Rent Control in Stockholm

Here’s an interesting letter from “Stockholm” to Seattle

Dear Seattle,

I am writing to you because I heard that you are looking at rent control.

Seattle, you need to ask your citizens this: How would citizens like it if they walked into a rental agency and the agent told them to register and come back in 10 years?


I’m not joking. The image above is a scan of a booklet sent to a rental applicant by Stockholm City Council’s rental housing service. See those numbers on the map? That’s the waiting time for an apartment in years. Yes, years. Look at the inner city – people are waiting for 10-20 years to get a rental apartment, and around 7-8 years in my suburbs. (Red keys = new apartments, green keys = existing apartments).

Stockholm City Council now has an official housing queue, where 1 day waiting = 1 point. To get an apartment you need both money for the rent and enough points to be the first in line. Recently an apartment in inner Stockholm became available. In just 5 days, 2000 people had applied for the apartment. The person who got the apartment had been waiting in the official housing queue since 1989!


In addition to Soviet-level shortages, the letter writer discusses a number of other effects of rent controls in Stockholm including rental units converted to condominiums and a division of renters into original recipients who are guaranteed low rates and who thus never move and the newly arrived who have to sublet at higher rates or share crowded space. All of these, of course, are classic consequences of rent controls.

Addendum: More details on Sweden’s rent-setting system can be found here, statistics (in Swedish) on rental availability in Stockhom are here and a useful analysis of the Swedish housing crisis with more details on various policies (e.g. new construction is exempt for 15 years but there isn’t nearly enough) is here. Jenkins wrote a comprehensive review of the literature on rent controls in 2009 that echoed what Navarro said in 1985 “the economics profession has reached a rare consensus: Rent control creates many more problems than it solves.”

Hat tip to Bjorn and Niclas who confirmed to me the situation in Stockholm and to Peter for the original link.


Because rent control kept Manhattan so affordable!

Milton Friedman knows low-hanging fruit.

A more worthwhile reform Seattle and others should replicate is France's innovative delinquent rent insurance fund:

"Tenants and landlords will pay into an insurance fund against unpaid rent. If a tenant defaults, landlords will no longer have to chase them through the courts, but simply apply to the fund for reimbursement. This fund will pay the landlord upfront, then investigate the claim themselves. If the tenant has defaulted due to unemployment, illness or low income, they’ll receive rent relief (a system already in place in France). If they’re just negligent or taking advantage, however, they’ll get sued. The crucial move here is that a potential burden is taken off landlords’ shoulders, who may then consider lower income tenants less of a risk and thus take more of them on."

I think the biggest benefit is not having landlords and tenants in courts - which is a drain on their time and resources, as well as the judiciary's.

Pay your rent or get out seems simple enough to me.

@Ed Although often renters need to withhold rent (or should be withholding rent) because landlords are not providing the warranty of habitability - heat is broke in the winter, black mold, water coming into the apartment, etc.

Why not just move, in that case?

Why not enforce a contracted right ?

OOOOH Hazel, you got served!

Because moving is costly and they signed a contract?

The insurance fund for unpaid rent would sort of negate the effect of withholding rent due to the landlord's lack of maintainance, wouldn't it?


Take it all, bitch!

In practice you will move, but that takes time. In the meantime, you will be having a nasty dispute with your landlord. By the time you are out, both sides will likely want to forget the whole thing and are unlikely to try to get any damages out of your landlord. Likewise, he is unlikely to try and get any unpayed rent from you.

@French, almost never is that the case. It does happen, and that certainly is reason to, but then the rent is paid to the court.

99% of the time is that the person does not have the rent. Sometimes out of hardship, but mostly they don't prioritize what is important.

I went through a time where my one tenant was getting later and later on the rent. Found out part of the problem is that her lease was up on the Lexus and she went with a (lower end) Mercedes.

Doesn't change anything, you could move or stick around and fight it out in court while you freeze. Your choice.

I don't see the point in fighting it out. I wouldn't trust the landlord not to do the same thing again, or with respect to other issues. Just move and find a place where the landlord actually maintains the place.

Would that it were so. Many years ago, a lawyer in New York City told me that if a tenant simply stopped paying rent, offering no excuse, an eviction would take 18 months. I doubt that things are any better today, and in some places, like San Francisco, they're probably worse.

Sounds kind of like unemployment insurance, applied to rent.

The biggest benefit is that people who pay their rent are forced to subsidize those who do not. The biggest beneficiary is the insurance company.

So people who pay their rent can subsidize those who won't?

This isn't an accurate description of how the French system works in practice.

The government does provide rent relief/assistance (it's called CAF); depending on how much you make, whether you have a family, etc, they give you anything from one to several hundred Euro a month to help with rent. Obviously, the result of this is that... rents adjust upward! A 300 sq.ft. studio in the south suburbs, where I lived --- in the middle of nowhere, almost an hour away from the center by train --- cost over 800 USD/mo.

On top of that, in order to be eligible for the rental insurance, you have to earn 3x the rent; if you make less than that, the government won't cover you, and therefore the landlord won't rent to you. In other words, you have to make 2500 USD a month (well above minimum wage) to even qualify to rent that pathetically small, rent-relief-inflated, out-of-the-way place. So there is no sense in which lower income tenants benefit from this.

*south suburbs of Paris, that is

Why do we assume that this is bad for Stockholm? Or Sweden?

And I don't see much evidence of rent control. What they have is far stranger.

