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Subletting in Sweden set to get more expensive

Published: 05 Dec 2012 15:33 GMT+01:00

The government wants to boost the supply of properties available for rent by removing the current cap on how much flat owners can charge would-be-tenants.

Currently, flat owners cannot charge whatever they want, instead they are restricted to setting a "reasonable rent" (skälig hyra).

That proviso means owners cannot set rent to cover the actual costs of ownership.

But starting on February 1st, 2013, property owners will be able to charge tenants rent in line with what it actually costs to own their homes.

The Riksdag's Civil Affairs Committee approved the government's proposal on Tuesday.

In addition to rent levels, the proposal strips tenants of the right to take landlords to court and reclaim money if they can prove they have paid too much rent according to the guidelines.

The Riksdag committee rejected, however, a related proposal that would allow tenants to rent out their homes without asking their tenancy organisation (bostadsrättsförening) for permission first.

Owners will still have to apply in writing before subletting their flats.

Tenant advocacy groups slammed the proposal, which should be voted into law on December 17th as the government leans on the minority Sweden Democrats to get a majority in parliament.

"The government and the Sweden Democrats don't care at all about renters," Barbro Engman, chair of the Swedish Union of Tenants (Hyresgästföreningen), said in a statement.

Engman thinks the new law is based on a "theoretical model" and will end up hurting those already struggling to find a place to live.

"Those who sublet are often young people who have a hard time breaking into the job market, so those who have the least ability to pay are going to be paying the most," she told the Metro newspaper.

Liberal Party (Folkpartiet) MP Nina Lundström, who serves as vice-chair of the Civil Affairs Committee, was optimistic that the new law would help ease the housing crunch that plagues Stockholm and many other cities in Sweden.

"I hope that we end up with more apartments with the guidelines on how sublet rents are set," she told the newspaper.

However, she admitted that the effects of the new law remain uncertain.

"It's hard to say today how much the volume of rental apartments will ultimately be affected."

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Your comments about this article

17:21 December 5, 2012 by pkpekka
What does "subletting" or "an apartment is rented out second hand" mean in this context? This is very strange terminology (very Swedish). If you own an apartment and then rent-it to somebody isn't this a first-hand contract? Or can you have a first-hand contract only if you rent from some governmental rental association? Do Swedish people not really own their apartments if you have to talk about "second-hand/andra hand" contracts in this case. What about all the Swedes who stand in line for 10-years for a first-hand contract and then rent their apartment(s) to pissed off foreigners or quest workers at inflated prices on the black marker? This is not going to be legal is it? I do applaud this more as a non-native if it brings some more apartments into the marker but much more needs to be done. People should not be able to hold onto their first-hand contracts the way they do now and they should be pricier in the first place (so there is less profit to be made from sub-letting or sub-sub-sub-letting). And I suppose they should build more apartments.
18:15 December 5, 2012 by Swedishmyth
Price controls lead to shortages? Surprise, surprise.

You could start by ousting the politically connected occupying inner city apartments at way below market value. But obviously that will never happen. Politics is involved in everything in Sweden. In fact, many Russian immigrants I've spoken to say that Sweden is more like Soviet Russia than contemporary Russia is.
19:08 December 5, 2012 by pkpekka
One should substantially increase the rent-control prices in the apartments that are on the queue in Stockholm area. This would increase circulation and reduce black-market profits. And make the most lucrative apartments entirely marker-priced by selling them to private rental companies or individuals. Then this extra money should be used to build more apartments, most of them market priced (at least 30-40 000 of them, the real shortage could of the order of 100 000?). Then markets would take care of the pricing when there is enough supply. Freeing up rent-control all over Stockholm might be too much to ask but there is no justification (other than corruption) for the most lucrative locations to be rent-controlled. For every "little-man" that has to more out of (central) Stockholm 5-10 would get a reasonably priced apartment in the outskirts of Stockholm, well with-in the metro lines (30-40 min commute). This is how it is in "normal" big cities. Abolish the queue-system step-by-step (if not otherwise possible)!
19:55 December 5, 2012 by engagebrain
These plans do not change the number of flats in Stockholm, they actually legitimise subletting, something that is now mostly illegal and exploits newcomers.

The result will be that rental flats will in future only become available when the primary tenant dies - otherwise they will keep on subletting and exploiting the unfortunate secondary tenant who gets pays a higher rent and gets sod all rights.

It would hardly be difficult to end subletting, just check who lives there, and make decent primary contracts available.
20:18 December 5, 2012 by ciaron9000
Can somebody please explain the Bostadratt system and why you can't buy the apartment outright.
20:45 December 5, 2012 by Beavis
ciaron9000 its a "share" in a collection of apartments the Bostadratt owns. So when you "buy" your apartment, your actually just buying a share in a group of them. Its an awful system but its the left overs from when the commys were in power who did whatever it took to make sure all apartments build in Sweden did not fall into private hands.
21:07 December 5, 2012 by Abe L
#6 - Hit the nail right on the head. It's a legacy leftover that needs to die ASAP.

Hence it's a shame that the most important part didn't pass, you still have to get permission from your bostadsrättsförening in order to rent it out, something you rarely get or only for a very limited amount of time. Which means that you as the tenant pay all the cost involved with owning a bostadsrätt but also that it's not used if you need to spend a few years abroad.

