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As the Swedish housing problem continues to hurt, the left is content on keeping the same stiff rules – with the twist to add more government spending as a solution. It is a bizarre display of economic understanding.

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Swedens Left Party wants to create a state-owned house building company as a counter-weight to the privately owned companies whose purpose is to build apartments for rent, totally missing the whole point of why these kinds of apartments aren’t built in the first place:

The rents are not market controlled. Instead, the law requires that the Swedish Union of Tenants negotiate and ok’s any rent agreements which makes it less attractive to buy homes as a long-term investment – Disincentivising that corner of the market to make more housing.

On top of that, the taxation on rent is a clean 30% if the threshold of $5600/year is passed. Any capital gains in housing sale are taxed at 22%. Communes get to collect a tax equal to 0.75% of property value every year.

This is a heavy upkeep and requires delicate economical planning, with a threat of any of these factors changing depending on who is winning an election, will ruin the whole calculation for any investor. The risk and the reward aren’t matched.

Faced with an incoming housing crisis, Sweden should look for an alternative way than the current thick regulatory nightmare, with taxation beyond all reason through every step of the process of building a new home. Houses aren’t built by hope, but with hammers – Removing as many bottlenecks as possible is ideal for growing a market.

Parties on the right have expressed a wish to introduce free market rents but have clashed not only with the left but also the Union of Tenants over this. The Union of Tenants whole business is built on that they can control people owning apartments as a third party, through laws that haven’t aged very well.

Even the Sweden Democrats want a more liberal approach, with less bureaucracy and making it easier to start a new construction company – Promoting competition, lessen the cost of development and thus lowering consumer prices.

Another ingredient, that will become troublesome down the road is a severe shortage of craftsmen of all kinds (electricians, carpenters, welders, etc) – The Swedish schools report a huge drop in students that finish the programs. Hotter building markets outside Sweden make a significant portion of the ones finishing their education to move where the money is, adding to the lack of craftsmen.

255 out of 290 Swedish communes report a shortage of housing. An estimated 600,000 new homes need to be built by 2025 according to the Swedish National Board of Housing Building and Planning, an increase of 13.5% of today’s total. How Sweden tackles these numbers is voted on this September – Welcome change or stay the same?

 


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