Has the quality of higher education improved since 1975? Why are tuitions so much higher?

@charlie - It's not 'bad' if you don't mind waiting a decade or more for an apartment. Some people don't. I do. In Greece they have an analogous situation with over-crowded court dockets, where it takes a minimum of five years to hear a simple case in Athens, and sometimes up to 20 years if the parties dig in their heels and get numerous delays.

Are the people waiting homeless in the meantime? Or living in some horrible impoverished village, waiting to start a beautiful new life in Stockholm?

In any case, it seems like the obvious solution to the problems that rent control creates with regards to supply, is for the government to step in to provide non-profit housing construction and maintenance. If there is one place that this could actually work out to not be a bureaucratic and inefficient nightmare, its Stockholm, Sweden.

The government creates a market supply problem by imposing rent control and your response is: is for the government to step in.

With statists it is Turtles All the Way Down. Every problem can be fixed via government intervention and any resultant problems can be fixed by yet more government intervention, ad infinitum.

Its not so much a question of government vs. markets, so much a question of eliminating contradicting incentive structures. Rent control in a market system eliminates incentives for private capital to invest into housing by decreasing/eliminating profits--so at that point, its absolutely ludicrous to continue to rely on private capital to be the main driver of new housing. So yeah, either eliminate the central role that private capital plays in the housing market, or leave private capital to properly process price information and react accordingly. But don't go with silly half-measures.

Arjun, when in a hole....

Of course not. We are fine, but it's frustrating. Anyone who can buy an apartment, will buy an apartment. Those who can't, are stuck with an uncertain second hand market. Some buy a first hand rental contract for $15,000. Others have to have room mates or live in old ladies houses even though they are in their 30s with careers. Other people rent the apartments that other people bought, and are paying off the mortgage for a stranger and are paying more than they should for the housing that they are getting.

We are fine ???
This was one of the reasons I left Sweden. I have met many others who emigrated because of this insanity.
If you haven't grown up in Stockholm, you're pretty much screwed as you're forced to go on the black market to pay tens of thousands of Euros for a rental contract that you could lose at any moment.
Fine ??
Seriously .. Sweden is a socialist hellhole where only rich people (with inherited wealth) can achieve a decent quality of life.
I'm so happy I left that place ..
I have lived on 3 continents and Stockholm has the most dysfunctional rental market that I have ever seen.

Justice delayed is justice denied. How is it possible for Greece to function as a modern economy if it takes five years to settle a basic lawsuit?

Or did I just answer my own question?

I don't know about higher education, but Sweden's grade school education has actually gotten a lot worse in recent years, as measured by international test scores. Most people on this blog will tell you that it can't possibly have anything to do with the country's introduction of school voucher system (and a school choice program) that uses taxpayer dollars to fund private institutions. I get it, everyone has to defend their ideology, but the truth is that we lack the data and methods to really know how big a role vouchers played in the decline in scores. One thing we do know is that the voucher/choice system certainly didn't make things better!

Well, we don't actually know that, unless everything else was held constant in the meantime. Was it? I have no clue; neither do you. But you have to defend your "everyone has a political act to grind except for Jan, who is above the fray" ideology, I get it.

I also seriously doubt that "international test scores" are a meaningful measure of anything, but that's a whole separate issue.

If you are saying that we don't know whether the voucher/choice system made things better compared to some magical counterfactual, then yes. It is theoretically possible that voucher/choice helped in some small way, but that the impact is not detectable because some other variable(s) was having a much more significant negative impact on education at the same time. However, given that there is no obvious factor that people can point to explaining why scores would take such a dive, my guess is that there were a number of small things going on whose combined impact drove them down.

I am very much agnostic on this issue. I truly believe it's up in the air whether vouchers, charters and school choice are effective for improving education overall (as opposed to something that benefits a certain subset of students). Do you have your mind made up about this topic already? What is your position?

I believe that different people have different ideas as to what constitutes the "best" education. My concept of what's best for my kids does not necessarily align with that of the school board, or the NCLB Act. And I definitely reject the idea that test scores are the end-all be-all of life, and I would never willingly send my kids to a school that is focused on standardized testing.

In all, I'd prefer gov't involvement in schools to be more akin to enforcing building codes. Right now they're acting as the construction company.

It could also be due to the bizarre new teaching methods of recent years. Compare and contrast with stolid old Finland, who seem to be doing fine. I know I've seen some hair-raisingly stupid mathematics teaching being advocated in our newspapers.

Perhaps it's due to disruptive students not being disciplined, or not subjected to anti-vouchers. (One can dream.)

Or it could be because of badly set goals.

Or the students are plain dumber, or less motivated. Some students complain loudly that they can't keep up with their multiple hobbies and so want less homework.

Perhaps the wages of being educated (in Sweden) are declining and students are rationally lowering its valuation.

Attacking vouchers seems like grasping at straws (or making political hay, your choice). Vouchers change the composition of each school's population, but not the overall student population, and the results seem to be declining overall. There seems to be no clear path to improving results by changing the school populations to, say, geographically based ones like before vouchers. (One may also recall that moving to districts with 'good schools' was done in Sweden as well as in the US, so the school populations would likely change less than a naive model would indicate.)

