Housing C

risis Com

mittee (Bo

kriskomm

ittn)

A FUNCTI

ONING

HOUSING

MARKET

A REFOR

M AGENDA

June 2014

A functioning housing market a reform agenda

Klas Eklund

Housing Crisis Committee (Bokriskommittn) 2014

Original: Eiserman Design

ISSN: 1654-1758www.bokriskommitten.se

Index

The mission and work of theHousing Crisis Committee 4Our message 61. Vision 92. and reality 153. Summary 31Endnotes 37

4 THE HOUSING MARKET OF THE FUTURE

The mission and work of the Housing Crisis Committee

The Housing Crisis Committee (Bokriskommittn) was appointed in September 2013 by the Swedish Property Federation (Fastighetsgarna Sverige) and the chambers of commerce in Stockholm, Western Sweden and Southern Sweden. The mission of the committee is to present concrete proposals on how not if, how the Swedish housing market should be reformed in order to function better.

There is currently a housing shortage, mainly in the metropolitan areas. There is substantial segregation and mobility on the housing market is low. The housing stock is used poorly. The directive stipulates that the committee is to primarily review the effects of the current rent setting policy and how rent control can be reformed, and secondari-ly how zoning processes, regulatory systems and legislation for hous-ing construction should be changed. The directive can be found at www.bokriskommitten.se.

We have followed the directive and in addition taken up other important questions, such as infrastructure, financing and tax regulations. We have not made as concrete and thorough proposals in these areas. It is still necessary to take up these questions too though. One key conclu-sion of our work is that one contributing factor to todays crisis on the housing market is that political decisions are made in separate silos and stacked on top of each other, without taking the whole housing market into account. A functioning housing market therefore requires significant, sweeping and concurrent reforms in several areas, as well as a broad and long-term political agreement for fixed ground rules.

Some of the proposals we are presenting result in transitory and adapta-tion costs. But our reform package as a whole will in the long term lead to an increase in housing construction, more rental flats, a decrease in black markets, an increase in employment, higher economic growth and stronger public finances without an increase in segregation.

The committee has had eight meetings, organised five seminars and published three reports. A political hearing on the committees propos-als took place in Almedalen on 2 July 2014.

4

THE HOUSING MARKET OF THE FUTURE 5

From left to right: Olle, Barbro, Bjrn, Klas, Tor, Ulrika, Sonny. Inset: Hans

Stockholm, 12 June 2014

Tor Borg, Chief Economist SBABKlas Eklund, Senior Economist SEB (chairman)Ulrika Francke, CEO TyrnsBjrn Hasselgren, PhD and Research Fellow KTH Royal Institute of Technology Hans Lind, Professor of Real Estate Economics KTH Royal Institute of TechnologySonny Modig, Housing Investigator and PunditBarbro Wickman-Parak, former Deputy Governor of Sveriges RiksbankOlle Zetterberg, CEO Stockholm Business Region

The members of the committee represent themselves; neither our cli-ents nor our employers necessarily share the opinion of all analyses and conclusions of this report. Nor does every member need to personally support every detail.

This is an English translation of an excerpt of the report by the Housing Crisis Committee; En fungerande bostadsmarknad en reformagen-da presented in June 2014 and available in Swedish.

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6

Our message:

Reform rent control, the zoning process and taxes

The crisis on the housing market is deep but it can be overcome. The proposals we are laying out in this report result in approx. 10,000 more new residential properties being built per year, tens of thousands of new jobs being created and growth increasing, the housing waiting lists get-ting shorter, the black market getting smaller and public finances getting stronger. Individuals will have an easier time finding housing.

The way to get there goes on two tracks: The mobility of the existing housing stock must be increased and housing construction must pick up in pace.

Only making proposals to increase construction is not enough. The largest economic problems come from inefficient use of housing, mobility being poor and chains of moves being blocked. This is why mobility must be increased. We propose a rent control reform and several tax changes that make it cheaper to move.

Only proposing re-regulating the rent setting policy is not enough either. In areas with a housing shortage, the rents would risk being driven up far too quickly and create social problems. We therefore propose a series of simplification measures with respect to the zoning procedure and advocate a limitation on municipalities use of their zoning monopoly.

7

Therefore and this is our main message a reform agenda that stands on two legs is required: both increasing mobility and stimulating construction.

Re-adjustment of the rent setting process should therefore be gradual. We are laying out a socially responsible and politically feasible proposal for how to do that. The right of occupation of the tenants is safeguarded, and protection from irresponsible landlords is strengthened. It is estimat-ed that the adjustment to fairer rents will take one to two years in most cities. In Gothenburg four to five years. Stockholm City Centre will take the most time ten or more years. But after that, Sweden will have a rent system that no longer creates bad lock-in effects.

A temporary housing allowance funded by a temporary wealth tax on older properties protects households with financial problems.

The deadlocks in the housing policy create growing economic problems. They can be dissolved via a prudent overall policy. This requires that rent control, taxes and zoning procedures be reformed simultaneously. This is conditioned on a broad political agreement, spanning several terms of office.

Our proposed reforms provide a reasonable balance between safety and efficiency. The Swedish political system has previously shown that it can come together for important decisions when they are really needed. Now that time has come once again!

1. Vision...

Its best to know what you are looking for before you look for it. Winnie the Pooh

Start from the end, not the means!The housing policy debate often starts with means and tools the zoning monopoly, rent control, the property tax. The pundits are generally attached to their respective positions on different tools being excellent or terrible. The means sometimes seem to be more important than the end.

The housing policy debate is therefore far too often a debate about individu-al details, not about the whole; it becomes a debate where experts in narrowly defined areas throw percentages, sections of laws and square metres at each others heads in a way that is incomprehensible to the average citizen. The media dramaturgy is controlled by looking for special interests that rant and rave at every individual proposal and therefore block serious solutions.

The Housing Crisis Committee instead wants to look at housing policy as a whole. That is why we are starting this report by stating what type of housing market we see as the goal, what we want to achieve. That is the goal and the contrast between this vision and todays reality which should determine what tools we should use, and which ones we should scrap.

First therefore, this initial chapter on how we think the housing market should work. In chapter 2, we go through how todays housing market actual-ly looks and why it does not work. In the following chapters (only partially translated), we draw conclusions on how we should move from todays dysfunc-tional housing market to the one we want.

Housing for all stages of lifeOn an ideal future housing market, housing and construction follow the needs of individual people both long-term needs driven by demographics and mov-ing patterns and more short-term needs affected by changes in income, taste, fashion etc.

