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EXPLAINED: What do proposed changes to Sweden’s rental laws mean for tenants?

EXPLAINED: What do proposed changes to Sweden's rental laws mean for tenants?
The proposals would only apply to newly built apartments. Photo: Ulf Grünbaum/Imagebank.sweden.se
What do the plans to change Swedish rental laws mean for residents, and could the row over the proposals really bring down the government? The Local explains.

What’s happening?

The Left Party threatened to topple the government over planned changes to the housing system in Sweden, which would introduce market rents for newbuilds. 

After the government did not respond to the Left’s ultimatum (which gave them 48 hours to either drop the proposals or go back to the drawing board and involve the Swedish Tenants’ Union in negotiations), the party said it would begin preparing a no-confidence motion.

The only snag was that the Left don’t have enough MPs to put such a motion forward. After they said they would not put the motion forward together with the far-right Sweden Democrats, the latter party — which does have the required number of MPs — said it would submit the motion on its own.

So that’s where we stand now, with the government said to face a vote of no confidence next week, unless the parties come to an agreement before then.

What are the rental laws up for debate?

Sweden currently has fairly strict regulations on renting.

One of the rules is that landlords may only charge a “reasonable rent” (skälig hyra) rather than choosing the price they set. This applies both to people who rent directly from property owners on a so-called first-hand contract, and to people who sublet apartments that they rent or own. In the latter case, they may charge a bit more than their own direct costs, but only to cover bills and services or any furniture included in the rental, and in the case of people who own the property, four percent may be added to cover the cost of capital.

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What are market rents and how would the government’s plans work?

Market rents are the opposite system to what’s currently in place in Sweden: landlords would be free to choose the price they set based on the market; in other words, based on demand.

The government’s plan would only apply to newbuilds, so previously constructed apartments would not be affected.

One of the planned changes is that location would play a bigger part in setting the price, so that housing in popular areas would go up in price. Rent would also rise each year in line with inflation.

Early in June, the government presented the results from a review into market rents, which had the stated aim of creating “a model that contributes to a long-term well-functioning rental market and efficient utilisation of the current stock”.

Why are market rents on the table?

The proposal is part of the so-called January Agreement between the ruling Social Democrat-Green government and the Centre and Liberal parties. 

After the 2018 election left neither of Sweden’s traditional political blocs with a clear majority, the government was forced to negotiate with its former opposition, and gained “passive support” from the Centre and Liberal parties. This meant that while the latter two parties are not part of the government, they agreed not to vote against the government’s formation, but in exchange they asked for significant influence on policy, resulting in the 72-point deal.

One of the points was that market rents should be introduced for newly built properties.

What are the pros and cons of each system?

The reasoning behind the current system is that it is fairer and keeps housing affordable. But caps on rental prices have also meant fewer new rental properties get built, especially smaller homes, because these are less profitable for owners.

Together with a rising population, especially in Sweden’s larger cities, this has led to a major housing shortage. Queues for first-hand rental contracts are often a decade or more, which means many people, and particularly newer arrivals to the cities, end up on second-hand contracts. In theory, these should not be much more expensive, but the huge demand for housing means people do get over-charged, and other restrictions on subletting mean these contracts can typically not last more than a year or two, creating an insecure situation for second-hand subletters.

Market rents could stimulate the production of more housing, shortening housing queues, but critics such as the Left Party and the Swedish Tenants’ Union (Hyresgästföreningen) say it will make housing more unaffordable, worsen protections for renters, and increase housing segregation.

Another concern, which was even highlighted in the government’s press conference announcing the changes, is that the new system may incentivise landlords to terminate contracts with tenants if they can find someone who will pay more, thus creating more precarious housing situations. That would be possible because rent would be set individually between landlords and tenants. The government said that “complementary proposals” would be put forward to address the concerns with the market rents.

What are the next steps?

The government will now send its proposals out for consultation, which means feedback from affected organisations will be gathered. After that, a final version would be prepared, with the aim of putting the bill to parliament in early 2022. If passed, they would then enter law from July 1st, 2022.

But before that, the government looks likely to face a no-confidence motion next week, so it remains to be seen how the outcome of that affects the planned changes. 

How would a no-confidence motion work?

In order for the vote to go to parliament, it would need at least 35 members of parliament to sign it. The Sweden Democrats said they were willing to join forces with the Left Party (which only has 27 MPs) for a no-confidence vote, but the Left has rejected their help, so the Sweden Democrats said they would submit the motion themselves.

At the time of writing this update on Friday afternoon, a majority of parliamentarians have said they’d support the motion: not just the Sweden Democrats and Left Party, but also the conservative Moderates and Christian Democrats. The latter two parties actually back market rents, but don’t support the government.

If the no-confidence goes to parliament it would need at least 175 members of parliament to vote in favour. The support of those four parties would be enough to achieve that.

Hasn’t the Left threatened to topple the government before?

Yes. The Left party are traditionally allies of the governing centre-left Social Democrats, but they were not happy about the January Agreement and the influence it gave to the two centre-right parties.

Back when the current government was being formed, the Left’s then-leader Jonas Sjöstedt was clear about his party’s new status as “the left-wing opposition”, and said they would not hesitate to bring a no-confidence motion if Löfven went ahead with reforms on for example de-regulating the housing market or workers’ rights.

Last year, the Left Party threatened a no-confidence vote over planned changes to Swedish hiring and firing laws. Ultimately, that didn’t happen because the government renewed talks with unions over the laws, and got them on board with its proposals.

The Left is in a difficult position because it aligns much more closely with the government than with the centre-right parties, but the government has moved further to the right on some of the issues that are core priorities to the Left Party.

Tune in to The Local’s new podcast, Sweden in Focus, on Saturday, as we discuss this article in more detail.

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  5. It’s strange that the new leader of the Left Party, Nooshi Dadgostar, hasn’t realised that the numbers are stacked against her. She herself has said nix to the Sweden Democrats, and there’s no way that the C, L, M and CD parties will vote with her against the government on this particular issue. So why go ahead with the threat of a no-confidence vote that is doomed from the outset? Really odd. One can understand her wanting to make her mark as the new leader, but she’s a polical featherweight compared to Löfven and Johansson and other prominent Social Democrats. She doesn’t stand a chance. Perhaps there’s an ulterior motive lurking somewhere. Will be interesting to see what happens once the 48 hours expire.

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