The hyresreglering (rent regulation) is a set of rules which set the limit of how much can be charged for a regular rented appartment in Sweden.
Unlike in other countries, it is not a liberal market system. The idea is that the price should be set according to the so-called bruksvärde (usability value), not by supply and demand. That is supposed to keep prices low and affordable even for poorer parts of the population.
The bruksvärde is determined by some factors such as: age, area, the existence of a lift and a balcony, the distance to the next supermarket. In principle the quality of the quarter may be factored in, but is no driving factor as in a capitalist market.
This system has one major advantage: rents stay low and affordable over long time spans, making it economically safe for everybody to live there.
However, the negative side effects are quite severe:
- it is not very profitable for companies to build rental appartment houses. Instead they build appartments for sale.
- Thus the demand is never matched. A system had to been found to distribute the few appartments among the many interested people: the bostadskö which uses waiting time as criterion.
- The waiting times are incredibly high - below 2 years waiting time it is sheer luck to find anything. The most attractive quarters require well above 10 years waiting time.
- Thus, having a hyresrätt is a de-facto-value. Tenants often don't want to give it up when they move. Instead the rent it out to others (andrahand) against the rules. That has created a black market and reduces the supply of legal rental appartments.
- People who want to have a safe appartment go to real estate instead. That increases the demand and prices rise.
Thus, this system is supposed to supply affordable rental appartment, but instead feeds the black market and the real estate market.