10 VISION...

On such a market, there is housing of all types for all income levels. There are rental flats, houses and tenant-owner flats with varying standards and sizes in different locations. There are newly built luxury apartments with all service imaginable as well as simple rental flats that allow you to enter the market and for people with lower needs or who are looking for housing for a shorter period of time. The differences in the price and rent reflect this and are therefore greater than today.

No one needs to turn down jobs or studies any more due to being unable to find suitable housing or because you dont want to break the law. There is a large and diverse supply of housing with different forms of tenure including more owner-occupied flats in growing regions. Generous and simple rules for renting out individually owned residential properties make it easy to find temporary housing for both short and long periods of time.

The market mechanisms on the housing market function better than today, which means that supply, demand, prices and rents are in better accord with one another. The prices are set based on individual negotiations, flat by flat but whether or not the rent is reasonable can be reviewed, and once contracts are entered into, the landlord cannot raise the rent faster than inflation during the years after the agreement without cause. Re-negotiations are held in the event of exchanges, new construction and at certain intervals. Housing in high demand increases the most in price when exchanges or sales occur, which creates drivers for increased construction in these segments. Conversely, the prices will be lower where demand is falling.

Freedom of choice and mobilityOn a functioning housing market, many people buy housing, but those who want more flexibility and dont want the responsibilities of an owner can rent. It will usually be a little more expensive for an equivalent residential proper-ty, similarly to other markets. Today it is a common perception that a rental flat should be cheap, but considering the service included, it is not strange if a rental flat is more expensive than a tenant-owner flat or an owner-occupied flat with the same standard. This type of price difference is accepted on most markets.

Rental flats are also popular among young people and those starting a fam-ily who have not saved enough capital to buy yet and want to keep their debt down.

People who come to Sweden temporarily to work or do research for a few years have more options than today, since they are often reduced to buying into a tenant-owner association (bostadsrttsfrening) as their only option, or

VISION... 11

whatever their employer can arrange. A well-functioning rental market con-tributes to making it easier for Sweden to attract qualified foreign labour and investments. It contributes to better dynamics and higher economic growth. Unemployment goes down, since it is easier to move to where the jobs are.

On this ideal housing market, the process from construction idea to ready to move into flat is also significantly faster. At present, it takes approximately six years in the Stockholm Region; on a well-functioning market, the goal should be a maximum of two years. One of the reasons it goes faster is simpler regulatory systems, both with respect to zoning and construction. That and a looser rent setting policy makes housing financing work better. Residential properties are quite simply considered more attractive to finance than before. Via better regional planning and coordination of housing construction and infrastructure initiatives, the housing market functions better.

The illegal trade in leases in the big cities has disappeared, thanks to the well-functioning market. The housing marketplaces rarely have long waiting lists, since the rents are better adapted to households willingness to pay, and since the supply of available housing matches demand well. Both long housing waiting lists and black markets have thus been eliminated.

Functioning chains on the housing marketOn the housing market of the future, it is both easy and cheap to move from one residential property to another. It is common for households to change forms of tenure. Turnover on the housing market is higher and the housing stock is used more efficiently. The chains connecting residences for households as they move, which characterise a functioning housing market, are more coherent than before, when they often were broken up due to rules for different parts of the housing market. They are also legal, because illegal exchanges have disappeared.

Young people, students and newly formed families have the ability to get into the housing market and get their own place to live. For most people, their first flat is cheap and fairly simply equipped. It is probably not in the city centre. But it is a first step in, and as their income and savings increase and the family grows, it becomes possible to trade up for better and more expensive housing. Those who need short-term housing at another location, or who simply do not want to be responsible for or cannot prioritise ownership at the time, will thus find cheap rental properties in the housing stock under a head lease or sublease.

Far from everyone can afford or want to seek a brand new residential property, but many households still want to try that out. Many of them take

12 VISION...

the opportunity to trade up, even if they perhaps already have a pretty new property. For families in a housing career it is also the case that those with rising income will get the opportunity to get housing in a better location, if they wish. Lots of residential properties are also sold to first-time buyers who have saved up starting capital or receive financial assistance from parents or relatives.

Many who live in an older property that has become too tight, too big or perhaps is in a somewhat worse location also take the opportunity to trade up, and thus leave behind an older but still good property. The available residen-tial properties are taken over by families looking for better housing, but who cannot afford or do not want to buy something brand new. They often leave behind older and sometimes cheaper housing.

By adjusting the prices of these residential properties to consumers willing-ness to pay, there will be a balanced supply of both new and used residential properties. No one needs to wait on a waiting list, if they dont have special preferences and therefore voluntarily choose to wait.

Social protectionThe housing market is in many respects a market like others where buyers and sellers meet and the price is set so that demand matches supply. But a residen-tial property is a commodity that is especially important perhaps the most important of all for many people. You would be hard pressed to neglect it if you want to live a normal life.

Even on a functioning market, the buyer or tenant tends to be the weaker party, for precisely this reason. Even on a future ideal housing market, strong consumer protection is therefore required when renting or buying housing. There will also continue to be a regulatory system that provides strong security of tenure. Contracts on the rental market will also be subject to judicial review in the future. And for tenants that have entered into a rental agreement, the landlord cannot raise the rent whenever he/she wants.

The housing policy enables the state and the municipalities to balance different interests in the future as well, such as the flexibility preferences of the builder and the landlord with the safety and predictability needs of the residents. They provide public assistance for finding housing to the weakest groups. The supply of residential properties for students and senior citizens matches demand.

On a future housing market with strong social protection, the present segregation can be reduced. The present housing policy tends to increase the difference between areas via rigid pricing, rent control and lock-in effects. A

VISION... 13

functioning future housing market instead has more diversified residential areas. Conscious planning combined with a better functioning housing market leads to areas being built that are accessible to different types of households, with different incomes and different housing preferences. The housing compa-nies cooperate with the municipalities to provide households with social pri-ority housing in different areas without putting together welfare-dependent households in special areas. With more diversified residential areas, the level of public service can also be more equal, in different areas as well.

This is the kind of housing market we want to have. This vision and how we are going to get there has been the guiding principle of the work of the Housing Crisis Committee.

2. and reality

The Swedish housing market is currently far from the ideal vision sketched out in the previous chapter. Construction has been low for several years, and a high proportion of Swedens municipalities are reporting housing shortages. The existing housing stock is being used inefficiently. The shortage of rental flats is particularly large, which contributes to the prices of houses and ten-ant-owner flats in attractive areas being pressed up. Household debt is increas-ing. The housing waiting lists are long. Many young people have trouble even getting into the housing market, and Swedish companies have trouble getting housing for foreign experts and employees only living in our country tempo-rarily. It is expensive and a hassle to create functioning chains on the housing market. The black market is extensive, although difficult to quantify.

