Stockholm’s Home Shortage Could Stifle Startups
nytimes.com
nytimes.com
Shouldn't tech workers or even just simply technology savvy people be able to work anywhere that has fast internet? So why is that community not living in the countryside or in small spread out concentrations, instead of everyone having to pile into certain cities?
If you make $300-400K/year in New York City, you can afford to live a little. Midtown or Chelsea apartment. Nice restaurants. Drinks in bars. $7 lattes.
Humans are social creatures and we want to be around other people. That's a generalization that usually holds true. Some people do want to live in a rural setting, with acres of land separating them from their neighbors. A coworker of mine does that and is quite happy with it. There just happen to be more of us, apparently, who want the urban environment.
Because it's not really as location independent as you think.
Yes, this sector can work remotely less painfully than others, but that doesn't mean its optimal.
Sure, if I could get gigabit fiber in the middle of South Dakota, I could work just as easily as anywhere else. Unfortunately, there wouldn't be anything for me to do outside of work.
I live in NYC right now and it's fantastic (and fantastically expensive). I can walk to any number of world class restaurants and museums, take the train to see even more amazing things, and generally feel like I have the world at my fingertips. Is that pricey? Yes. But I work so that I can make enough money to do things I find fun, some of which are things outside of work.
For all the complaining about a lack of talent, the people making the hiring decisions sure don't seem to want to compromise on this point. That sort of "perk" is huge for me -- it's the sort of thing that would make me interested in your company in the first place.
Edward Glaeser wrote a book that answers your question: Triumph of the City. Cities promote knowledge transfer and idea generation because of all the random interactions that happen among people. It's useful to be among people who are doing things like what you're doing. Cities offer great ways for cooperation and competition.
If you're doing routine tasks over and over again that can be done remotely maybe you don't need to live in a city. But the rest of us do, and the reasons make a lot of sense!
And with the high level of gentrification in many successful cities, unlike 25 years ago those urban centers are now also attractive for older people and people with families, people who used to move to the suburbs.
People want to be there, and contrary to what a very vocal minority suggests, most people don't want to work remotely, at least not full-time, and those that do don't necessarily want to do it from the middle of f-ing nowhere.
I make a database client, and when I look at the billing addresses of my customers, I do see a lot of companies based in San Francisco; but the majority of customers are from pretty random locations all over the world.
Sama's tweet from about a month ago really resonated with me: "it's so unbelievably frustrating how hard it is to get lots of new housing built in the bay area. this one thing would solve so many probs."
There are so many factors at play here, but it mostly boils down to politics.
As more entrepreneurs start tacking big problems with lots of red tape (i.e. banking, brokerage, medicine, insurance, etc.), I wish more people would look to housing and how to keep costs sane.
PS - email me if you're in the space or have ideas. Real estate entrepreneur here. Would love to hear ideas, give my opinion, or chat about possible solutions.
Several areas in the world suffer from the problem, but there are cities where housing prices rise way slower than the others.
However, this doesn't do much/anything in terms of 1.) creating more supply to meet the current demand of areas like Palo Alto, SF, Manhattan, Stockholm, London, etc. or 2.) making housing more affordable.
To 'disrupt' this you would need to eminent domain a good chunk of the city a la the Western Addition in the '50s.
http://www.bloomberg.com/news/2011-02-03/portugal-crumbles-a...
Has this happened before? How did it turn out?
1.) Mid-1940s - thousands of single soldiers came home to places like Detroit and Chicago after the war and wanted to buy homes and start families. Because housing development had slowed or been stopped for years, these soldiers came home to housing shortages. You can read online about this, but mostly these folks moved back home for a bit, and by the late-40s, early 50s, several massively successful homebuilders were either started or hit their stride (i.e. Levitt and Sons).
2.) Today - in parts of North Dakota and Texas - similar problems to the bay area. Lots of overnight fortunes being made from oil and gas (pipelines, drilling, transportation), and a big lack of housing stock.
The first was solved with plenty of cheap, vacant land; and the creation of suburban sprawl / planned communities. My sense is the second issue will be solved similarly (if the boom continues).