"I am very much agnostic on this issue. "

Cut the bull, if you were agnostic you would't have started the conversation with the comment:

"Most people on this blog will tell you that it can’t possibly have anything to do with the country’s introduction of school voucher system ... I get it, everyone has to defend their ideology"

You are more ideological than almost any other poster on the site. You are attempting to create a narrative that everyone else is ideological, but you are just an impartial observer seeking the truth. It's a ridiculous posturing given your posting history.

JWatts, you've seen me post on stuff here--I don't hide my strong views and biases when I have them. Why would I lie about in this particular case? It is objectively true that the majority of people on this blog support vouchers and school choice absolutely.

I used to lean toward the view that vouchers were a flat out bad idea, but I'm open to them out if a good case can be made for it. I don't see the evidence. And as Urso points out above, it also depends on what you think a good outcome is--should tests be the main focus?

You gotta calm down.

Jan - I also have been waiting to see what the data says and right now there is a lot of noise and little signal. My prior is that increased choice, such as charter, vouchers, etc., is beneficial but the data on outcomes is still mixed. There is one nuance I don't see much discussed though.

In contrast to public schools, charters usually have some defined criteria for their continued existence. They fall below and they get closed. Consequently, what I see happening is that the average scores can be about the same between charter and public but the standard deviation is a lot smaller for the charters. Public systems can have both great and terrible schools which produce an average (think NYC). The charters tend to have a tight SD, i.e. no terrible schools (they get closed down) but not many high performers either.

If true, I think this explains the continued popularity of charters among parents, even if the averages seem to indicate that they are producing the same results. From a parent's point of view, I would much prefer that my child attend a program where I know they will achieve at least an acceptable minimum, rather than enter them into a system where they might be very advantaged but they might also be badly disadvantaged.

Depending on your politics, Sweden's fall is either a) obviously vouchers, or b) obviously immigration

Or something else...

Only 14% of Swedish kids attend private schools and these schools have declined significantly less than their public counterparts.

So that's not it. Heavy immigration might be a cause but perhaps a greater influence is the relaxation of education methods from knowledge acquisition to student-led learning. Students spend half the amount of time on math homework than they used to for example.

Only 14% of Swedish kids attend private schools and these schools have declined significantly less than their public counterparts. So that’s not it.

No. I thought this would be obvious, but there is a model that could very much explain how the vouchers explain this. The theory is that you expect the kids who take the vouchers to be a self-selected group of smart children with engaged parents and above average test scores. This is not a stretch, because better students and their parents tend to seek out all opportunities to enhance their education. This model would have resulted in:
1) relatively higher scores for the voucher students compared to public school students (because those students were already high-achievers), and
2) relatively lower scores for the public schools (because the higher performing students have been moved to voucher schools, so aren't able to prop up public school scores)

Without having before and after test scores for all students and controlling for other factors, we just don't really know.

Does this apply to higher ed as well? Is Harvard illegitimately stealing students from UMass? Or is there a meaningful pedagogical distinction between 17 year olds and 18 year olds on this point?

That wouldn't explain why scores went down overall

Cliff's right.

Cliff, you're right. Nobody knows why scores went down overall and nobody knows why they went down less among the voucher students. The overall downward shift may be explained in part by the voucher and choice system, but it may not. One can imagine quite a lot, but nobody can prove it as far as i know with the given data.

Urso, I don't understand your point. Higher ed is not universal, nor guaranteed through public funding.

Blinkered much?

Only 14% of kids use vouchers but the curriculum is universal, and the curriculum has changed dramatically to a student-led learning model.

Why would you assume that a little bit of choice selecting a school, which only 14% do, is a reason for falling standards and completely ignore a wholesale change in teaching methodology?

This change has been responsible for falling standards in Canada too.

Chippa, I didn't assume that. Did you read my comments at all? I said it may have caused the decline in scores, as any number of other things that changed over the period may have. We don't know what caused the drop for sure, because they didn't run an experiment. Dismissing the idea that it could be vouchers or school choice out of hand is foolish though. In fact a recent OECD report covered in the article below urged Sweden to reexamine the school choice program. And funnily enough it actually blamed the growth in the student driven learning model you don't like on the shift to school choice. ;-)

Maybe school choice drove uptake of new and bad teaching models. Wouldn't be the first time a change in education policy had major unintended consequences.

Perhaps test scores fell due to immigration.

It's not just private schools in Sweden that are getting worse:

Jan, maybe this, 5% 3rd worlders hurt, and they probably make up 10% of the school age kids:

he ten largest groups of foreign-born persons in the Swedish civil registry in 2012 were from:[238]
Finland (163,867)
Iraq (127,860)
Poland (75,323)
Former Yugoslavia (69,269)
Iran (65,649)
Bosnia and Herzegovina (56,595)
Germany (48,731)
Turkey (45,085)
Denmark (44,209)
Somalia (43,966)

Oh, maybe. Do they have test scores by country of origin?

@Jan - vouchers may not be the direct cause of Sweden's education system, however, I see it being one of a handful of confounders pinned to the 600# donkey (gorilla) in the room.
The answer will be found once, if ever, Sweden breaks out test scores by race. I am quite positive that there lies a very strong correlation between increasing immigration/asylum and decreasing test scores.

"you can remove the boy from out of the trash (third world pit), but you can't remove the trash (third world mores) out of the boy"

"Has the quality of higher education improved since 1975? Why are tuitions so much higher?"

Something to do with returns :) Apparently, you were asleep the day they taught that.

You hit the nail on the head. What next: an article about how Swedish tables are dogs because they have four legs?

