In my opinion we need both. Just building more won't help me.
If I'm going to live in Stockholm (or any other large city really), I want to live in the city center. I want to walk or bike to the office, and have all the restaurants near by etc. It's very unlikely that the housing stock in the central parts of town will ever increase substantially.
I'm willing (and honestly lucky enough to be able) to pay the premium for living downtown, if market rates were imposed.
(There's an argument to be made about how abolished rent controls can increase interest by companies to build rental properties and get municipalities to issue building permits. Also that a non-negligible share of attractive rent-controlled housing is under-utilised, e.g people who don't live in them full-time but keep the contract because it's nice to have every once in a while).
But yes, we definitely need a lot more housing overall. Cheap and close/with good connections to places where people work.
It's of course expensive to live in the city center in most large European (or American) cities, this is not particular to Sweden.
> I'm willing (and honestly lucky enough to be able) to pay the premium for living downtown, if market rates were imposed.
I think this basically points out the trade-off. Right now, difficulty living in the city center of Stockholm or a large city is somewhat more evenly distributed compared to typical European countries, it unusually effects even the rich. Under a more strictly market approach the difficulty would be eliminated for the rich and increased for others.
Whether that's a net win depends who you are, of course.
> It's very unlikely that the housing stock in the central parts of town will ever increase substantially.
So one way or another there are more people who want to live there than there is housing. How is it allocated? It can be allocated by a waiting list, in which you might have to wait 9 years. It can be allocated based on the market, in which those with more ability to pay get to live there. It can be allocated based on some combination of "personal network/nepotism" and "graft", in which leaseholders of rent-controlled apartments rent them out at profit to them, or at no profit to their family and those they know.
Based on the article, the current system of course is a combination of all of those. Adjusting the portion of each of them would benefit some people and disadvantage others, depending on how adjusted.
There are some dynamic effects that might be dangerous to ignore. Like lobbying efforts for new construction might increase if there's money to made in construction of rental apartments, or more efficient use of square meters (smaller apartments/more used apartments).
But overall, yes, I totally agree. It's an allocation problem of a finite resource, with different tradeoffs.
My favourite idea, if we are going to keep the rent-controls, is to use a lottery.
What do you like better about a lottery vs the current "waiting list" system? (If we ignore the grey-area-legal sublets and market-rate-rentals that exist now and could exist or not in either system).
They're both kind of "everyone is equal, you don't get a leg up becuase of how much money you have or other status, everyone gets a chance for this limited in-demand resource" approaches, at least on their faces... the same portion of everyone interested actually gets a house either way... I'm confusing myself trying to think through the practical experienced implications of a lottery (which you can keep entering every year) vs multi-year-long waiting list. I mean, I guess obviously the lottery stops privilging those who expressed their desire longest ago/first! I'm not sure if this is good or what. I guess it would give younger people, or people who don't plan out their whole life in advance, a better chance?
(We've reached the default threading limit, so unsure if this will be visible...)
1: I don't believe there's a moral value attached to being in the waiting list. Everything else equal (completley ignoring personal situations, current housing, income etc), everyone waiting "deserves" an apartment the same amount.
2: My view is that there's actually an inverse relationship between "deservedness" (taking personal situation in to account) and amount of time waiting, especially on decade timescales. People who have been waiting for 20 years are older, have had more time to potentially save money, are arguably more likely to have a resonable housing situation. Basically they are "point wealthy", they weren't forced to spend their queuing points on a bad apartment after 8 years, they are still collecting more points waiting for the nicer ones. And the fact that they can do that, to some extent, indicate that they are in a better situation.
(2b: It would eliminate the absurd situation when people live 30 years of their life in an expensive house, collecting queue points, and then sell the house and move into a rent controlled apartment.)
3: It would incentivise/allow a centralisation of the allocation system and increase mobility between cities.
