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ECONOMY

Homeless to ‘skip’ long rental queues in capital

Some of Stockholm's homeless population are set to be offered permanent accommodation in the city centre, as part of efforts to help them reintegrate into society. But the move is a highly controversial one in the capital where there is a long queue for first hand rental contracts among tax-paying residents.

Homeless to 'skip' long rental queues in capital
There is a long queue for housing in Stockholm. Photo: Image Bank Sweden
Stockholm's Social Democrat-led City Council has announced that it wants to give more help to vulnerable people who have been unable to secure first hand rental contracts in the heart of the capital.
 
“This could be large families, homeless people, addicts,” Green Party councillor and social affairs spokeswoman Ewa Larsson told Swedish newspaper Dagens Nyheter.
 
She added that the move was designed to avoid concentrating these groups in social housing projects in the Stockholm suburbs.
 
“We'll take a greater responsibility, we want all locals to have an opportunity to stay in their city,” added housing commissioner Ann-Margarethe Livh.
 
The move builds on previous projects run by SHIS, a private organisation contracted by Stockholm City Council which already provides seven-year contracts to disadvantaged groups.
 
Under the new plans, some homeless people will be given permanent accommodation in existing and new apartment complexes run by SHIS, which currently takes responsibility for 2,300 apartments in 22 locations around the city.
 
“We provide help for all kinds of people – young, old, families, people with addictions or debt problems, who live alongside other Swedes in our accommodations, bridging the gap between housing provided by social services and the regular housing market,” SHIS spokesman Fredrik Jurdell told The Local.
 
“They pay the rent like everybody else, although sometimes that comes from benefits. What is different is that we have specially trained staff on hand, restaurants and reception areas – facilities that provide extra support for people who live there and makes the housing more acceptable to others in the neighbourhood,” he added.
 
According to Jurdell, giving some residents permanent contracts will help “ease the pressure” on individuals and families currently “limited to seven years” of secure accommodation in Stockholm.
 
“We are talking about giving more stability to people who have really struggled. For example giving a seven-year contract to a 60 or 70-year-old addict who has spent ten years on the streets and putting him an apartment on his own out in the suburbs…well it would be better if they were among others in a place where they can get support.”
 
But the move is a controversial one in a city where in some areas tax payers are facing a 20 year wait for rental accomodation. This has resulted in a strong subletting culture, with prices spiralling in recent years despite rules designed to cap rental increases.
 
However it is backed by Sweden's largest centre-right party, the Moderates, which led the previous government.
 
“We see it as a continuation of “housing first”, a similar project the Alliance worked with during our mandate,” it said in a statement emailed to The Local.
 
Asked if he understood complaints about the plans to give first-hand contracts to homeless residents, Jurdell told The Local: “It is a relevant question. I would say that our main task is still to act as a stopgap to help people before they can get back into the regular housing market. But for some groups they could spend years in the queue and still struggle to get a permanent contract because of their problems or because they don't have references, or because there are so few apartments available for very large families. So the changes will help with this.”
 
The announcement by Stockholm City Council comes a day after Sweden's Prime Minister Stefan Löfven unveiled his national strategy for tackling the housing crisis, pledging that 150,000 new homes would be built each year from 2016, in a move designed to help both Swedish and international workers.
 
“We have a major housing shortage in Sweden. Housing is a key part of the government's labour strategy,” he told a press conference.
 
“A housing shortage is one of the biggest obstacles to growth, such that people cannot move wherever they want,” he added.
 
While in many other European countries public housing is reserved for those on lower incomes, anyone can apply for this kind of accommodation in Sweden, which is usually maintained to a high standard. Both public and privately owned apartments are available to those who register with the city's housing service.
 
Around one in three Swedish adults lives in rented accommodation.
 
Most vulnerable adults in Stockholm are already offered some form of state-subsidised social housing, in line with national guidelines, but this is not always permanent and is often in suburbs outside the city centre.
 

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ECONOMY

What will Sweden’s interest rate hikes mean for foreigners in Sweden?

Sweden's Riksbank now expects its base interest rate to be close to two percent in three years' time. What will this mean for foreigners living in Sweden?

What will Sweden's interest rate hikes mean for foreigners in Sweden?

How high could interest rates go? 

The Riksbank on Thursday increased its key interest rate above zero for the first time since the autumn of 2014.

But it isn’t going to stop there, it expects to hike the rate in small increments over the next three years, to 1.18 in the middle of next year, to 1.57 in the middle of 2024, and to 1.81 in the middle of 2024. 

At a press conference on Thursday, the bank’s governor Stefan Ingves said that people should prepare for higher rates, but stressed that there would be “no extreme rate levels”. 