For argument's sake, if real estate in Stockholm is 40% overvalued, what portion of that 40% is due to the rent control system? Are the "soviet-style shortages" due to the rent control system, or other forces?

Generally overvalued real-estate doesn't cause shortages. Shortages are caused by price controls or restrictions on development.

Many rental buildings in desirable locations in Stockholm have been bought out and converted into member-owned condominiums (I hope that's the term).

It wouldn't surprise me if strong building height and coverage restrictions have something to do with it. The Stockholm City planning website is basically unhelpful, with a crappy 2003-style web GIS map, so I can't actually tell what the zoning and preservation laws are like - but it's pretty standard in Scandinavia to have extremely tight restrictions on building, especially near the historic centre of cities. In a metropolitan area of 2.2 million, there are only three buildings over 30 storeys in height. And if you look at satellite imagery, you can also see that, just outside the old city with its 4-to-6 storey buildings, there's a quick drop to single family houses on 5000 sqft lots, and apartments surrounded by huge green spaces. And there's no La Defense-type business core outside the inner city, either - so there's no obvious pressure release valve for all that demand.

Other than "Waiting for a new apartment sucks," can anyone either summarize or provide a link to a discussion on the effects of 10 year waits for apartments? Something like "lowers mobility which makes the economy less agile, but lowers crime by stabilizing neighborhoods"? I'm not saying either of those are true, but you get the idea.

Read the analysis Tabarrok linked to, esp "the reality" section

Crime. Overcrowding. Ridiculous commutes. Jobs that can't be filled. Delayed family formation. It is considered a huge social and economic problem. Most of the solutions really show markets at work...

Only a minority of people under 32 have a stable living situation (actually have a legal long-term rental contract). The rest live with family, or piece together (mostly illegal) sublets, or couch surf, or have long expensive commutes, or camp in their workplace or in a car/trailer.

Offering a sublet is somewhere between illegal and severely limited, even for people who own their own condo/coop, which adds to the problem.

As a result, it's hard even to get a sublet (legal or illegal) and prices are very high and there are, of course, no legal protections in the gray/black market. Prices are also extremely high -- there are strict controls on the price of a legal sublet, so it's normal to 'rent furniture' ( usually some kitchen junk) or have a 'key deposit' to pay the rest of the price.

A recent survey said almost 20% of women who were looking for a sublet reported being pressured to provide sexual favors in return. In practice, bringing a large (> $1000) wad of cash works pretty well, too.

Illegal sublets are often short term, so it's not unusual for people to change addresses four or five times a year or more. This increases the risk of identity theft, because social services are tied to the registered address. In one news story, a young woman reported that she had had over 20 addresses in the past four years. Her job ... administrative assistant ... in the Stockholm housing agency...

Fraud is rampant. Newspapers regularly report people handing over large sums for apartments that don't exist and warn people to try to at least see the apartment and check that the keys they are given work. Interviews with victims usually say that they thought it might be fraud, but the needed to take the chance.

There was a recent report that organized crime is getting involved in some neighborhoods....

Further out of the city, it gets easier to get an apartment. The average one-way commute for workers in Stockholm is just under an hour -- 90 min or more each way isn't unusual.

It's also (more of less) legal to rent a bedroom and not uncommon for people to pay big rent for a room that is available only 7pm to 7am Monday night to Thursday night. Friday afternoon to Monday evening has to be spent somewhere else (e.g. family in other cities).

Even well-paid professionals can't find places to live and leads to shortage of doctors, nurses, engineers, etc. Companies often have staff whose job is trying to find housing for them, even if this isn't really legal. At one point, the official home page of the US embassy had a notice saying they were looking for sublets...(maybe they do fast visa processing in exchange :-)

There are some shanty towns - students occasionally put up a tent city on campus - mostly as protest, but even at top ranked schools like KTH a fair number of students matriculate or come as PhD/post-doc or visitor, but don't stay because they can't find anywhere to live. Students are sometimes caught having dangerous numbers staying in one room. There is limited student housing, but it just means that many students start working without ever graduating, just so that they have somewhere to live (i.e. the waiting list is longer than the length of the degree course...) A number of low-tier universities from small towns advertise on the Stockholm subway -- 'we guarantee a place to live'.

There are also a few real shanty towns, but they're mostly migrant construction/farm workers in summer and Roma and the social services and Red Cross work hard to try to deal with them.

[citations desperately needed]

What will you believe? The world you see all around you, or what progressive orthodoxy dictates the world MUST look like?

How about neither, since people often see what they want to see, or what they think they should be seeing? Let's base our opinions and analysis on the facts, which must be derived from data and empirics--hence, rejecting rants by anonymous Internet comments unless backed up by data and empirics

Says the person who posts links to Jacobin.

“Waiting for a new apartment sucks,”

I don't understand why so many commenters are okay with this.

It's absolutely shocking. When I rented in New York City, I mailed a broker on Friday a little over a month before I wanted to move in, looked at apartments the day after, and had a lease signed Saturday afternoon.

Waiting since 1989??

A tale of "a protected tenancy" in London.

I suppose a 'Soviet-style' housing shortage one where people need to wait a long time to get one. Whereas a New York City style housing shortage is one where people will pay 1 million dollars for a studio.

The unspoken premise behind basically every Tabarrok post is that it's socially optimal in all situations for rich people to get whatever they want, as soon as they want it. Well, maybe.