One obvious difference is that the bay area doesn't have much land left to develop, and what is left is mostly too expensive, or protected from development.
However, the situation was a bit different back then since much of the urban population had died and didn't need to be displaced.
I have no idea if similar situations happened in ancient Middle East or Asia.
"Keeping the costs sane" for tech workers would mean putting the housing out of reach of many ordinary people.
There is a finite amount of space, and the reason why housing scarce in many cities in Europe is because a large portion is reserved for rent controlled social housing (which unlike the US isn't just the extreme low end).
Not doing that clearly doesn't work either (see SF), and has so many negative social side-effects that are unacceptable in Europe, so you don't even have to bother trying to suggest it.
It simply comes down to too many people wanting to live where there's not enough space. To solve that, you have to look at social factors, not bureaucracy and real estate.
Personally I would suggest looking at the people who actually wouldn't mind getting out of those cities but currently can't for various social and economic reasons. Ironically, those are not the tech workers who could at least theoretically work remotely.
The only people who want to live "higher" are the people who want high end apartments in the inner city. And those are the places where height restrictions are there to protect the historical nature of the inner city.
I've lived in areas like this myself, and I agree they're not nice. However, I have to think it's not only locality to city center that makes central areas good, it's also that they are self sustaining burrows. There's ample housing, parks, jobs, retail, restaurants, bars, etc.
The politics behind this is absolutely terrible zoning regulations in the US that make mixed-use zoning difficult, and the fact that people own their houses, and don't want to see the value go down. So basically rent seekers.
No, I really don't think that is what it comes down to in Europe (maybe ex UK). More often than not, the reason why local authorities are planning for say 15,000 new homes instead of 30,000 new homes per year is funding not space. Not just funding for housing, but also for public transport, etc.
People in continental Europe will happily live in large appartment blocks if rents are affordable. You can easily buy a couple of single family homes in a sparsely populated area next to a big city and build 10 storeys high, or revitalize some brown field estate that is already owned by the government.
But as you correctly point out, housing in (contintental) Europe is typically subsidized, even for medium income folks. If a city is growing fast, building new homes has to be subsidized now but tax revenues are only going to come in later.
So we have three options: Raise taxes, increase government debt or deregulate to attract private investment. If you have a choice of public or private investment, which one do you choose? I think the answer depends on whether or not you know exactly how much demand there is for what type of supply and on how transparent and competent the local government is.
The demand for housing is pretty well known. We don't need much innovation in that sector. There is not a lot of uncertainty about what is required. All we need is money to build build build.
Let's look at some government bond yields: http://www.bloomberg.com/markets/rates-bonds/
And here's the Swedish 10 year: http://www.bloomberg.com/quote/GSGB10YR:IND
In my opinion, if national governments that can borrow for 1% they should take the opportunity to raise debt, tons of it, and fund housing and other infrastructures now. Or even better, introduce European infrastructure bonds to raise that money, so it can be spent in countries with higher interest rates as well.
Was lucky enough to have the company I was recruited for help me by having their name on the rental agreement, covering any expenses the owner might have if I thrashed the place, didn't pay rent, etc. Ended up finding a place for 13.000SEK/month on the outskirts of Stockholm, at the very last subway stop.
For most of the employees starting at the same time as me, most of their rental agreements were only valid for a year or so (and the owner could kick renters out pretty much at any time), forcing people to go and find other apartments, which is not easy when the employer no longer offers support with the contract.
One colleague of mine found that his response rate was extremely low on his bot that automatically applied for an apartment, which matched his criteria, as soon as it came up online. He suspected his non Swedish sounding name was a factor, so he changed the name in the message to something Swedish-y ("Sven Karlsson" or smth. like that) and instantly the response rate rose dramatically. As a foreigner, not having anyting on your Swedish credit report doesn't help either.
I'd be more useful if cities made it a policy that the amount of housing subsidy you receive is proportional to the year you moved to the city. That would achieve the same goal as rent control (i.e. affordable housing), but alleviates the mutex on many structures that could be torn down to make way for structures that permit great density.
Affordable housing programs are fine. Tying up the underlying asset indefinitely is counterproductive.