Right now each city have one or a few different queues. People are generally not signed up to all queues across the country, because of hassle and cost (each queue is like 0-20 USD / year). So if I wanted to move to say Gothenburg, I would start from zero and be years away from an apartment.
Because of this, there is no interest from anyone to create a centralised queue. If everyone joined the central queue at birth, it would be meaningless!
But with a lottery based system, a central queue would be no problem. I could just select the cities I'm interested in at the moment, and have the same chance as everyone else. I could take a "bad" apartment, because I'm still in the lottery and might win a better one to upgrade,
I just hope they never abolish the restrictions on second hand contracts. That has completely destroyed London, Barcelona, etc. - where your landlord might just be some investor in Zurich or New York.
Also allowing for more remote work, so people can do more from smaller cities.
Why isn't there more building? In most places that "need" rent control, it's because there are heavy restrictions on building. And rent control, all by itself, serves as a disincentive to build. Why should I invest in a new building when I can invest in something else that's less hassle, more liquid, etc.?
Not to mention historical controls on building, rules about shading out other buildings, onerous permitting processes that take years, potential lawsuits, the annoyance of prostrating oneself before random bureaucrats begging for the ability to spend one's own money, etc. I think I'll just go YOLO into options futures instead, or throw my money in a global index fund.
Each of these rules is well intentioned, or at least has a well intentioned sounding justification. (Often, the main force behind them is a monopolist who specializes in navigating them, and doesn't want to have to compete on an even footing in an open market.) Altogether, however, the rules make a sticky web that causes entrepreneurs to throw up their hands and go elsewhere.
Rules about building is like dessert. A few desserts is a good idea. A meal constructed entirely of dessert is not so healthy, especially in the long run. Figure out how to make it easy to build, and people will build. And those folks need to be wooed, not with sweetheart deals out of the public purse, but with a clear, easy to navigate regulatory environment. If you make it easy to compete, there will be much competition.
Overwhelmingly, though, there's no competition in these kinds of jurisdictions because powerful interests LIKE it that way. Think of those folks who spent EUR 10K on a square meter of condo. Are they going to be happy at your proposed regulatory reform that promises to quadruple the rate of building? Of course not! You are directly attacking their asset, that they strived and scrimped and worked for for years! Are they going to come out and say that? Only rarely. They are going to talk about the character of the neighborhood, or the historical significance of whatever, or the environmental impact of a skyscraper in the downtown, or make overtly racist comments about who might move into these new buildings, or anything that will rally people to their cause to STOP THAT BUILDING!
Build more? Where? Stockholm center is just islands and all of it is already built, at least the areas where everybody wants to live. Same goes for most big cities. Unless you want a skyscraper metropole.
If you want something cheap there are plenty of cheap apartments available in the suburbs.
I'm not a property developer, so I don't know how many flats they are forced to rent out as first-hand contracts when building new blocks.
You can definitely buy apartments from new blocks though, and then you're just paying the normal market price.
Second-hand contracts and commercial rentals also aren't covered by the rent controls, but I imagine the property developers can't rent them like that directly (only by selling them).
How does it do that? Are the builders typically the same as the owners in Sweden? If so, I could see that being true. But if housing builders are different than the eventual owners, the have different economic interests, and rent control shouldn't limit housing production.
Doesn't really matter who the owner is. If it costs 1 million to build a new apartment complex, and rent control means it will only return 500K in a reasonable time frame it doesn't get built. If it returns 1.5 million in a reasonable time frame it does. A builder isn't going to build it if no one will buy it, and no one will buy it if they lose money on the rent.
Rent control doesn't apply to the price of new housing, at least for any the many many versions of rent control I've seen. Rent control only limits the increases on existing housing.
The new building can charge whatever they want, they just can't depend on large increases in rent later on after their initial pricing. This same assumption, no huge rise in rents later, is also applied by financiers.
I also rent second-hand and it sucks, but I don't think things will improve just by abolishing the controls on first-hand contracts.
We just need to build far, far, far more. Especially with so much immigration.