All of this creates problems and difficulties for individual households but also reduces Swedens economic dynamics. The development of growing regions is being slowed down and the result is slower growth in incomes and jobs. Employment is brought down. The social economic costs are substantial and they will be even worse if the dysfunctional system continues during an economic upswing when the pressure on the housing market increases.

Growing housing shortageThe fact that Sweden as a whole is suffering from a housing shortage is obvious. In Figure 1, you can see a sharp falling curve of flat construction. The bulges are the periods of subsidies and speculation. The Million Programme in the 1960s and 70s (the extensive housing construction pro-gramme in Sweden during the 1960s and 70s focused on construction of 1 million flats, dependent on heavy government subsidies), can be seen clearly, as well as the period following the deregulation of the credit market in the late 1980s when many took the opportunity to take out loans with subsidised terms and the accompanying crash landing.

16 ... AND REALITY

Figure 1. Number of finished residential properties 1958-2013

Source: Statistics Sweden (SCB)

Putting an exact number to the shortage is not that easy. Surveys can exag-gerate the problems, while more strict financial definitions can be designed in different ways.

The Swedish National Board of Housing, Building and Planning (Boverket) has investigated the housing crisis in economic terms. The housing crisis is defined as the shortage of housing in proportion to demand with purchasing power, i.e. not how many residential properties citizens, municipalities and companies would like to have in general. More specifically, the housing deficit is defined as the difference between todays housing stock and what would be required to eliminate excessive housing prices. Excessive price in turn means price increases exceeding the price increases caused by population growth. By this definition, the housing shortage would therefore be the shortage that is not dependent on population increase per se. Instead, it would be the shortage due to the housing stock not increasing in proportion to increased incomes, low interest rates, urbanisation and changed preferences.

Calculated in this manner, the 2012 housing shortage totalled 156,000 residential properties, with just over half, approximately 86,000 in the three metropolitan areas. There were excesses of a total of 7,000 residential prop-erties in some of the depopulating municipalities. The important point here is that there is a big shortage, even in narrower economic terms, and that it is not limited to the biggest cities. In addition, the housing shortage is rising

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... AND REALITY 17

fast. According to the definition of the Swedish National Board of Housing, Building and Planning, it has emerged over the past ten years. There was a balance as late as in 2003.1

Major regional shortagesIf we instead use the municipalities own calculations as a basis, 126 munici-palities reported having a housing shortage in 2013. As much as 67 percent of Swedens population lives in municipalities reporting a housing shortage. Only four percent live in municipalities with excess housing. The balance has tipped toward shortage quickly. In 1994, only three percent of the municipalities reported having a housing shortage, while nearly 70 percent of the municipali-ties reported that they had an excess.2

There are big differences between different cities and regions. In the late 1990s, nearly 50,000 flats were empty. Between 1998 and 2005, the munic-ipalities received government grants to demolish over 20,000 residential properties. Since then, the economic and demographic trend caused a sharp increase in the demand for housing in growing regions.

Over the past years, housing construction had totalled approximately 20,000 units per year. In comparison to the population increase, that is a very low number, see Figure 2.

Figure 2. Housing construction and population increase 1969-2013

Source: Statistics Sweden

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18 ... AND REALITY

The gap between population and construction is especially substantial in the big cities. In the Stockholm County, the population has increased by approx-imately 35,000 per year over the past years, but the number of finished flats has only been approximately 7,000 per year.3 The conditions are similar in the Greater Gothenburg Region. The population has increased by approximately 10,000 per year over the past years, but the number of finished residential properties has only been approximately 2,000 per year.4 In Malm, the popu-lation is increasing by approximately 5,000 per year. The number of finished residential properties in 2013 was approximately 1,000.5 In all three of the metropolitan areas, the increase in the number of finished residential proper-ties was thus only one fifth of the population increase.

Fewer and fewer rental flatsTotal construction has not kept pace with population growth. At the same time, a dramatic change has taken place within the housing stock. The proportion of tenant-owner flats has seen a large increase over the past 20 years, while the proportion of rental flats has fallen. Since the beginning of the 1990s, the number of tenant-owner flats has increased by approximately 50 percent, while the number of rental flats has stood still.

The gap has further expanded over the past decade. Between 1997 and 2012, the number of rental flats fell by 94,000, while the number of ten-ant-owner flats increased by 234,000. Approximately 110,000 rental flats were converted into tenant-owner flats in the first decade of the 21st century in Stockholm County alone.6 16,000 flats were converted in Skne (in the South) and 20,000 in Vstra Gtaland (in the West) in the same period. In both cases, this was more than the number built in the same period.7

... AND REALITY 19

Figure 3. Change in the proportion of rental flats in blocks of flats in Greater Stockholm

1990-2012, in thousands

Source: The Swedish National Board of Housing, Building and Planning, Market Report May 2014: Lst lge p Bostadsmarknaden [Deadlock on the Housing Market]

The young and the old dominate among those living in rental flats. The rental flat is in other words still an important path into the housing market for younger households. Over 50 percent of people aged 25 to 34 rent, after that the pro-portion of renters falls rapidly as incomes rise and children enter the scene. Upon retirement, only just over 20 percent rent their flat. However, older pen-sioners without live-at-home children, but with a need for service, often live in a rental flat. For the 85+ category, the proportion of renters has risen to nearly 50 percent.

In other words, the rental flat has important characteristics that make it attractive for different categories of residents. The rental flat is also still impor-tant in the big cities, where over one third rent their housing. In smaller cities, the proportion of renters is only one fourth.

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20 ... AND REALITY

Shortage of rental flatsMunicipalities that have a balance or even a surplus of residential properties in total report a shortage of rental flats.8 The number of municipalities report-ing a shortage is also increasing; in 2013, 246 municipalities, or 85 percent, reported a shortage of rental flats. The year before, the number was 242 municipalities.

There are plans to build in just about all of the municipalities with a short-age of rental flats. But a majority of them still are of the opinion that they need to build more than planned, in consideration of the high demand. The flat size mainly lacking is one and two room flats with kitchens.

Just under one third of all municipalities estimate that they have a short-age of tenant-owner flats. Just over half of the municipalities in Greater Gothenburg and just as high a number in the smaller university municipalities report a shortage of tenant-owner flats. In Greater Stockholm, the number of municipalities reporting a shortage of tenant-owner flats is just over 40 per-cent. In particular, the municipalities report that they are lacking residential properties with three rooms and a kitchen. The demand for small flats with 12 rooms and a kitchen has also been increasing for several years.