“We’re not slamming on the brakes, more taking our foot off the pedal,” he said. 

It’s worth remembering, though, that in the run-up to the Swedish banking crisis in the early 1990s, the key interest rate moved from 1 percent to 2 percent to as high as 10 percent, before the Riksbank finally upped it to 500 percent in a desperate attempt to defend the krona. 

As recently as February the Riksbank was not expecting to raise rates from zero until 2024, so if inflation proves more stubborn than expected, the key rate could possibly go higher. 

But Robert Boije, chief economist at Swedish state-owned mortgage lender SBAB, said that as inflation today is most likely the result of higher energy prices, and supply-side constraints, rather than because there’s too much money in the system, the risk of seeing higher rates than the Riksbank has outlined is relatively small.  

“There’s a higher probability of a lower repo interest rate [than expected] in 2024 than of a higher interest rate,” he said. 

How will higher interest rates affect mortgage rates? 

According to Claudia Wörmann, SBAB’s housing economist, interest rates on floating mortgages could nearly double over the next year from around 1.8 percent today to about 3 percent in January 2026.

She expects two-year fixed mortgages, which are now at around 2 percent to rise to 3.4 percent in January 2025, while five-year fixed-rate mortgages will rise from 2.5 percent today to 3 percent in 2023 and 4.1 percent in 2026. 

Many mortgage lenders had already anticipated Thursday’s rent rise, with Handelsbanken/Stadshypotek, Skandiabank, and SBAB all upping their mortgage rates by as much as 0.25 percentage points last week. 

Bigger monthly payments for those with loans

According to Wörmann, someone with a million kronor mortgage who currently has a two percent interest rate, would see their monthly payment double from about 1,160 to 2,330 if their mortgage rate rises to four percent. 

As most borrowers pay more than they need to simply to meet their interest payments, however, many have some flexibility, meaning they can slow down their repayments to make it easier to bear the increased cost, she said.  

“One aspect is the interest rate, but you need to bear in mind that a normal household amortises much more than they pay in interest rates,” she said. 

Lower buying power for those without a mortgage

For foreigners in Sweden looking to borrow to buy a house, higher mortgage rates will reduce the amount of money they can borrow to buy a house or apartment.  

Houses and flats in Sweden might get more affordable

Two years of rising house prices showed signs of coming to halt last month. 

The Swedish financial supervisory authority warned earlier this month that in its worst-case scenario, where rising interest rates are compounded by higher power costs for consumers, house prices could fall by as much as 30 percent. 

In its less dramatic scenario, the prices of apartments owned as part of a cooperative – so-called bostadsrätter – would fall only slightly, while the price of detached houses would fall 10 percent. 

“Our prognosis is that housing prices at the end of 2024 will be about ten percent lower than what they were on January 1st this year,” said Boije. 

The decline will start with a 1.3 percent drop this year, followed by a bigger 6.1 percent drop next year, and then a 3.8 percent drop in 2024. 

For most buyers the affordability of housing will not change very much, Boije points out, as higher interest rates will reduce the amount they can borrow. 

“If there’s a one-to-one correlation between the interest rate and housing prices, then the use cost of housing in economic terms will not change very much,” he said. 

Foreigners who are able to buy in Sweden without taking out a loan, will see a benefit, however.

It will also become easier for those taking out a mortgage to gather together the 15 percent of the value of the property they are required, under Swedish law, to pay in cash. 

READ ALSO: Will Swedish housing prices plummet as interest rates rise?

Wörmann said there was little doubt that the increase would start to pull down house prices, particularly when you looked at rising costs and post-pandemic effects. 

“It’s more expensive to buy food, you have to take into account that people are spending much more money on electricity and on fuel,” she said.

“We are leaving a pandemic where we were stuck in our homes, which might have meant that people didn’t mind paying a lot of money for their house as they spent so much time there. Now we are released from our home, and that might change how we look at our homes and our willingness to buy something expensive.” 

For foreigners who have yet to buy a house or flat in Sweden, a 30 percent fall in prices would of course be quite welcome, increasing the affordability of property in the country. 

Foreigners paid in local currency may benefit from a stronger krona

The hike in interest rates saw the value of the Swedish krona rise against both the dollar and the euro on Thursday.

If the Riksbank has now left behind the loose monetary policy which saw it keep the key interest rates negative between February 2015 and December 2019, the krona could strengthen against other currencies. 

“If markets now expect the Riksbank to be more hawkish relative to the Fed in the US and the ECB, this should increase the value of krona,” Boije said. 

This will mean foreigners paid in kronor will earn more once their salary is converted into another currency. Conversely, those paid in euros or dollars, but living in Sweden, could see an effective salary cut. 

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