The limitations of Sweden's rent control system and how HMOs provide an alternative model


An article on BBC News entitled "Why rent control isn't working in Sweden" reports how insufficient stock of rent-controlled apartments in Sweden and especially Stockholm has led to a housing shortage.  Once secured, a rent-controlled apartment is for life in Sweden.  Sometimes it will be passed between relatives or friends or sub-let at a higher rental (although regulation is intended to prevent the latter).  It seems that flat-shares are not common and that there are few private letting agencies given the focus on rent-controlled properties.

The private rented sector and insufficient housing supply (a Europe-wide problem) has produced the house in multiple occupation (HMO) model in the UK whereby a residential property is let to persons occupying in more than 1 household who share some basic amenities.  The definition of an HMO is a residential unit occupied by 3 or more tenants not as a single household and with shared basic amenities such as a bathroom, toilet or cooking facilities.  The standard of HMO accommodation is regulated through the HMO licensing regime (read my article summarising the 3 types of HMO licence:  Market forces set rental levels and HMO acquisitions are popular with buy-to-let investors because of their income-generating potential.

As a lawyer acting for investors in HMO portfolios, it is interesting to contrast the Swedish rent-controlled landlord and tenant property model with the UK's private market generated HMO.  Each cater for affordable housing demand and each will have their drawbacks and critics.   

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A shortage of accommodation in Stockholm and other cities, is causing a major headache for young Swedes - in a country which has been championing rent controls since World War Two. Rents are supposed to be kept low due to nationwide rules, and collective bargaining between state-approved tenant and landlord associations. In theory, anyone can join a city's state-run queue for what Swedes call a "first-hand" accommodation contract. Once you have one of these highly-prized contracts it's yours for life. But in Stockholm, the average waiting time for a rent-controlled property is now nine years, says the city's housing agency Bostadsförmedlingen, up from around five years a decade ago.
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