Mark Stephens questions whether the Swedish housing system provides a suitable template for reform in the UK

The other week I went along to the Nordic Horizons event to listen to Mariell Johlin, of the Swedish Union of Tenants, provide a fascinating  lecture on her country’s housing system and in particular its system of rent-setting.

For many in the audience – used to our “wild west” system of deregulated private renting – what they heard would have been a revelation.

The Swedish Union of Tenants (SUT), with more than half a million households in membership, negotiates rent increases each year with the representatives of the municipal housing companies and – since 2011 – the private landlords, too. The outcome of the negotiations, which are conducted at the level of the municipality, are binding on both the properties rented by the municipal housing company (MHC) and the private rented sector.

Many people in the audience were clearly impressed with the Swedish system

But is it a people’s paradise?

The Swedish housing system is very different from our own. Formally, there is no “social” housing as such. Indeed it is such an alien concept, that when I spoke at a meeting in Stockholm a year ago, the only English words I heard spoken in the break-out groups were “social housing.” Sweden financed housing construction during the period of the “Million Homes Programme” (from the early 1960s to early 1970s) on the principle of tenure neutrality. So the private landlords received more or less the s

ame subsidies as the MHCs.

The Swedish housing system was therefore founded on what Jim Kemeny called a “unitary housing market” – which he contrasted with the British “dual” rental market in which the social rented sector performs a “residual” role in housing the poorest households, the private rented sector either strangled by market-insensitive regulation or largely left to the market, and everyone else becomes home-owners.

I gained a valuable insight into how the Swedish system worked on a study visit to the country in 2000, when researching Social Market or Safety Net? for the Joseph Rowntree Foundation. It became clear that Sweden was able to operate the system as it did – essentially with relatively shallow supply-side subsidies spread across a broad range of the population – because of its internationally low levels of income inequality and poverty. In contrast, with our very high levels of poverty, it is not only necessary but right that we should provide deeply housing as an essential safety net to the broad spectrum of our population who live on low incomes. This approach was reinforced by the obligations placed upon local authorities since 1977 to provide secure accommodation for non-intentionally homeless people in “priority need.” Scotland has gone one stage further by abolishing the “priority need” restriction in 2012.

The critics of this approach might call it “residualisation.”

I preferred to call it a safety net.

I learned something more about the Swedish system in research conducted with Suzanne Fitzpatrick for the UK Government. Far from providing “housing for all” Swedish municipal landlords actively avoid housing the poorest and most vulnerable households – at least from the more popular stock. Formal minimum income requirements (e.g. they must be a multiple the rent), requirements for references, no history of rent arrears, and no record of complaints from neighbours each and together help to form a barrier against the poor and vulnerable.

This tendency is likely to be strengthened by Sweden’s response to the European Union’s ruling that Swedish municipal housing is insufficiently targeted to merit exemption from normal competition rules. When faced with the same problem, the Dutch housing associations placed an income cap on eligible tenants. In Sweden, the MHCs decided to become more “mainstream”, so weakening their social role further.

Those people who are unable to access housing through the mainstream market, must turn to the social services departments of the municipalities, in the hope that they are able to provide housing leased by them from the MHCs or private landlords. These “training flats” are often managed as a kind of probationary tenancy, with requirements for tenants to meet employment or training obligations, and abstain from alcohol or drugs. If they meet such obligations then they might progress to mainstream municipal housing.

When I worked at Glasgow University in the 1990s and early 2000s, we hosted a number of study visits from SABO, the body that represents the Swedish MHCs. As the leader of one such party told me, an important motivation was to educate colleagues in the dangers of moving to a more selective housing system. But on my visit to Sweden in 2000, I found that polarisation exists within the Swedish municipal stock. The better off households tend to live in the older housing – whose rents are also relatively low because the debts used to build them have been paid off. Meanwhile, those with little choice are more likely to be housed in the less popular peripheral housing schemes built in the 1960s and 1970s. I was taken to Rinkeby, an estate in Stockholm, where today more than 85% of residents were either born abroad, or both of whose parents were born abroad. This is an extreme case, but it illustrates the point that “housing segregation is strong and increasing in most Swedish cities” (Lind, 2014).

