Opinion from a Libertarian ViewPoint

Contrary to Public Myths, Rent Control Hasn’t Been a Success in Sweden

Posted by M. C. on July 20, 2022

The average wait time for a rent-controlled apartment in Stockholm has risen from five years to nine years in the last decade and even double this in the more desirable locations. The proportion of Swedish people ages 20–27 living with their parents has been rising and is currently the highest since records began.

It’s almost like the rent controls have caused housing shortages. Who could have predicted it! Just about anyone with eyes, honesty, a passing interest in economic history, and a not entirely closed mind. Price controls have always and everywhere produced the following results.

James Murphy

Sweden’s rent control is widely touted by many who don’t understand economics as a model for how a property market should work. Young people in Ireland, for example, like to point to Sweden as a nirvana where rent control ensures easy availability of affordable and high-quality rental stock. 

I was once told by a young work colleague with strong socialist tendencies that they could move to Stockholm and get a high-spec modern apartment for a mere pittance compared to rents in Ireland. A cursory Google search, which garnered a string of news articles attesting to various issues arising from Swedish rent control, shone a harsh light on my young colleague’s fervently held, yet thoroughly fallacious belief.

Even left-wing newspapers and media outlets have had to accept (begrudgingly) that rent controls do not work. In Sweden, as in other cities with similar policies, rent-controlled apartment contracts have become valuable assets to be husbanded and exploited. Many tenants who hold the coveted rent-controlled “primary” contracts sublet properties to “secondary” tenants on the black market at rates double the rent-controlled amount

Once renters obtain primary contracts, they rarely relinquish them. Only half a percent of primary rental contracts in central Stockholm find their way back to the housing agency. It is almost impossible for any newcomers to the city to get one of the contracts (woe betide my young colleague and their putative flight to Stockholm!). People keen to jump the queue revert to a range of methods, ranging from leveraging personal networks (leverage newcomers rarely possess and hardly something a “fair” and corruption-free model rewards) to paying bribes (definitely corrupt) that can amount to several years’ rent.

As one can imagine, one class of people gaining advantage (through chance, corruption, or seniority) over other classes of people is not a recipe for social harmony. The first class’s then lording this over the others makes it worse. Another pernicious effect of the waiting lists is falling mobility across Sweden (people waiting on a particular housing agency’s list do not want to move and go to the back of another list). This lack of mobility is feeding into difficulties for employers, one in five of whom cite accommodation shortages as a major impediment to hiring staff and growing their workforces.

See the rest here

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