The rental queue works like first-comes first serve basis. And the first-come means whoever registered first on the rental queue site. The main queue is maintained by Stockholm State. There is no way for anyone to pay more money and get ahead in queue.
Apart from that, there are always new buildings which have no queue but rent is more (40 or 50% more than usual. Anyone who is willing to pay that amount can get an apartment within 2 months time frame.
Then there is a 3rd black market. A lot of people sublet there for shorter and some for longer terms.
Having said that all, I've thought about this problem but couldn't come to the prefect solution. When state controls the rents & the process renting, it gives guarantee to low-income families that they can also live in nice neighborhoods.
This is due to the fact that the Swedish home rental market is controlled by laws and regulation.
To get an apartment in Stockholm get a loan buy the apartment pay your loan interest + electrical bills and such.
It is in the end cheaper than renting and has other benefits aswell, and some disadvantages to... There is loads of factors.
And I'm guessing it's not easy to get a loan (I haven't tried so might be wrong).
The flip side is, once you've bought a place, it can be really really cheap to live in with the current interest rates. We pay less than $1000 for a two bedroom in central Stockholm for instance, all included (interest, fees, electricity, water, heating, tv, broadband). This also means absolute prices are insanely high, and will probably continue to rise since there's still room for it to grow.
It takes more time to actually find a decent place you like than to secure the loan. That took a month for us. We saw 30 apartments.
Btw bids on two apartments. One was a low ball and they didn't want it. The second one the price rose 200k (SEK) before I won.
Everybody's experience is different, but I think we can agree this is madness and not good for our economy. I rarely have much positive to say about the US, but one thing is that you can literally go to almost any city (except maybe SF and NYC), live in a hotel, and within a week you have found some place to live. Might not be the highest standard of living, but you can always trade up.
I got the "lånelöfte" (guarantee to loan) from the bank in a single phone call which allowed me to bid.
May I ask what bank you went to? I can add that I had the necessary 15% but outside the country.
They never asked about it, nor previous work history.
Also, I don't have a Swedish name if you were wondering :-)
Not a rebuttal or anything, but I thought you might enjoy it.
It's been a while since I've studied, so my information might be outdated, but feel free to send me an email if I can help in any way. I live in Copenhagen.
It's in central Södermalm. I genuinely despise it, but many people (including my partner) like it so I'd suggest looking it up first.
41 square meters. 1.5 rooms. Fully renovated bathroom (Nov 2013)
Favourite perks
2 Seconds to Lidl 7-22
10 seconds to Systembolaget (liquor store) 9-19 (weekdays)
15 seconds to ICA (has a tapas bar with nice wines) 7-23
20 seconds to Apoteket (Pharmacy) 8-22
20 seconds to Medborgarplatsen subway
You're gonna have to learn to talk that Variety speak!
Rent controls and policies made for a negative populational growth only make things worse
No, I've actually seen several ones (not Swedish though)
Most of them are cramped (especially in Ireland/UK)
I've saw the tall ceilings (not really an advantage to me), wooden floors are nice as well as the large windows, seems like this is more common in Continental Europe (France/Germany)
But: no elevators until they managed to fit one somehow, the old doors/windows may be a liability (maintenance also they are not very good heat insulators)
As for the rest of Europe, the demand speaks for itself, even if you don't personally like the style and high ceilings, most people do.
There were standards on house building which assured a minimum floor area which were later abandoned. The UK now has the smallest homes in Europe. The windows are tiny, and the materials are cheap.
I agree turn-of-the-century housing was generally generously proportioned, and well built, and stand the test of time. And the housing that followed up to 1940s, even the austere housing that followed in the 50s wasn't bad either. But from the 60s onwards the quality took a nose dive (there are some good quality social housing complexes), and the puny mock victorian 80s and 90s houses are the worst examples.
This is a great book on the subject: http://en.wikipedia.org/wiki/A_Guide_to_the_New_Ruins_of_Gre...
I'd be interested to hear why the UK took a turn for the worse, and other places didn't (or perhaps they did to a lesser degree). Belgium is similarly cramped but seems to continue to build good proportioned housing.