The Finch Formerly Known As Gold

5 March 2006

Don't you dare open this market!

The Swedes have rent control, and it doesn't work any better there than it does here. In fact, it might even be worse.

In Sweden, rents are generally set by something called "bruksvärde," which means literally "value of usage"; municipal housing providers negotiate with the hyresgästföreningen, or tenants' unions, and private landlords are expected to stay within the same general price range. The agreements cover size, age and general condition, but do not cover location: an apartment in downtown Stockholm and an otherwise-similar apartment out in the boondøcks will rent for just about the same number of kronor. It should surprise no one that new construction is essentially at a standstill; no one will give up an old apartment to move into a newer and de jure costlier one. Swedish scholar Johan Norberg writes:

[H]ere in Stockholm we are obsessed with flats because it's impossible to hire one. You have to be wealthy enough to buy one. And this is because of rent control, which means that the government stops you from hiring at market prices — which means that people never leave a flat in central Stockholm, that the flats are empty until the contract can be given to their kids, that there is a huge informal market, that no one builds new flats and that the old ones are turned into cooperative flats. And just like in every rationing system, you have to have the right contacts to get a flat in Stockholm.

It's an election year, and there's been a proposal to eliminate rent control. The tenants' unions have hired an ad agency to conduct some guerrilla marketing; the agency prepared thousands of stickers to plant on tenants' doors warning them that a switch to market-based rents will cost them 30 percent more.

The effect these stickers will have on would-be tenants way down the waiting list has yet to be determined.

Posted at 9:59 AM to Dyssynergy