Only 17 percent of the municipalities report a shortage of owner-occupied residential properties. The number of municipalities reporting a shortage of owner-occupied flats has fallen from 93 municipalities in 2010 to 50 munic-ipalities in 2013. Just under half of the municipalities in Greater Stockholm report a shortage of owner-occupied flats. In Greater Malm and the smaller university towns, approximately one fourth of the municipalities report a shortage of owner-occupied flats.

Long housing waiting listsOn 31 December 2013, there were 431,144 people on the housing waiting list in Stockholm. The increase was 32,000 people or eight percent last year. This is to be compared with the fact that the Stockholm Housing Service finds flats for only about 10,000 households per year.9

Of those on the housing waiting list, approximately 14 percent are active, defined as people who submit five or more interest applications per year. In spite of the fact that the housing waiting list is growing, the number of active people is decreasing. 84 percent of those who are on the list already have some form of housing arranged, such as their own head lease, their own tenant-own-er flat or their own house, or they live with their parents. One third of the people on the housing waiting list report themselves that the reason they are on the list is as insurance for the future; i.e. many people get on the housing

... AND REALITY 21

waiting list to be on the safe side without actually needing housing now. But even if you only count those who are active, the statistics show that there are few rental flats in proportion to demand.

The average waiting time for the housing waiting list in the City of Stockholm has increased sharply in recent years. In 2009, the average waiting time at the Stockholm Housing Service was just under five years; in 2013 it was over eight years. In the city centre Sdermalm, Kungsholmen and in Vasastan the waiting time is 1617 years. The Stockholm Housing Service finds so few flats for people on the housing waiting list in stermalm, another attractive city centre district in Stockholm, that it does not even present any statistics.

Waiting times have risen in the suburbs as well. In Tensta, a Stockholm suburb from the Million Programme, the average waiting time in 2009 was just over three years. In 2013, it had risen to nearly six years. In Vaxholm, a small municipality north of Stockholm, the waiting time rose from under three to nearly seven years in 2013. In central Sundbyberg, a popular municipality close to Stockholm, the waiting time is 20 years. The average waiting time for all of Stockholm County is 7.7 years.10

The waiting time is substantial in Gothenburg as well. Boplats Gteborg is a marketplace where those looking for housing and those who are offering hous-ing are to be able to find each other. The registered number of people looking for housing is nearly 200,000. The pressure on the rental market can be illus-trated by the fact that over 900 applicants went to each flat among the 8,000 listed in 2012. The average waiting time was three years in the city centre and between one and two years in the suburbs. The waiting time for a student flat was approximately three years.11 There are however large variations; the medi-an registration time in the most attractive areas can be over seven years, while the waiting time in less attractive areas can be under one year.12

In 2013, approximately 39,000 people were registered on the waiting list of Boplats Syd, a housing service for Malm. The waiting time is an average of two years, which is shorter than in Gothenburg and Stockholm.

Segregation getting worseOne argument for the social housing policy in general and rent control in particular has been the wish to counteract segregation. Many fear that free pricing would result in people with high income getting to live better than those who have low incomes.

For houses and tenant-owner flats, this is however accepted. There is no price control there; whoever wishes to and can pay the most can buy the res-

22 ... AND REALITY

idential property in question. With rising housing prices, low-income house-holds and young people without wealthy parents have therefore had a tougher and tougher time getting into the home ownership market. On the other hand, there is price control on the rental market the negotiated use value (bruksvrde) of the flat determines the rent, not the willingness to pay.

The idea of this price control is that everyone should be able to afford to rent even the attractive rental flats. But if the housing supply (such as in the city centre of a growing region) is insufficient for the entire demand, the hous-ing must still be rationed divided up in some other way besides willingness to pay.

One common mechanism is rental waiting lists via the housing service. When this is insufficient, other channels become important, such as contact with relatives and friends, or the black market. The connections are obvious: extremely long waiting times for attractive areas lead to many trying to get around the waiting lists via contacts or buying past them via the black trade in leases. People who do not have contacts or are unwilling to break the law are stuck with the waiting lists. This creates segregation although in a different way than free pricing.

Rent control is a blunt instrument for redistribution. The controlled rent benefits everyone who gets a hold of a flat not just low-income households. Several studies have analysed the effects of rent control on segregation, both with respect to income and ethnicity. The conclusion is that rent control does not stop segregation at all. Several years ago, people living in rental flats in the stermalm district of Stockholm made just over twice as much as those living in rental flats in the Sdermalm district, another city centre district in Stockholm. The study found that segregation on the basis of income was actually higher for rental flats than for tenant-owner flats. In the same manner, there is a clear connection between origin and an attractive housing address among the rental housing stock, while this does not apply to tenant-owner flats to the same extent. Ones country of birth makes a bigger difference for where one lives when living in a rental flat than when living in a tenant-owner flat.13

Economists at Uppsala University came to the same conclusion in a study that attempted to analyse the effects of the use value system on segregation among the rental housing stock: In essence, the results mean that the typi-cal resident of a rental flat in Stockholm City Centre is highly educated, is a native of Sweden, is old and has a pretty high income, while the population in the suburbs consists to a greater degree of households with small children and immigrants. This pattern is not as distinct on the tenant-owner flat market... Since the use value system generates a flat rent structure, this indirectly results in a subsidy for those living in the city centre. This subsidy is geared toward

... AND REALITY 23

older, highly-educated households without children and without immigrant backgrounds.14

One argument for rental control that is often raised is that we thus can avoid social housing special houses or areas for people with subsidised housing. Social housing exists in several countries (see next chapter), but Swedish poli-tics has rejected this type of policy as segregating and stigmatising. Such spe-cially designed housing areas therefore do not exist on paper in Sweden. But in reality, the combination of rent control and a poorly functioning labour market has resulted in certain areas in the suburbs of the big cities becoming environ-ments with a high number of unemployed people. Reliance on government assistance is high and social security benefits are common. Social housing has in this sense de facto come in through the back door, as a by-product of housing segregation and high unemployment.

The conclusion is that rent control has not achieved its goals. It has been unable to stop segregation with respect to income while possibly aggravating segregation with respect to origin. First and second generation immigrants are put at a disadvantage. Rent control thus does not achieve the goal often cited as the main argument for its existence.

Black marketsLong housing waiting lists tempt many to go via the black market instead. There are several studies of widespread abuse in this area. Numbers involv-ing black trade are by definition uncertain, but various estimates still make a strong case.