See Hazel above:"Shortages are caused by price controls or restrictions on development."

Soviets choose one type of control and the Progressives another. As for the rich people, thank the Progressives.

As someone who has lived in a place with fairly strong rent control (Berkeley - at least 25 years ago), I can speak from experience that what happens is that very few units are actually available to lower income people or students, and those students who do get an apartment often hold onto them, even long after they are relatively rich professionals, even if it means commuting to another place (like San Francisco) when they would otherwise have moved away, furthering the shortage. (As an aside, back when it had commercial rent control (which I think has since been ruled unconstitutional - I think it was the only place in the US that ever had it), there was an occult bookstore in my neighborhood that never seemed to actually have any customers - but then again, maybe they were just invisible.)

Or they were using it as a front for hunting vampires.

Leaving your childish class warfare rhetoric aside, AT thinks everyone should be able to buy anything they can afford.
Doesn't seem that crazy to me, but then again, knowing that some people out there are rich doesn't make me angry.

"Afford" is a funny concept though. If you can afford to wait eight years, you can get an apartment in central Stockholm. Or, if you can afford to pay a million dollars, you can get an apartment in Manhattan. Why is one obviously correct and one obviously wrong?

ps- calling me childish or angry isn't a real response ;)

Or, you know, you could try to figure out how to set things up so there isn't a massive housing shortage...

Easy - move to White Plains, or its Swedish equivalent. Short of that, no matter what system you choose there's some physical limit of housing you can realistically cram in per acre. (I guess you could pave over Central Park, which would have the doubly beneficial effects of increasing supply while reducing demand.)

There is some physical limit but we are nowhere near it

According to the post, the Swedish equivalent of White Plains still has a 7-8 year waiting list for an apartment.

One critical difference there is that with the million dollar studio, there is incentives to build more. With Rent control, there is not.

The red keys on the map are "new apartments," which I assumed meant apartments under construction. There are a bunch. Should there be more?

The waiting list is decades long. What do you think?

Those new apartments have to be leased at the controlled rent price, which seriously dampens ROI and payback period on construction. Wouldn't be surprised if a government wasn't the builder in several cases.

So it's heavily subsidized "affordable housing". That's why there's no incentive to finish it quickly or build lots of it.

Renting in New York is a hell of a lot cheaper than renting in San Francisco. Which of those cities relies on a more market-based approach?

If a city wants more affordable housing, they should relax zoning rules and other regulatory barriers that don't truly protect health and safety.

The government could also simply building more housing themselves. I think Singapore has had a lot of success with this approach.

>The government could also simply building more housing themselves.

This is a key point. Although we need to also take into account the way government can replicate failures of private developers and slumlords, or even become captured by the interests of private capital--I'm thinking of the way Section 8 housing has often function in the US. The key is to develop public housing authorities that are actually accountable to 1) tenants, and 2) local communities and neighborhoods, and which have heavy communication and coordination with local businesses, schools, etc.

In the Netherlands, cities love to promote new housing, because they profit from property taxes and selling the land they bought cheap before they changed the zoning. Housing is heavily subsidized through government-supported housing associations, direct monthly payments to most renters (high rents and high incomes excepted) as well as generous income tax deductions for mortgage interest payments (leading to high property prices and the highest private debt in the world). Still, the waiting list for public housing is more than 10 years in Amsterdam and Utrecht, the most popular places to live. Only highly paid professionals can afford to rent from private owners. Middle-class homeowners in the cities complain their neighborhoods are being colonized by developers who split family houses into apartments for students or immigrants. Natives complain that asylum seekers are assigned priority so they don't have to wait 10 years. Renters tend to stay in public housing after their income rises; now the government tries to nudge them out by allowing housing associations to charge higher rent for higher incomes - yes, that means they send your income tax data to your landlord.

I'm not sure there's any system able to accommodate the demand for urbanization and the growth of single-person households. Singapore is a city-state which is able to control urbanization by limiting immigration, and seems to have problems with overcrowding and a low fertility rate related to lack of housing. Maybe the free market works well in Texas, but how well does it work in an area where the space to build new housing is limited?

An analysis of rent control in Stockholm and other cities from earlier this year: Swedish rent control experience a warning for Sydney.

Also see additional info from author (and others) in comments.

Isn't this something we figured out as a species... say... a century ago? My head hurts.

As a species, perhaps. As a subgroup of the species that gets the benefit of living there at a low price, while forcing any other entrants into the community to be people of considerably higher means, the old system is great.

The issue is analogous to Taxi Medallions. Those who got in at the start have a valuable asset, and they don't really care about everyone else.

Also young people in the community.

On the other hand, it's nice to have a huge, centrally located apartment at a ridiculously low cost.

And once rent control is in place it becomes harder and harder to exit from because existing tenants have such a strong interest in maintaining it.

A tip for people searching for apartmens in Stockholm: There are landlords (Akelius for example) that are not part of the queue system. They can not charge a higher price for the apartments but they can choose whom ever they wish, ie high income people. I got an an Akelius apartment "just" a 30 minute commute from my job (and city centre) about 3 years after I moved to Stockholm. If you make above 500.000 SEK your chances of getting one will improve a lot. That said, I don't actually live in Stockholm anymore, the apartment is in another municipality.

Ooooohhh, so instead of "discriminating" on price they can just discriminate the old fashioned way!

Obviously a Stockholm is an example of a place with a broken rent control system. Is there an example of a good rent control system?