I otherwise think this is a step in the right direction and they can always correct the above point later on.
04:01 December 6, 2012 by banuazizi
Can anyone explain why Sweden doesn't just want to build more buildings/apartments when there's housing shortage EVERYWHERE ?
08:52 December 6, 2012 by smilingjack
why the reluctance of the bostadsrättsförening to allow leases?

I have encountered the same situation and even abuse from other tenants in the block because we were non swedes.

racism? concern over property abuse?

strange as hotorget where I was originally was mostly arabic ( see market stalls ), sudanese and back packers. as we were leaving a letter came saying the entire block was in a catastophic state of disrepair and that the block was going to cost a fortune to repair.

in our 3rd apartment now and have seen the same scenario unfold each time. half renovated apartments. short lease. no matter how pristine you thought the apartment was after you scrubbed it from top to bottom ( we were warned about obligatory cleaners having to come in ) the "owners" also found "major damage" and demanded payments. always for parts of the apartments that needed replacing. a good scam. but not so when you have a good foriegn lawyer.

I should probably post the name of the dodgy agent involved.
09:45 December 6, 2012 by engagebrain
re smilingjack & Abe K

Most bostadsrättsförening wil give permission for rentals of 1 or possibly 2 years.

The reason for not automatically gving permission is to try and keep blocks occupied by owners - people who have a longterm interest in maintaining the block and taking on the various jobs that are required.

Rentals by an owner or a secondary contract create a new and worse relationship between the association and the the temporary tenant, with little that an association can do to control an antisocial tenant. The last thing you want is to find that your neighbours are a series of stag party drunks just renting for the weekend.
10:33 December 6, 2012 by EP
What happens in the situation that you let your flat out, the BRF decides it doesn't want you letting it out and wants you to come back (or sell it). You're away from Sweden, or have moved away and you can't sell it because the market (for example) is down. Then it seems you're in a bind.

Strange system, in effect, you cannot own an investment property that is a flat in Sweden. Be it whether you're away or living in another BRF in Sweden, since as I've heard since you cannot be a member of 2 BRFs.

Arcane system and really stupid
12:00 December 6, 2012 by Shibumi
So those of us who rent are going to get even more screwed. No more price control pressure (not that it ever seemed to matter much) but we will still be thrown out after a year or two of paying outrageous rent prices even if we are model tenants. Just because the BRF said so and "rules are rules". This really sucks.
12:14 December 6, 2012 by engagebrain
If you want the housing market to really get out of control introduce private landlords and the buy to rent method - in the UK rents are completely out of control with those forced to rent, who cannot get primary contracts with decent associations, paying half their salaries in rent.

Another joy of private landlords is that many use every trick in the book to fleece tenants and they are very hard to nail through the courts.

Get rid of illegal secondary contracts, which is actually a different question to buy to rent, and the whole rental landscape will improve. Introduce private landlords and and a lot of people will get badly screwed. In London very high rents have not led to new building - this might lead to lower rents. Housing is too important to be left to the for profit sector.
13:12 December 6, 2012 by expatdave
If there are any Government officials reading this then try growing a pair and make some changes. People are not happy, it's plain to see.

Here are my tips:

1. Investigate those that have first hand contracts and whether they need them or are just scamming the system by renting them out again and pocketing a bucket load of money.

2. Those that are scamming the system obviously lose their contracts and their apartments are returned into the system to help those that actually need them. This should increase the supply.

3. Give people the right to rent out their 'bostadsrätt' apartment when and how they want. This will also increase supply and return the market to equilibrium.

and lastly by doing the above the market will become more attractive to investment companies and hence more apartments will magically get built much like everywhere else around the world.

Problem solved!
23:19 December 7, 2012 by henry.bn
What is wrong with the Böstadrätt system? It comes to the same thing as ownership in practice. And it also reduces the potential problems arising when neighbours let out to tenants who prove to be troublesome eg noisy..

It is a better system than the English leasehold, which gets the worst of all worlds. You pay ground rent to the freeholder and get nothing at all in return, plus maintenance charges which can be a rip-off, unrelated to actual costs. And if the neighbours sublet to troublesome tenants the freeholder is not usually going to enforce the conditions of the lease, which can lead to the run-down of the whole block. One problem is that people buy flats with no intention of living in them but to rent out. They don't give a damn about the neighbours if their tenants are eg noisy. This can make problems for those who have bought their flats to live in. It also causes a shortage of flats for owner-occupation.

Good that the government has not proceeded with this freedom to sublet - there is endless potential for trouble.
23:44 January 8, 2013 by mlatimudan
I can't really say that I fully grasp this system, but to be honest it seems insane. What does the ordinary Swede stand to gain from this system? Here in Croatia if you buy an apartment you are the owner in the full sense, not this leasehold like in the UK or this bostadsrätt in Sweden. If you want to rent it out, you are free to do so at any price you can fetch. If you want it to be empty for 10 years, which would be fairly stupid, you are free to do so.

We do have a small hitch with renting. From the owners point of view the tenants can, regardless of an existing contract, stay longer and the owner cannot legally evict them without a court order, nor can he cut off their water/electricity/heating, nor can he enter the flat and throw their things out and change the locks. And the courts here take forever, and all the bills are for the owner to pay so to get reimbursed from the tenants a private suite has to be filed.

With that being said, it still makes more sense than this Swedish system. At least to me.
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