The Swedish National Board of Housing, Building and Planning divides the black housing market into three parts: unauthorised subletting, trade in leases and fraud.15 The unauthorised subletting probably occurs often in areas where it is difficult to get a head lease; the harder it is, the less willing those who have such a lease are to terminate it traditionally and allow the flat to go back to the landlord. Instead, the person in question sublets it, sometimes at an excessive rent. The Swedish National Board of Housing, Building and Planning has not even tried to state how extensive this part of the black market is.

With respect to trade in leases, the Swedish National Board of Housing, Building and Planning also neglects to try to quantify the extent. There are no official statistics in this area. However, the Swedish Property Federation has made an attempt with owners on the private rental market in Stockholm via a survey. In 2006, it was estimated that the black trade in Stockholm City Centre turned over approximately SEK 660 million. For three major muni- cipalities in the Stockholm Region; Stockholm, Sundbyberg and Solna, it was

24 ... AND REALITY

estimated that the total turnover of black leases amounted to SEK 1.2 billion.16 It should be underlined that the numbers of this study are very uncertain.

Figures from studies with the same methodology are unavailable for later years. The Swedish Property Federations estimate is however that total turn-over has increased. However, the number of leases entered into has decreased due to low construction rates and conversion to tenant-owner flats. But the price per lease has risen sharply.17 This data is also uncertain.

In Gothenburg, Boplats Gteborg has polled residents, with the results indicating that the lock-in effects have increased, which results in fraudulent exchanges and unauthorised subletting with illegal additional rent charges.18 The South Sweden Property Federation (Fastighetsgarna Syd) has conducted a poll in Malm, which shows the same type of problem, with increasing trade in black leases but with uncertain figures.19

In both of these parts of the black rental market unauthorised subletting and trade in leases the parties involved, both the buyer and the seller, have something to gain from the deal. That is why there is very rarely a report to the rent tribunal or the police. There is also a third category in the Swedish National Board of Housing, Building and Plannings analysis, which is pure fraud. One example of this is when rental flats at attractive addresses put on housing exchange forums on the Internet become an arena for fraudsters. There are police reports and a variety of investigations here, but there is a large number of unrecorded cases; we dont know how large a number of fraud cases reach the surface.

In summary, there are no estimates of the extent of the black market that are certain. However, the Swedish National Board of Housing, Building and Planning believes that a reasonable conclusion is that it is affected by the housing shortage and poor mobility on the housing market. The increasing housing shortage can therefore be assumed to result in an increase in the black market.

Growing problems on the labour marketThe housing shortage in growing regions has become a major economic problem. All sectors are having greater difficulty recruiting staff. The public sector has recruiting problems due to the housing shortage, in sectors such as the healthcare sector. Recruiting foreign experts is particularly problematic. In a recent investigation, as much as 70 percent of foreign expats in Stockholm state that it has been very difficult to find housing; another 14 percent answered that it was difficult. The housing shortage was thus the biggest obstacle for qualified foreign labour to overcome.20

... AND REALITY 25

For newly started and fast growing companies, the housing shortage is a significant impediment to growth. Two thirds of start-ups in Stockholm say in a survey that the housing shortage causes problems for them; they have trouble attracting people to Stockholm, and also have trouble retaining staff. Stockholms housing problem is flagged as a serious international competitive disadvantage for startups.21 If we look at already established companies, nearly one third of the fast growing small businesses (599 employees) have at some point had difficulties recruiting due to the housing shortage. Every fifth grow-ing companies has failed to recruit staff due to the housing shortage. More than one fourth report that it takes a longer time to recruit due to the housing shortage which delays investments.22

These are the companies where most new jobs are created. In other words, the housing shortage directly impacts employment and skills supply and thus also growth and competitiveness for Sweden as a whole.

Quantifying the impact on employment is however difficult. One of the few studies that was bold enough to take on this task came to the conclu-sion that unemployment for the country as a whole would be 0.3 percentage points lower if job applicants moved to counties with more open positions, but the housing shortage impedes moving there. Employment could simul-taneously increase by three percent.23 However, the study only answers the question of what greater mobility on the labour market means in light of the jobs currently available. It does not say anything about the more long-term effects on growth and job creation a better functioning housing market would have which is significantly more important. The recent Social Democratic Research Committee for Labour Market Reforms (Socialdemokratiska Forskningskommissionen fr arbetsmarknadsreformer) is one of several com-mentators who asserts that a new housing policy including a reform of rent control would be positive for employment in Sweden.24

This is something that has been pointed out in several international studies and comparisons of Sweden in the past years. For example, the OECD underlines the poorly functioning housing market as a threat to dynamics and growth in its most recent review of the Swedish economy and recommends a series of measures market rents, simplified construction regulations, intervention against weak competition, tax changes, etc. to deal with these growing prob-lems.25 The same is recommended by such diverse organisations as the EU26 and the World Bank.27

The risk is obvious that the problems will get even worse in the event of a future economic upswing. Swedens economy has grown slower than usu-al over the past years. The main reason is the repercussions of the financial crisis and a weak export market. Investments have been repressed and unem-

26 ... AND REALITY

ployment is high. If problems on the housing market persist, this will delay and obstruct the upturn expected in the coming two years according to most economic commentators.

In the long term, the task is even more important. The demographic projec-tions indicate continuing rapid urbanisation. Stockholm County is expected to grow from a population of 2.1 million to 2.5 million in 10 years and 2.8 million in 2030. A population increase of 100,000 is already expected for the City of Gothenburg by 2020, and the City of Malm is expected to grow by approximately 40,000 in the same period.28 Accommodating this population increase with the present poorly functioning housing market will be a difficult challenge. This will probably require wider regional commuting and costly infrastructure investments. In the long term, completely new construction and transport solutions are needed.29

Continuing low construction and a shrinking number of rental flats would have strong negative effects in this context. The gap between population and construction would be made even wider. Matching jobs and skills would be made difficult. Therefore, the housing shortage in general and the rental flat shortage in particular have clear negative effects on the labour market and skills development.30

How could things go so bad?The conclusion is clear: The social and economic costs of the housing crisis are already substantial now and will increase in the future. This poses the ques-tion: How did things get so bad? None of the people who made the housing policy decisions were aiming for this situation. The crisis is a result of a long list of political decisions and market effects, which have piled on top of each other for years, without anyone paying attention to the big picture.

The demand for housing has increased, driven by population growth and rapid urbanisation. The rate at which people are moving into the cities in Sweden is faster than in almost all other European countries. One reason for this is the growing immigration. Another is a substantial change in our living preferences. One generation ago, people were moving to the suburbs; few families with children wanted to live in the city centre. These days, more households have two people who are gainfully employed and city centre living is more attractive, even if that leaves fewer square metres per person. Increased demand and rising willingness to pay is pressing up housing prices.

