Contrary to Public Myths, Rent Control Hasn’t Been a Success in Sweden
Sweden’s rent control is widely touted by many who don’t understand economics as a model for how a property market should work. Young people in Ireland, for example, like to point to Sweden as a nirvana where rent control ensures easy availability of affordable and high-quality rental stock.
I was once told by a young work colleague with strong socialist tendencies that they could move to Stockholm and get a high-spec modern apartment for a mere pittance compared to rents in Ireland. A cursory Google search, which garnered a string of news articles attesting to various issues arising from Swedish rent control, shone a harsh light on my young colleague’s fervently held, yet thoroughly fallacious belief.
Even left-wing newspapers and media outlets have had to accept (begrudgingly) that rent controls do not work. In Sweden, as in other cities with similar policies, rent-controlled apartment contracts have become valuable assets to be husbanded and exploited. Many tenants who hold the coveted rent-controlled “primary” contracts sublet properties to “secondary” tenants on the black market at rates double the rent-controlled amount.
Once renters obtain primary contracts, they rarely relinquish them. Only half a percent of primary rental contracts in central Stockholm find their way back to the housing agency. It is almost impossible for any newcomers to the city to get one of the contracts (woe betide my young colleague and their putative flight to Stockholm!). People keen to jump the queue revert to a range of methods, ranging from leveraging personal networks (leverage newcomers rarely possess and hardly something a “fair” and corruption-free model rewards) to paying bribes (definitely corrupt) that can amount to several years’ rent.
As one can imagine, one class of people gaining advantage (through chance, corruption, or seniority) over other classes of people is not a recipe for social harmony. The first class’s then lording this over
Article from Mises Wire
