To save you from reading to answer the clickbait title: insufficient supply combined with people abusing the system to sublet for profit or gift rent controlled apartments to friends and family.
>Only around 8% of Swedes live in households spending more than 40% of disposable income on housing, compared to 15% in the UK and almost 40% in Greece, according Eurostat data.
Something is keeping rent low in Sweden (relative to a few other European counties).
The issue is there aren't enough first-hand contracts, or enough properties in general. But the rent controls as discussed only apply to first-hand contracts, which are the minority.
However those assumptions rarely hold in practice. In the US, to get a construction loan, you can't assume a big rise in rents in coming years. So the financial decision to build new housing is gated by an effective assumption of rent control by the financiers.
Removing rent control would convert the decades-long wait list into a decades-long struggle to make enough money to afford rent, would it not?
So you can't really be an absentee landlord.
The rent controls apply to first-hand contracts (kinda like council housing in the UK). Which is basically non-existent for working people now.
If you just look at the expense you'll miss the fact that people don't get enough groceries, or apartments.
Weather.
Because it's not just about supply and demand, and attempting to frame it as such is seriously reductionistic.
Essentially you're at Why #1 here, and you have at least 4 more Why's before you even begin to scratch the surface of the root cause
I'm a big supporter of rent control. But I also think the problem here is supply and demand. I've never met a supply-and-demand skeptic that would do anything except deny its applicability. They could ever explain why themselves or point to somebody else's explanation. And I've met a fair number of such folks.
I'm left thinking that they just don't want to see new homes or new people. But if you have an explanation, I'm all ears.
But let's give it a shot!
There's no denying that there is a lack of supply in housing in some parts of Sweden, particularly in Stockholm, where there are very long queues to get a reasonably priced apartment to rent. There's no denying that rent controls are probably one contributing factor to why the supply is too low. But it's important to note that it's just one of many variables in this equation. So what other contributing factors are there?
Well, for one, acquiring permits is pretty damn hard in Sweden. It's a long process with a lot of NIMBYism, not entirely unlike what I've understood is the case in San Francisco.
There's also the issue of rental units being profitable on a far longer horizon, leading investors looking to make their money back quickly to look at the buyers market instead. Which leads us down the path of the very high prices in the buyers market. What's causing that? For one, very low interest rates in the housing loan market (about 1-2%), but also tax policy, giving lenders a tax deduction relative to their interests payments. Yes, you read that correctly - buying a home, ie being richer than average, comes with tax deductions.
In Sweden, paying off your home loan for a long time wasn't even required - you just continually paid the interest, and perhaps lent even more money against your home when the value increased.
There's also the fact that the public housing providers have more or less been dismantled in many cases, and sold off to what essentially amounts to slumlords, attempting to game the ever-living hell out of the rent control rules. The playbook is more or less:
- Buy old public housing
Then - Spend as little as possible on upkeep, be actively hostile to current tenants - When anything goes wrong inside the rental unit, refuse to do anything but a full-scale renovation
And
- When any tenant moves out, perform a full-scale renovation
And finally
- Legally raise the price, as the standard of the rental unit has increased, often increasing the price as much as 50%
I don't pretend to know the answer to this complex issue, nor do I pretend to entirely understanf every part of it. Nor do I claim that rent control is the right answer or the wrong. But one thing is for sure - reductive arguments claiming that rent control is the root cause is wrong on the basis that it does not begin to understand the issue even slightly.
Hopefully this begins to cover some of the nuance of the issue.
These are all very legitimate concerns. But at the heart of all this is still the supply problem, the lack of housing.
I also agree that blaming this on rent control is wrong. But the real problem is enacting rent control, then saying "that's enough, problem solved." Because at the core there is still the shortage problem, which makes al the other problems worse.
Has rent control "worked"? Both yea and no. It has worked at what it is meant to do, which is great. But it hasn't solved housing, as too many proponents say it will. Similarly, more housing alone won't solve everything, but it makes all these other problems much easier.
Of course, abolishing rent control doesn't get rid of mismanagement but rent control is generally used to justify mismanagement.
In a perfect world I would also like to see rent control removed, as there certainly are negative consequences from the policy, but removal without viable alternatives literally means that a sizeable chunk of poor people will be out on their asses, more or less. I cannot in good conscience support that.
London is having a hard time because supply is less than demand.
Stockholm, NYC, Paris for the same reason.
It's really one of the largest things that seemingly every developed country is struggling with right now.
I don't personally believe Stockholm is more affected than any other European capital except perhaps Berlin, which somehow seems to stay affordable (likely because of supply).
Not Japan! Tokyo rents are surprisingly cheap relative to other major cities.
In Tokyo?
In other words, Japan lacks the regulatory environment (common in all these other countries) that depresses supply.
Perhaps there's a lesson to be learned from that.
More generally. Non reproducible assets/aka monopolies can extort more money out of people now that people have more money thanks to low interest rates. Notice how being rich doesn't make you rich because of abuse of monopoly power to do perfect price discrimination.
This has got to be satire, right?
There are a thousand things to do with a property and the government decides, hey guys, stop that 1 thing out of thousands. Then people will do all the thousand other things. The government then acts surprised that its incomplete policy has failed.
You can also just tax the land.
If a subletter voluntarily enters into an agreement with a lessee to pay above the rent control amount, who is the victim?
Is it not a victimless crime?
Even if the "agreement" was "voluntary" for the parties who entered it, it can still affect third parties.
Would you be less hurt when there is nothing available?
All rent control does is favor "first-come-first-serve" instead of "who pays the most".
The victim is the person not able to rent on a first-come-first-serve basis instead of someone willing to pay more than is allowed.
That's indeed the only sensible thing I can think of. But it's a very odd thing to me (that a mutual, consensual agreement between two people is governed by the interests of third parties).
And also because "consensual agreements" rarely are. Typically one party has more power than the other and can force terms.
By definition, you only get truly consensual agreements when the balance of power is equal - which it very much isn't in rental markets with deliberately restricted stock.
For the group of aspiring startup founders HN community has a very high percentage of Marxists in it :)
https://www.quora.com/What-is-your-worst-landlord-story
Of course some tenants are terrible too, but those stories seem to be rarer.
The only way to avoid it is a very tyrannical East German system where people rat on each other to, we’ll, gain something, maybe that coveted apartment…
It's hard to make sure either of this never ever happens, but it is definitely possible to make sure it's not happening as much as to become a social problem.
It's more akin to the council housing crisis in the UK.