In the context of this increasing demand, there are several growing imped-iments on the supply side: Rent control, the bureaucratic zoning process etc. and the fact that the state has abdicated from its past leading role.

... AND REALITY 27

Until 30 years ago, housing policy played a central part in the development of the welfare state in Sweden. Cheap and functional housing affordable for everybody became a cornerstone in the building of the Swedish welfare state Housing policy was dominated by cooperative ideology for a long time, where the joint responsibility and savings of the residents played a key role. In the post-war period, the cooperative approach was replaced by the state and the municipalities taking greater responsibility. Rent control, housing assistance, municipal public housing companies, environmental programmes, capital market regulation and interest deductions became key words in the devel-opment of housing policy from cooperative and self-determination to a state macro policy for housing construction and financial regulation.

In the Million Programme of the 1960s and 70s, the state directed the nations savings to housing construction via regulations. Banks and insurance companies were forced to buy prioritised housing bonds with low return on investment, which was a form of cheap financing for construction. This sub-sidy policy culminated in the beginning of the 1980s as the domestic interest rate and credit market regulations were combined with extensive subsidies directly to residents: first mortgage loans at guaranteed interest rates and state subsidised second mortgage loans. People who were lucky enough to partic-ipate in these support programmes literally got paid to live in their housing. Property prices rose, driven by all the subsidies, while inflation and the right to deduct interest impaired loans and loan instalments. And due to the extensive subsidies, the market became less sensitive to poor construction quality and unjustified construction price increases.

The system eventually became unsustainable. This created high economic and budgetary costs, and distortions of resource-allocation, while it contrib-uted to debt and counteracted savings. A grey, unregulated credit market emerged alongside the credit market regulations.

A system shift therefore was pushed through in the second half of the 1980s. It occurred gradually, by governments with different political per-suasions. First, domestic de-regulation of the credit market came in the mid 1980s, which pulled the rug out from under the state plan economy on the credit market with a special position for the prioritised loans for housing construction. In 1989, the currency regulations were abolished, which was a pre-condition for control of the domestic credit market. Then the major 1990 tax reforms came along, as the value of the interest deductions fell radically. Reduced subsidies for household loans followed. The public housing sector was given tighter frameworks, given that it was forced to build up its own invest-ment capital. EU membership additionally resulted in Sweden committing to not re-regulate the credit market.

28 ... AND REALITY

The financial risk of housing construction was thus privatised with the major parties in agreement. It was moved from the state to the companies (housing and construction companies) and households, as it is on most other markets and in just about every country. It is now up to private companies to provide consumers with the goods and services desired, without the state going in and taking special financial responsibility for providing the service in question.

While this was happening, the macroeconomic conditions changed. Sweden went from high to low inflation, which meant that high inflation no longer ate up the real value of mortgages. This type of indirect subsidising of housing thus also disappeared, with visible subsidies disappearing at the same time.

Rigidity is blocking the housing marketThe state has thus relinquished control of financing and risk on the housing market. But the policy has not drawn the full conclusions of the system shift it itself initiated. While the financial risks have been privatised, central parts of the regulatory system have been preserved as they were during the previous, state-dominated period. In some cases, the policy, e.g. in terms of taxes, has made it even harder for the markets signals to get through. The price signals coming from the increased demand which should have led to increased con-struction are being blocked: Rent control prevents the price signals from getting through to the supply of

flats. It blocks chains of moves and slows down mobility. The recent attempt to loosen up regulations with rents better adapted to market conditions in newly built properties has not been very successful (see next chapter).

Rent control is also the main reason for the large number of conversions from rental flat to tenant-owner flat. A property will be worth much more if its flats become tenant-owner flats than if they remain rental flats, because the controlled rent keeps revenues down. It is therefore more profitable for the property owner to convert them and sell them as tenant-owner flats.

The zoning process for construction is long, bureaucratic and larded with appeals. The municipal zoning monopoly delays the market getting through. Special municipal requirements and conflicts with formal national inter-ests according to the planning legislation sometimes with an unclear value make construction more expensive.

The infrastructure is insufficient and is often planned on a different level than the level where housing is planned.

... AND REALITY 29

The combination of moving taxes, interest deductions and abolished proper-ty tax has perpetuated inefficient and uneven taxation of different forms of housing, while mobility on the market has been limited.

The total demand for housing has risen via population growth and rising incomes. But at the same time, the reduction in subsidies combined with rising prices for tenant-owner flats and a lower number of rental flats has made it increasingly difficult for low income households to find housing. The result is a housing market that is characterised by both lacking mobility and too low construction.

We are deeply critical of the lack of an overall perspective. Sweden no longer has a coherent housing policy instead there is a muddle of inconsistent measures, which are short-term, mutually contradictory and often driven by special interests.

What should be done?The gap between vision and reality leads to clear conclusions about what should be done. Two main tasks need to be tackled: Mobility on the housing market must be increased. Rent control

should be reformed so that rents better reflect supply and demand. This is necessary to reduce the lock-in effects of the existing housing stock. This adjustment should be followed by social protection measures to reduce the transition costs for low-income households. The tax system should be reformed simultaneously. Todays combination of low current housing prop-erty taxation and high capital gains tax creates lock-ins for tenant-owner flats and houses. Therefore, the capital gains tax should be lowered and a low, simple property tax should be reintroduced. In chapter 3 (summarised in the next section), we present our proposals for how this is to be done.

Housing construction must be increased. Regulatory changes simpler zoning and construction regulations, a reduction in the rights for municipalities to limit and block construction with special regulations are necessary to be able to speed up construction processes. Pressure on the construction sector to raise productivity should be tightened and competition should increase. Infrastructure and housing construction should be planned jointly in a more constructive manner. Financing and tax issues should be overhauled to ensure that those living in rental flats are not put at a disad-vantage. Our proposals in these areas can be found in chapter 4 (summa-rised in the next section).

30 ... AND REALITY

This is a broader approach than what is usually taken in the domestic housing policy debate. However, external analysis from organisations such as the EU, OECD and IMF have the same type of overall approach. It is striking how international analyses of the Swedish housing market emphasise rent-al control, distorted taxes and complicated zoning provisions31 while the domestic debate prefers to avoid tackling the very special Swedish version of rent control.