I would imagine that a "good" rent control system would provide several mechanisms to better track the market: exemptions for new buildings, reset to market rate when new tenants move in, generous annual increase allowance (at least the inflation rate, if not more). So in everything but the hottest markets rent control wouldn't cause market distortion.

Is there an example of such a system in practice, and has it been analyzed? The exemptions for new buildings would provide a good escape valve in those hot markets provided that there aren't significant bureaucratic barriers to new builds. There are still obvious distortions and problems caused when there are tenants paying significantly below market rate, but are they worse than forcing Grandma out of her apartment?

What is the purpose of rent control?

I believe the 'good' rent control system you describe applies to San Francisco. I know you can raise rates by inflation each year, and you can charge whatever you want on a newly free unit when someone moves out. I also think buildings built after something like 1982 are not subject to rent control but I could be wrong on that. The problem in SF is even if you wanted to build a new building without rent control, you can't navigate the red tape for approval in less than 5 years

There are lots of other distortions and problems in San Francisco. All sorts of historic preservation laws, density rules, general NIMBY-ism. City Lab had a good article about this recently.

DC's rent control rules, to the extent they exist, are also of this type. I have known exactly one person with rent-controlled housing in DC ever, and I've lived here on and off for ~10 years. Housing costs here are also insane. There's an argument to be made that density rules & red tape contribute heavily here as well, although I think that ultimately a hot housing market driven by a strong and growing economy in a city with a relatively small areal footprint is always going to result in highly inflated rents.

Mandatory savings schemes to force you to buy the home after X years at an appropriate market-rate, or vacate the damn property.

The Belgian system is quite close to this:
- The basic principle is that the initial rent is set freely, except for short-term leases (which are quite rate)
- The rent can be reset to market rates when new tenants move in, and after nine years if the landlord decides to negotiate a new rental agreement. Then, it can again be reset every three years.
- Both tenant and landlord can also ask for an increase/decrease every three years, including during the initial 9 year period, if market conditions have significantly changed. They have to prove a 20% difference between the market rate and the agreed-upon rate, or 10% if the landlord has made changes that have increased the rental value.
- There are cost of living increases, based on the inflation rate.

By and large, this means that there is no significant price gap between old and new rental units, beyond what differences in quality would command.

There are still shortages in the main cities. But it's primarily due to very strict zoning restrictions (e.g. buildings can't be taller than the tallest pre-existing building) that make it very difficult to increase the housing supply in places where there are no vacant plots of land (i.e. everywhere in cities).

The irony with rent control, of course, is that it increases the cost of housing and massively transfers wealth from the poor and weak to the strong. From blacks to whites, from poor to rich, from young to old.

You assume it is an irony. I assume that it is on purpose.

Swedes are one of the most generous nations from a policy perspective. Foreign aid, domestic social safety net, etc are all very generous. Why do you think they'd design this system to intentionally transfer wealth from poor to rich? Is it purely cynicism or your ideology that makes you say that?

No. It is economic analysis. The fact is that.the Americans are no less generous than the Swedes. In each case I tend to agree with Derek regarding motivation; at a minimum it is selfishness coupled with not caring about the impact on others.

That is honestly laughable. There is no coordinated conspiracy by large groups of policymakers to design regulatory mechanisms that on their face sound beneficial to working people with the real goal that some other group will make money in the long run by slowly draining funds from the very people who think the policy is helping them. In a country that has gives more foreign aid and accepts more refugees per capita than almost any other nation and has one of the most comprehensive welfare systems in the world.

To Jan (below): Anyone familiar with the history of rent controls in New York City would know that my characterization is on the mark. The resulting "shortage" makes the argument that the controls benefit their victims easy to sell.

So, I don't know if anyone saw the Netflix 'Daredevil' adaptation, but I have to say the bad guy was one of the most sympathetic villians I've ever seen in a comic book adaptation. The show tries to make it out that he's so evil because he's offering his tenants $20,000 to vacate, and they're supposed to be nobly resisting this evil capitaist offer by remaining in their apartments - because they've lived there all their lives, and how dare the landlord try to make them move so he can demolish the building and build something else. Because I guess, in the minds of New Yorkers you have some sort of intrinsic right to keep renting the same apartment forever.

Many Progressive's aren't really progressive. Hence the adulation for a Cuba that's trapped in the 1950's and the dismay that lifting the US trade embargo, might bring modern conveniences and cars to Havana. Because having Applebee's restaurants and CVS pharmacies on every corner is clearly worse than being able to afford a vehicle built in this century.

Progressives against lifting the embargo? Where. I mean I remember when the restrictons came off there was a great howling of rage on this blog by the conservative commentariat about appeasing communists rabble rabble.

Clearly, Daredevil should fight eeevil landlords by organizing condominium conversions.

Well, he is a lawyer. It makes more sense than his blind ninja approach.

I live on the Upper West Side in Manhattan in a market-rate rental apartment. In New York City about 55% of all housing is rent controlled in one way or another so it is not surprising that nearly all my friends live in apartments with substantially below market rents. None of my friends are remotely poor and several are on the upper end of middle class. How then did they get subsidized housing? They are all smart, well-educated people who know how to play the system and several have connections too. These are all people who are ever so liberal but try to tell them that they are hogging a scarce resource that others deserve more and they become enraged.

This, to me, is the main point of leftist politics: You get to feel morally superior but someone else bears the cost.