But what of the private landlords? These cannot be compared readily with their British counterparts. Much of the Swedish private rental stock was developed with access to more or less the same interest subsidies that the MHCs enjoyed, which is why they can be treated as being part of the same sector without causing them to disinvest. In other words, it is most unlikely to provide a suitable model of the UK.

Indeed, with chronic hosing shortages, the Swedish system is looking decidedly shaky. The difficulty in accessing housing in the large cities is now acute – the very reason I was invited to speak about the British system at a meeting organised by Global Utmaning (Global Challenge) an independent Swedish think-tank a year ago. (I didn’t recommend it!) In these circumstances the system of rent regulation does a fine job of protecting “insiders” from the market pressures arising from shortages, but as the academic Hans Lind has observed “most of it [the rental market] is closed to ‘outsiders’.”

The market in legal and illegal sub-lets and sales of regulated tenancies are now the only route in for those who cannot access the mainstream market.  Indeed, Lind argues that the SUT’s policy of insisting that new developments should pay their way from the moment they are completed, reduces the MHCs’ ability to provide new affordable housing. In other words, the principle of rent pooling so that the debt burden associated with newly constructed dwellings is shared is firmly rejected to project existing tenants at the expense of those people who are locked out of the system.

Even Sweden’s previously enviable record on poverty is on the slide. In 2005, almost twice the proportion of people in the UK lived below the OECD’s poverty line as was the case in Sweden. By 2012 the rates were almost identical – not because things had improved here, but because the poverty rate had soared in Sweden. (Poverty is still lower in Sweden than in the UK on the EU’s poverty line, but the gap has narrowed.) If my long-standing hypothesis is correct, the Swedish housing system will need to adapt to reflect this new reality.

None of this is to excuse the UK’s record on housing.

Like Sweden we have a mounting crisis of housing supply, and people of my generation have benefited from house price inflation at the expense of younger people. The UK Government seems determined to wreck the vital safety net function offered by social rented housing – through fixed-term tenancies, the “affordable” rent model, the extended right to buy, and the cuts to Housing Benefit. The record in Scotland is better, but the commitment to new social rented housing has been too weak here, too.

And none of this is to suggest that our private rented sector should remain unreformed. The Scottish Government seems to have been persuaded by a system more akin to Germany’s whereby initial rents are usually set by the market whilst restrictions are applied to increases. These limits are normally 20% over a three year period, but in most States these have been reduced to 15%. In especially pressurised markets, caps on new rents are being imposed, too.  The proposed granting of security of tenure is also a significant reform given the notorious insecurity offered by the “assured shorthold”/ “short assured” version here.

There is much to admire about Sweden. Its policy on refugees – adopted in the face of a growing anti-immigrant party – puts us to shame. But in this instance, we almost certainly have more to learn from Germany.

 

Sources

Fitzpatrick, S and Stephens, M (2007) An International Review of Homelessness and Social Housing Policy, London: Communities and Local Government

McCrone, G and Stephens, M (1995) Housing Policy in Britain and Europe, London: UCL Press

Housing Europe (2015) The State of Housing in the European Union 2015, Brussels: Housing Europe

Lind, H (2014) “Social Housing in Sweden” in Scanlon, K, Whitehead, C and Arrigoitia, M (eds.) Social Housing in Europe, Wiley-Blackwell

Stephens, M, Burns, N and McKay, L (2002) Social Market or Safety Net? British Social Rented Housing in a European Context, Bristol: Policy Press

Stephens, M, Fitzpatrick, S, et al (2010) The EU Study on Housing and Exclusion, Brussels: European Commission