We would like to underline that these various reforms are conditioned upon one another: If rents are adapted to market conditions without regulatory simplifications

and increased construction, there is a risk that the supply of housing will respond too slowly; in that case, rents may be driven up quickly in much of the market. Increased construction in growing regions in turn cannot take place without expanded infrastructure and better functioning public trans-port. Property tax and capital taxation affect the relative prices between different types of housing and have clear effects on household demand, as well as the financing of construction. The tax system must therefore also be overhauled as the regulatory systems are rearranged.

But it is not enough to only increase construction. The greatest economic costs of the poorly functioning housing market comprise inefficient use of the existing housing stock.32 Rent control creates lock-in effects in the rental housing stock and high capital gains taxes do the same for owner-occupied properties and tenant-owner flats. The chains are being blocked. Since the housing stock includes over 100 times more residential properties than what is built per year, it would take far too long to fix the problems just by building new properties. It is also considerably more expensive to build new properties than to implement measures to counteract the poorly functioning housing market. Inefficient use of the housing stock therefore must also be tackled. The bottled up chains must be opened.

This is our main conclusion of the analysis of the gap between reality and vision. Different political areas must cooperate to together contribute to make it possible for the vision of a well-functioning housing market to be achieved. It is therefore not enough to just build more or just reform rent control. The following chapters lay out our proposals (summarised in the next section) .

Summary

1. Vision

The Housing Crisis Committee strives for a housing market with housing of all types and for all stages of life. Where there is mobility and where zoning pro-cesses go quickly. Where housing with different forms of tenure are available for different wallets.

We want to see a housing market where residents have great freedom of choice in terms of prices, locations and forms of tenure. We want to see functioning chains of moves and more extensive housing construction. A market where housing waiting lists and black markets have disappeared.

We want to see a housing market where housing is attractive to invest in and where financing of construction functions well. Where the process from con-struction plans to move-in is fast and non-bureaucratic.

We want to see a market where residents have strong security of tenure. Where leases on the rental market can be tried in court.

We want to see a housing market where segregation is lower than it is now. Where municipalities and property owners cooperate to distribute social priorities in a way that does not lead to heavy concentration in specific areas. Where newly built areas are planned in such a way that they are available to different types of households, with different incomes and preferences.

2. and realityThe Swedish housing market is currently far from the ideal image. The hous-ing shortage is widespread, housing waiting lists are long and the rental market is in crisis.

The shortage of rental flats for young people and low-income households is acute. Housing is segregated. Young people have trouble beginning to climb the housing ladder, and chains of moves are blocked. Black markets are far too common.

32 SUMMARY

These problems are not only due to low housing construction, but also to an even greater extent to inefficient use of the existing housing stock.

The housing crisis is aggravated as the population increases and more people move in to the cities, while bottlenecks on the housing market block employ-ment, dynamics and growth, and harm all of Swedens economy. Without reforms, the housing crisis will get even deeper.

One reason for todays problems is that public measures affecting the housing market are not coherent. The state has abdicated its previous roll as planner and financier. The financial risk has been shifted to construction companies, property owners and residents. But the policy shift is inconsistent. While the supply for housing rises, mobility is impeded by obstacles and distortions on the supply side.

Rent control creates lock-in effects and shuts the door on those who do not have contacts. High and perpetual capital gains taxes inhibit mobility on the market for tenant-owner flats and houses. A complex and drawn-out zoning process is costly and weakens competition. Joint planning between housing construction and infrastructure is insufficient.

There is therefore no longer a coherent housing policy. The policy is pursued in silos, and mutual connections are not sufficiently taken into account. An overall policy is required to solve these problems. Such a policy tackles two main areas simultaneously: Mobility on the housing market and housing construction must be increased.

Both of these tasks are necessary. It is not enough to only build more. The biggest socio-economic costs comprise inefficient use of the existing housing stock. This is why mobility must be increased. It is likewise not enough to only adjust rents to market conditions. That would drive up rents far too quickly for many households. This is why construction must be increased.

Our conclusion is that simultaneous and coordinated reforms of rent control, zon-ing processes and infrastructure must be made, as well as of taxes and financing.

3. Recipe for increased mobilityOne reason for the low mobility is that the Swedish rent setting system is obsolete and stale. It creates lock-in effects and blocks chains of moves. The

SUMMARY 33

housing stock is used poorly, which has negative effects on the labour market and growth.

Rent control scares off investments in rental properties and instead creates strong driving forces to convert rental flats into tenant-owner flats. This control that was intended to protect the tenant in reality risks depleting rental flats.

Rent control does not reduce segregation either. The spread of income among residents of rental flats is just as large as for residents of tenant-owner flats. Rental flats are actually more segregated with respect to origin probably because contacts are required to move forward on the rental market.

Switching to completely free rent setting, without any control at all, is inap-propriate. The right of tenure of the tenant must be protected. We propose a gradual reform of the rent setting system, in two steps.

1. The Rent Negotiation Act (Hyresfrhandlingslagen) is to be amended so that no party can be forced to sign collective rent negotiation agreements. No party should be obliged to charge negotiation compensation on behalf of the counterparty either.

A free right to negotiate is to be immediately applicable for newly built flats. In older flats, the rent may be changed by a maximum of five percent per

year during an adjustment period until rents have been adapted to market conditions. It is estimated that it will take approximately ten years or more in Stockholm City Centre, and significantly less in Gothenburg and Malm. In most medium and small cities, the adaptation will just take a year or so.

2. When adaptation of the rent level is complete, rents are set freely during exchanges or new construction. Large rent hikes should be avoided between the time a tenant moves in and moves out; changes should be gradual. In old leases, rents in five-year phases may be changed at the pace of inflation; greater increases are allowed in the event of renovation or reconstruction.

Tenants will continue to have strong security of tenure and unreasonable rents will be able to be tried in court. Protection from irresponsible land-lords should be increased.

When empowered by them, the Swedish Union of Tenants (Hyresgstfreningen) can also represent a group of tenants in the future in negotiations under the present model, if both parties have agreed to such a collective negotiation agreement.

34 SUMMARY

The social consequences of the transition should be alleviated via targeted temporary housing assistance, financed by a temporary welfare tax on older properties.

We say no to social housing, i.e. that special housing areas are set aside for socially weaker households. Instead, we recommend increased cooperation between municipalities and housing companies. The companies must reserve a certain number of residential properties for municipal housing services ran-domly distributed in different areas.

Increased mobility also means that it will be easier to change forms of tenure. Therefore, tax differences between forms of tenure must be reduced and lock-in effects for tenant-owner flats and owner-occupied properties must also be reduced.

The tax system restricts mobility for tenant-owner flats and owner-occupied properties due to high capital gains taxes. Therefore, reintroduce a low prop-erty lax, reduce the capital gains tax and the tax on deferrals. Reduce the land registration fee and the mortgage tax.