Was the Bronx not available for comment? I'd love to see such a letter showing the burned out buildings and high crime.

As a former citizen of Seattle, and who wants to move back some day, I am horrified that people are thinking of implementing this.

Google Mitchell Lama. You will discover the same thing in NYC, but with less pretty pamphlets.

Seattle is *NOT* thinking about rent control. Seattle no longer uses Thought.

There seems to be total and absolute political consensus in Sweden that the rent control system must stay because market rents and social housing that come with free rent setting are unacceptable at any price. See below:
'Market rents won't solve Sweden's housing woes'
Published: 19 Nov 2013 17:00 GMT+01:00

"In Sweden, politicians don't set rents; they are set via negotiations between the players in the housing market. This model has likely contributed to the stability and growth in value for rental properties. If market rents are introduced, that means we also need to introduce social housing, something we in the Liberal Party (Folkpartiet) housing policy group oppose. It creates lock-in effects and segregation and becomes to an obstacle to fighting social exclusion."

- Nina Lundström, Liberal Party Member of Parliament and housing policy spokesperson

That's a false dichotomy dressed up with several misleading statements. First of all, the players in the housing market negotiate nothing. The negotiations are performed by organizations that are given the power to do so by politicians, and who are supposed to represent "players in the housing market." As for the "stability and growth in value for rental properties," I'm not sure what she's talking about. Stability means things do not change; growth means they do. As for increases in value, it is unlikely that the value of an asset is going to increase if you cap the price that can be charged for it, whether directly or by shifting responsibility onto corporatist institutions. As for stability, I would agree that fixing prices makes it hard for prices to adjust to market conditions. I don't see how that's a good thing. Then comes the bit about "social housing." The assumption here is that the current system guarantees housing for low-income people, and by getting rid of it, that guarantee would disappear and have to be replaced by a different mechanism. The assumption that the current system guarantees housing for low-income people is, however, blatantly false. It guarantees no such thing. Besides, while I agree that government provision of an entirely separate category of housing for low-income people is a problematic way to subsidize housing for low-income people, it's far from the only way. If the MP's goal is to subsidize rent for low-income people, she should just propose a rent subsidy for low-income people, like the Dutch "huursubsidie". (But please oh please not the US Section 8 system where statutes fix the amount of the subsidy and the amount spent on the program, and then you end up with waitlists and lotteries for the subsidy. And also don't emulate the rest of the Dutch system, which is just as bad a mess as the Swedish.) If she does want to encourage the construction of specifically low-rent apartments, but doesn't want the government involved in building them, she could consider the Swiss system of subsidizing private development in exchange for *time-limited* rent cap.

Personally, I think that the current Swedish policy, as well as similar policies in other countries such as The Netherlands, is a blatant violation of EU treaties on the freedom of movement of people. Nobody who doesn't already live in Sweden is going to sign up for these waiting lists. In fact, it wouldn't surprise me if one weren't allowed to, or if a mechanism simply didn't exist for doing so. This is no less an artificial limitation on labor mobility than requiring that EU citizens learn Swedish before moving to Sweden, which would be obviously illegal.

From reading the article, I suspect Sweden has problems with cartelization in the rental market and regulatory capture preventing the building of new units.

Why wouldn't the market respond to higher rents by building more rental units? The article suggests that construction companies benefit by leaving land unexploited. That would only make sense if the market is cartelized to the point that existing players can efffectively prevent other companies from constructing new housing units.

The queue time referenced in this post is only valid for resource-starved people (i.e. the poor). People with financial or other capital buy their apartments or deploy all sorts of short cuts, some legal, some more questionable. With 'market' rents, of course, poor people would have to wait forever to live in these areas.

This is not to say that the Swedish system works well, far from it. But the solution is not 'market' rents.

What's stopping the market from responding to high market rents by building more units?

You're talking about Stockholm not some ugly-ass random american city...Probably not much space to build in anyway

Dear Seattle...please implement rent controls. And $50/hour minimum wage. Please pretty please! ASAP!

Economists need more natural experiments to study. And if a city has to commit suicide in order to provide the data, better Seattle than anyone else.

Of course, I suspect Seattle city can get away with all sorts of lunacy because its legal boundaries aren't all that encompassing of the metro area. People can easily move to Bellevue or other surrounding cities, and the effects won't be too great.

Agreed, I don't think it will work but I really do want it to be tried

Well, it's just that we've got the big earthquake coming anyway, so it will be hard to measure the long term effects. IBGYBG.

(JK. The New Yorker article is mere apocalyptic fiction.)

Econogeeks should be thinking how to measure whether or not the poorest move away from the Seattle urban center to the poorer suburbs. (Politicogeeks should be measuring the network effects of passing a minimum wage law.)

The "poor" living inside Seattle are hipsters and hippies. They'd rather live in tents under a bridge, then move anywhere other than downtown Seattle (and some do in fact live in tents under the bridges)

The real "poor" don't live in Seattle. They live in Renton or somewhere around Seattle.

Still, I'd love to see that city commit suicide through such policies. Provides great data, plus I really don't like Seattle. So, two birds with one stone.

10 years ago Renton might have been low rent. I interviewed at Amazon, and the team lead mentioned he had an affordable house. I asked him where that was, expecting to hear south Kent, Auburn, or maybe Buckley. The answer was Puyallup. This for a guy that works in Downtown Seattle.

