps, if we try hard, we can bundle all those mortgages and sell derivatives here also. If you want to see how well Swedish banks handle real estate, take a look over the past few years at their success rate in the Baltic countries when they were allowed to run rampant.

When the conservatives like Reinfeld and his bunch start talking about how they are going to "fix" the economy and the markets, BE AFRAID. BE VERY AFRAID.
13:57 February 14, 2011 by skatty
Firstly, the problem is not just the Stockholm inner-city, but the "Stockholm in general", but of course, as usual Swedes like to see problems much smaller than real size, when they can't solve it!

Secondly, it's ridicules just turn rental apartments to tenant-owner apartment because concepts of rental apartments doesn't work. You should change the concept, and not just try to change the rental to the tenet- owner apartment.

I don't think it's a good idea to own apartment in a fast paced job market. I mean the job market is not stable like half a century ago, people have to change job and lose job faster. The housing system should be adapted to the labor market. To own apartment and house is good for people, who know that they remain in a place for long time. The rental system works better than ownership in a fast pace labor market. If somebody lose job somewhere and can find job somewhere else, the guy should be able to move and rent an apartment as fast as possible, but by the ownership method, people have to think twice for many different reasons like house prices in different places and losing money on selling their properties.

The tenant-ownership is good in countries with a long and stable labor market, when remarkable number of people have enough supply to buy house and pay mortgage with a permanent and stable job.
14:01 February 14, 2011 by ronneby
1.Someone stays in a queue to rent an apartment (Hyresrätt) for 5 years and finally gets it. In those 5 years, he managed to save 15% of money required to buy an apartment and bought one.I am not sure if he can still live in the Hyresrätt, but i think this is the way it has been going on...

2.I don't think that there is any sort of regulation on the number of apartments one owns..i have seen people owning the whole building and they rent it out(mostly in black) and they earn much more just by renting.

what can be the solution for these cases
14:26 February 14, 2011 by engagebrain
The problem is that people with legitimate contracts will not give them up when the move elsewhere- instead they sublet and make money. The poor sod has to pay the original rent plus the profit.

Subletting is illegal - it cannot be all that hard to actually check who is living in each flat and break up the black market and get the legitimate rental sector moving.
17:43 February 14, 2011 by kaze
err....if you free the rental market then it will become disproportionatly more rich people with all the houses.
17:58 February 14, 2011 by Mib
Tenant owners should be allowed to rent out their properties without Housing Association approval. But, the Housing Association can create regulations that must be followed to ensure others are not subjected to unsocialable behaviour. But, it is easy to legislate to stop speculators from buying several properties and renting them out to make money, which is what caused many of the price bubbles in other countries.

With regards to the current rental market, it has an ideal, but it doesn't work. It has created a black market where 6 figure sums are exchanged to get the 1st hand contract. It needs to be reformed. Maybe do regular spot checks to ensure the identity of the person who supposedly owns the contract is the one living there and enforce large fines and removal from the right to rent in Stockholm if they have exchanged contracts for money.

It seems in our wishy washy world where no-one seemingly takes responsibility, they try to solve a problem one way that affects everyone, when in fact they just need to enforce the rules that already exist and be more hardline, as it is quite clear the system is being abused everywhere.

Personally, I would bring in market forces to the rental market and bring in schemes to help "key workers". But, let's not kid ourselves that this is London....most people can afford to buy on the outskirts of Stockholm (mortgage tax relief). There is even a tax scheme for people to claim travel relief off their tax if they have to travel in from afar to get to work. Both of these are not available in the UK and some other countries. All of the above should be regulated as to ban speculators and brought in over say a 10 year period as it needs time to allow people to adjust if needed. With free University education, determination and a bit of luck, there really is no excuse to not be able to afford to have a roof over your head. Only the people who are unable to help themselves or have hit a bad patch i.e unemployment should get help from the state. The ONE thing that would help very much is that the Government use some of the surplus money to encourage more building of property to meet demand that will reduce property and rental prices. But hey....why state the bleeding obvious!!
19:45 February 14, 2011 by Toonie
Reinfeldt says: "You're supposed to hand over your secure-tenure contract to the next tenant, but in reality a black market has developed," he said.

HAS developed? To my knowledge this has been the situation since the 1970s. Anyone who complained about it back then was labeled a 'conservative' or even a 'reactionary', which is what happens when people privileged by a corrupted system have their assumptions challenged. There are plenty of countries with open rental systems (the renter lets it to the person he/she prefers), but rents can be controlled to a greater or lesser extent, meaning rent rises are index linked. On the other hand, well-heeled and well-connected Stockholmers have shown themselves to be so imaginative in getting round the existing rules that I'm sure they'll find ways to maintain their advantages. 'Key money' will probably remain unless the law is changed to one similar to a 1950s British law penalising the person who solicits the money, not the person being solicited for it.

@ Mib "Maybe do regular spot checks to ensure the identity of the person who supposedly owns the contract is the one living there and enforce large fines and removal from the right to rent in Stockholm if they have exchanged contracts for money."

There used to be checks. People living in the same building would make their suspicions known. But agreements were often made (maybe still are?) where a sub-letter agreed to pretend to be a partner or relative. Not only was the sub-letter screwed over socially and financially, they also had to tell lies to keep a roof over their heads. Not a great advert for the Swedish 'way of doing things'. Overheard someone last year talking about a new novel set in Sweden with a tragi-comic description of the rental market in Stockholm. It's by an American or Brit, I think. Anyone know anything about it?
20:10 February 14, 2011 by mojofat
It's amazing to me that a whole country can take a fairly straightforward concept in the rest of the world and create something so unnecessarily complicated. Having lived all over the world, there isn't anything that approaches the absurdity of this swedish housing system. Maybe communist soviet union or east germany in their heyday...but even that may be a close call.
11:51 February 15, 2011 by engagebrain
Giving subletters a reward for turning in the primary contract holder would work.

Also do the subletters pay or declare tax on the profit they screw out of their poor tenant ?
14:16 February 15, 2011 by Shree
The rental policy in stockholm is just hopeless. I think it is very easy task to fix all the illegally owned apartments in stockholm. Its just matter of goverment awakening and taking some action. Its very unfortunate that a good system is turned into a black market. We humans are hopeless creatures. Wake up Stockholm and surrender your illegal apartments. Sweden is good country, dont spoil a good nation.
16:02 February 15, 2011 by texaslass
Shree,

Sweden is like every other country in the world, where people will do what they can to make money and get ahead. It is not a matter of good or bad, it just is human nature.
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