Profit hunt dampens housing construction

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Profit hunt dampens housing construction

The challenge of finding solutions to Stockholm's housing shortage must compete with the profit margins of commercial construction companies with a vested interest in keeping property prices high, a new report has found.


"The interplay between municipalities and construction companies has become more centralized, with the municipalities having a key role with their city planning monopoly," the report from the Stockholm County Administrative Board (Länsstyrelsen) said.

"It's the construction companies' risk and profitability assessment that in the end decides whether new housing is built."

The report found that the Swedish capital needs at least 300,000 new homes as the population is expected to increase from 2.1 to 2.6 million by 2030.

The city is well-known for its long housing queues, with a mortgage-to-disposable-income rate much higher than the rest of the country.

"The level of new production of homes has been way too low for many years now and the accumulated housing shortage in the Stockholm region is now significant," Stockholm county governor Chris Heister warned in the introduction to the report.

He added that the housing situation in the capital region hit the young, students and the newly arrived particularly hard, while pinpointing changes in recent years to the housing market.

"Fewer rentals [hyresrätt], long housing queues, tougher demands from landlords and housing associations for those applying for rentals as well as rising home prices have led to more people having a hard time entering the housing market," the report noted.

The reports' authors argued that Stockholm needed at least 7,000 new student residencies and that adequate housing was a prerequisite if the city wanted to attract dynamic people and have a competitive edge nationally and internationally.

Prices for apartments within cooperative housing associations (bostadsrätt) and small single-family houses have nearly doubled since 2005 and, overall, prices are not expected to drop.

Yet while the report put a large portion of responsibilty at the door of commercial construction companies, it also noted that some companies were attempting to diversify their portfolios in order to become less sensitive to fluctuations in the market.

"Some co-op apartment builders have started building rental apartments that they themselves intend to manage, which show that the construction companies are now trying different solutions to widen their product range and reach more target audiences," the report noted.

"Which means they will become less vulnerable to changes in the financial climate."

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