Reinfeldt under fire over housing comments

Sweden's prime minister Fredrik Reinfeldt has courted criticism from some quarters for suggesting that Stockholm's rental housing market is not performing as smoothly as it could.

• Reinfeldt slams Stockholm rental 'market' (14 Feb 11)

Reinfeldt waded in to the notoriously partisan issue of housing regulation in general and the situation in Stockholm in particular in an interview published in the Dagens Nyheter (DN) daily on Monday.

"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 newspaper.

Reinfeldt went on to point out that there is a thriving market in black market rental contracts and that there was little point to secure-tenure apartments in the inner-city as they almost never came onto the market for new potential tenants.

But the prime minister's comments were not welcomed by all parties with an interest in the housing market.

Barbro Engman, the long-term chair of the Swedish Union of Tenants (Hyresgästföreningen), used her blog on Tuesday morning to chasten the PM that "he does not decide how we should live".

"If one is to consider if the rental market works or not depends on the ambitions that one has," Engman wrote, criticising those who argue that a free market in rental apartments would alleviate all problems.

Housing minister Stefan Attefall of the Christian Democrats argued in response to Reinfeldt's comments that secure-tenure apartments are needed in Stockholm's inner-city.

"He describes a problem. But the secure-tenure apartment is needed and has its place. And the government is working to strengthen the standing of the secure-tenure apartment," he said to DN.

Attefall pointed out that an adjustment to greater differentiation of rents levied for apartments in areas in demand to those in the suburbs is underway.

"But the new system does not mean market rents," Attefall pointed out.

Gustav Fridolin of the Green Party described Reinfeldt's comments as "Kafka-esque", arguing that the problems with a black market are no reason for not acting.

"It is important to build more," Fridolin said, pointing out that the problem is not unique to Stockholm's inner-city.

The debate has emerged following a series of articles in DN which highlighted 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, thereby undermining one of the key arguments used in the system's defence.

Stockholm's system of apportioning rental apartments thought secure-tenure rental contracts was developed as a way to guarantee all residents the ability to find housing even in more desirable neighbourhoods.

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.

According to Hans Lind, a real estate professor with the Royal Institute of Technology (KTH), the key problem Sweden faces is that owners of tenant-owner apartments (bostadsrätter) can't sublet their properties at market-based rents, a problem to which Reinfeldt also drew attention.

"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," Lind explained to news agency TT.