It’s no news to anyone that finding a place to live with short notice in Sweden is difficult, especially if you are looking for a place to buy or rent in Sweden’s major cities such as Stockholm, Malmö, Gothenburg. Lund isn’t a big city but it is no exception to the lack of housing. Why is it so hard to find housing in Sweden? Why are prices of real estate rising but not the number being built?
The answer to the first question lies in the fact that the housing market right now is experiencing market failure. What does this mean? It means that the allocation of goods and services is not efficient. The quantity of houses provided does not match the quantity of houses demanded. This means that there are negative externalities, monopoly over housing, asymmetric information to the buyers and the market failure occurs in the short term.
The Swedish government has implemented a number of policies in order to try to control the housing market. This in effect is a largely debated issue as many people believe the market should be free and non-regulated. This regulation has been put in place in order to keep rents and prices down, but in actual fact it has been having the opposite effect. The idea of rent regulation occurs when government set limits (price ceilings) or rent stabilisers (regulation on when rent can be raised and by what percentage) this is to protect tenants from paying ridiculously high prices. This type of system has a lot of negative consequences and has been criticized for creating enormous queues which result in long waiting times and black markets where people rent their flats for double the prices due to the high demand.
And people feel stuck and large families have to live in small flats.
The lack of housing indirectly affects the GDP and the job market as job mobilization is proven to be very difficult. Many people must refrain from good job offers and university placings as they cannot find any accommodation to rent or buy at a reasonable price or for the long term. In recent years the building of houses and apartment buildings has declined greatly since the 1960’s where apartment buildings and villas were built in abundance, also due to the lack of housing. The population has been rising since then, unfortunately what hasn’t is the number of apartments and houses.
What is then the solution? There are some obvious remedies which include building more and many apartments and houses as fast as possible. Another option is deregulating the housing market and let the market set the price of housing in terms of both rent and sale. It is also possible to reduce the tax on housing and therefore reduce the so called “moving tax” which will result in easier movement and more incentive to move house or flat if necessary. There are obviously more feasible solutions such as social housing, increasing the competition between building contractors but this is no easy task to take on. It will take a lot of time and reforms by the Swedish government to produce a more effective housing system where the Swedish population can fulfil their need for housing without waiting for years and move houses and apartments with ease: when you want to or when you need to.