The tax system is not neutral. It benefits owning over renting. We advocate an enquiry to investigate tax neutrality between owning and renting.

4. Recipe for increased housing constructionThe zoning monopoly of the municipalities is an anachronism in a time where several municipalities cooperate on major infrastructure projects and zoning must take place in coordination with private builders. The process is also far too long and complicated. We want to see a simpler and faster process, with less power for the municipalities and more power for regions and county councils.

Let the layout plan have more control, simplify local planning and use simple zoning procedures as far as possible. Special area regulations should be able to serve as the basis for a planning permission right away.

Reduce the ability for municipalities to have special requirements. Make hous-ing supply a general interest with the same status as other national interests already formalised in the planning regulation. Reduce the ability to appeal construction and zoning cases, limit the group of people entitled to appeal.

SUMMARY 35

Limit the municipal zoning monopoly. Private builders should to a greater degree be able to take the initiative in the zoning process.Jointly plan housing construction and infrastructure. More creative financing solutions for infrastructure are needed. Put greater emphasis on the regional level.

Sweden should not go back to the old subsidy system, but support should be given to housing savings for young people. The state credit guarantee system should be overhauled and to a greater degree geared toward projects that benefit low-income households. Individual repayment plans for households are to be preferred over statutory general requirements.

Investigate the entire capital taxation system and the ability to reduce the value of interest deductions.

Construction regulations should be harmonised not just between Swedens municipalities, but also in the Nordic region and in the long term in the EU. The conversion pressure should be increased on the construction sector and the parties of the labour market must eliminate the guild mind-set in the con-struction sector.

5. What will the consequences be?The effects of our proposals should not be compared with the situation today, but how the situation will develop without reforms. Within five to ten years, our proposals will result in:- Increased construction approximately 10,000 more flats per year.- A lower housing shortage.- More rental flats.- Less extensive black market.- Increased mobility on the labour market.- Increased employment: 20,000 new jobs directly in the construction sector

and many more tens of thousands in the economy as whole if the indi-rect effects of increased mobility are included.

- Unchanged economic segregation and reduced segregation on the basis of origin,

- Lower household debt.- Stronger public finances.

36 SUMMARY

6. A long-term overall policyThe housing issue is so important and spans such large fields that it should be treated as a single policy area not divided up into different silos.

A broad political agreement for at least two terms of office is a pre-condition for a broad strategy to be credible and hold up over a long period of time. All parties need to give and take in such an agreement.

Swedens political culture has previously shown itself to be capable of coming together and taking long-term and difficult decisions when needed. Now that time has come once again!

Endnotes

1 Boverket, Report 2012:18, Bostadsbristen ur ett marknadsperspektiv

2 Dagens Nyheter, Januari 21, 2014

3 Stockholms Handelskammare, Report 2014:1: Bostadsbrist farlig flaskhals fr jobben

4 Vstsvenska Handelskammaren, Report 2014:1: Bostadsbristens pris

5 Malm stadsbyggnadskontor: Tertialrapport 3, 2013

6 SOU 2012:88: Att hyra frn en rtt fr alla till en mjlighet fr allt fler

7 www.hittabrf.se

8 Data in this and the next section taken from Boverket 2013: Bostadsmarknaden 2013-14

9 Stockholms Bostadsfrmedling

10 Dagens Nyheter, February 3, 2014

11 www.boplats.se

12 Boplats Gteborg, Marknadsanalys 2014-02: Kontraktsanalys 2013

13 Hanna Fridell and Cecilia Brogren: Lyckas hyresregleringen motverka segregation i Stockholm?, Ekonomisk Debatt, 6/2007

14 Mats Wilhelmsson, Bo Sderberg and Cecilia Enstrm: Household allocation and spatial distribution in a market under soft rent control, Uppsala Universitet. Citations from a debate article by the same authors in Bofast 9 September 2011.

15 Boverket, Report 2011:30: Dligt fungerande bostadsmarknader

16 Fastighetsgarna Stockholm: Missbruket av bytesrtten en rapport om svarthandeln med hyreslgenheter I Stockholm, 2006

17 Dagens Industri, February 21, 2014

18 Boplats Gteborg 2009: Slutsatser av Boplats underskningar om svarta lgenheter 2001-2003, 2006 och 2009

19 Kvllsposten, May 2, 2007

20 Oxford research 2014: Analys av utlndsk arbetskraft i Stockholms ln

21 Fastighetsgarna Stockholm 2014: Stockholm som startupstad

22 Stockholms Handelskammare 2014:1, a.a

23 Georg Marthin 2012, Measuring mismatch in the Swedish labour market, Finanspolitiska rdet

24 Bertil Holmlund m.fl: Arbetsmarknadsreformer fr jobb och vlfrd, Socialdemokraterna 2014

25 OECD: Sweden 2012

26 European Commission, Occasional Papers 186, March 2014; Macroeconomic Imbalances, Sweden 2014, se srskilt avsnitt 3.3

27 World Bank 2014: Swedens Business Climate. Opportunities for Entrepreneurs through Improved Regulations

28 Stockholm Business region

29 A long term projection of the development in the Stockholm Region the coming 50 years is presented in SWECO: www.stockholm2070.se

30 Se e.g. Nima Sanandaji: Hyresrttens betydelse fr en dynamisk arbetsmarknad, Hyresgstfreningen 2013

31 A good example is given by the European Commission in its latest analysis of the Swedish Economy: European Commission, a.a

32 See e.g. Boverkets marknadsrapport, May 2014: Lst lge p bostadsmarknaden, och Boverkets marknadsrapport, november 2013: Bostadsbristen och hyressttningssystemet ett kunskapsunderlag

B okriskommittn

an initiative by

Bokriskommittn, Box 16050, 103 21 Stockholm. www.bokriskommitten.se

The Housing Crisis Comittee has had the mission to consider how - not if - the Swedish housing market can be brought to function better.

We are deeply critical of the lack of an overall perspective. Sweden has no longer a coherent housing policy - instead there is a muddle of inconsistent measures, which are short-term, mutually contradictory and often driven by special interests.

The dead-lock in the housing policies create growing eco-nomic problems. They can be dissolved via a prudent over-all policy. This requires that rent control, taxes and zoning procedures be reformed simultaneously. This is conditioned on a broad political agreement, spanning several terms of office. Our proposed reforms provide a reasonable balance between safety and efficiency. The Swedish political system has previously shown that it can come together for important decisions when they are really needed. Now that time has come once again!