The situation is roughly the same in the Netherlands. Half the houses are owned, half rented. About 80 or 90% of the rental market is rent controlled "social housing". A given block of houses is designated as owner occupied, social rental, or free market rental; they do not flow across sectors. These are operated by corporations like utilities, and the rent is capped at levels (710 euro per month, minus a subsidy of a few hundred euros per month for those with lower incomes) which are the same across the country, i.e. in Amsterdam and in little remote villages, and independent of apartment size. To get a rent controlled apartment, one must have a reasonably low income (about 34000 euro per household per year), again independent of location.

The unsurprising result is that the "free sector" has very high rents, about equal to ownership costs, catering to the mobile and wealthy. The social housing has very long waits, of 10 to 20 years. These units (especially in some locations) are so valuable that young people dare not earn too much money while waiting. But once they have a social housing unit, their incomes may increase with little fear of eviction. Couples who may wish to separate sometimes do not so do, and those who wish to unify keep their old units. Growing families live in crowded units. Residents of social units invest in remodeling them, further reducing mobility.

All of this is tax subsidized, of course. Any proposed changes to these policies are protested as being anti-poor.

Clearly superior solutions would be means-tested rent vouchers and assistance for first time buyers.

I am no fan of rent control, but I strongly suspect (a) this article is nonsense, and (b) the long wait is for below market rate government/local council apartments.

My previous London neighbours, an Anglo-Swedish couple, moved back to Sweden a few months ago after about 4 years in London. They fixed up a Stockholm apartment in about two minutes by phone before they moved back - and it was held vacant for them, which would never happen in (non-rent controlled) London. They just rang up their old landlord who said their old place was available. And considering they are both about thirty (and she'd been to university and teacher training college in England), I don't see how they can have waited 10 years to get that apartment, lived there for a few years, then lived in London for several years.

(b) the long wait is for below market rate government/local council apartments.

Awardable housing! Surely the best sort.

Your neighbours were extremely lucky in that the apartment was available and it was a second-hand contract, meaning they pay rent to the actual owner. First-hand contracts are what this article is about.

Of course, if you're wealthy enough or able to get a bank loan, you can simply purchase an apartment but to rent one legally (first-hand contracts), the wait really is decades.

This article is factual. :(


"Your neighbours were extremely lucky in that the apartment was available and it was a second-hand contract, meaning they pay rent to the actual owner."

Who on earth do Swedish tenants usually pay rent to, if not the actual owner? I'm sure you know more about this than me, but if Swedish tenants usually pay rent to someone other than the actual owner, I suspect rent control is not the only problem.

As a 2011 transplant to NY, I feel sympathy for the native middle class getting pushed out to the outskirts. But I also agree with the view that rent control is a selfish insiders' screw everybody else move, totally unrelated to charity. It's also a convenient way for populist politicians to pretend to try.

Don't exaggerate the extent of rent control in NYC. I don't know precise #s but I'm sure the vast majority is market rent. Alnd don't exaggerate prices by quoting averages. You can still rent in safe parts of the Bronx near metro stops for close to $1.50/sf. The kids tripling up sharing because they have to live in E Village or Williamsburg are largely who complain the most that rents are through the roof.

One category is what we rent control. These are rare and amount to quasi-ownership. Rents are very low, in lower Manhattan often less than the monthly coop fee would be for a similar flat. These are heritable but only if the younger generation moves in early enough before death. So they're dwindling steadily. I would be surprised if these haven't been the motive for dozens of murders.

The second category we call rent stabilized, and breaks further into income-restricted and not. The latter are older, big buildings. The discount to market for these varies widely and may be zero, depending on when and how they entered the program and where they are. Generally lately the market has not gone up faster than allowed increases under this program, and many buildings are exiting. Non-income-restricted stabilized apartments with big discounts to market are rare. You must have high income and perfect credit to qualify, and pay for renovation yourself.

Income-restricted stabilized apartments are created through various programs that give public support to developers in exchange for a portion of flats allocated to 'affordable housing'. These are mostly middle class in lower Manhattan and inner Brooklyn and lower-middle elsewhere. Often in outer boroughs they end up actually priced at market. These are allocated by lottery, so you tend to see mainly college educated people getting the competitive ones, as blue collar aren't as keen on form-filling.

And then there's public housing. These range hugely from nightmare hellholes in outer Brooklyn and S Bronx to townhouses in the upper west side. They are heritable on similar terms as rent control. So in lower Manhattan and near parts of Harlem and E Harlem public housing flats are effectively quasi-privately family owned.

I doubt these have much effect on average rents. Without them, supply in lower Manhattan would grow and some areas would gentrify faster, especially north of near the park. Some lower income demand would shift to outer districts. Mainly it's just a bizarre waste of money and effort. My main complaint is the way public housing locks its children into underperforming schools and communities and curries low expectations. But that's not so different from Section 8 which is far bigger nationally.

There are three categories of rent control plus public housing.

Oops a little editing artefact at the end there, sorry.

I don't know if this has already been said. And it may be obvious. But I'm saying it anyway. This is thereabouts the situation for rental apartments, yes. But lots of apartments in Stockholm (as in much of the rest of Sweden) are not rental apartments, but more like condominiums. So you DO NOT have to wait ten years to move. You can move in months or weeks, if everything works out. But the prices in Stockholm are sky high, so you have to have access to lots of capital or credit. So, the relative lack of new construction is not only due to rental controls. Note that this is no defense of rental controls ...

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