^NewsInternational Rental Insights: Sweden

Introduction

Inspired by a Brookings series reviewing rental housing globally (link), we’re creating a series looking more closely at what we can learn from rental systems and regulation around the world. The series will focus on rental regulation, but also touch on the housing sector in general. While this series will primarily focus on how rental tenancies are regulated and the different forms tenancy structures can take, we believe the most critical factors for improving housing outcomes is an abundant supply of housing, facilitated by a more elastic housing market, efficient regulation, and market-based resource allocation.

Rental Housing in Sweden

Sweden’s rental housing system is very unique as rents are not set according to market supply and demand but rather on a concept of utility value but is essentially collectively negotiated. In general this means that rents are far below market rents – by as much as 50%. The result is persistent lack of new construction, extremely long waitlists of up to 20 years and a large black market for subletting. The lack of supply means that only about ~35% of Sweden rent – less than many other European countries and similar to North America – despite what appears to be a highly favourable rental system for tenants. This rental system of artificially low rents is also only possible because around half of the rental housing stock is owned by nonprofits known as Municipal Housing Corporations (MHCs) which received government subsidies to construct the housing. While this structure offers stability and predictability for tenants lucky enough to receive a unit, it introduces significant challenges related to housing supply, access, and allocation—particularly in growing urban areas like Stockholm and Gothenburg. Most apartments—especially in cities—are accessed through municipal waiting lists or direct landlord queues. In Stockholm, average wait times for a first-hand rental exceed 9–10 years, with some reports exceeding 20 years in prime areas. Notably, there is no “social housing” in Sweden, because non of the rental is income tested and there is effectively no market rate rental allowed via private negotiation. The remainder of the housing ecosystem is about ~41% private owner occupied and ~23% cooperative.

Term and Structure

Most rental agreements in Sweden are open-ended (indefinite) by default. Even if a lease is fixed-term, the law allows tenants to terminate with three months’ notice unless otherwise agreed, and in some cases tenants may invoke shorter statutory periods (e.g. one month) depending on circumstances.

Leases automatically renew unless valid termination grounds are presented. Subletting is only allowed with landlord consent or with permission from the regional rent tribunal if certain conditions are met. Unauthorized subletting risks forfeiture of tenancy. Although large black markets have formed because of the very large gap between allowed rents and market rents.

Rent and Adjustments

Sweden’s bruksvärdessystem (use-value system) means rents are negotiated collectively and benchmarked to other dwellings of similar quality and utility, rather than determined by demand. This system is enforced through negotiations between property owners associations and the Swedish Union of Tenants, and disputes may be adjudicated by the Rent Tribunal. While technically Sweden allowed privately negotiated rents and do not consider their rent setting practices as ‘rent control’ – the tenant can always appeal to the Rent Tribunal to reset their rents to the ‘negotiated amount’. It’s a essentially a form of bureaucratic rent setting. The Swedish Tenants Union has been criticized however for making any changes necessary to preserve their monopoly control over rent negotiations as the organization depends on fees from the rental market.

Rents can be increased only once every six months and must remain “reasonable“, defined in law as not “palpably higher” than similar units (usually capped at 2–5% above comparables).

Municipal housing companies have in recent years been allowed to charge higher rent for new buildings (cost-based rents allowed for ~15 years before falling under the general rent control framework), but due to high construction costs and limited long term returns, housing starts are limited.

Commencing a Tenancy and Deposits

Landlords typically require proof of employment or income, credit check, and references, and may request a deposit (usually one to three months’ rent), though deposit amounts are not regulated in detail. Application fees are also not usual or legal. Foreigners face no formal restrictions, but new arrivals often struggle due to the general supply shortage. Landlords cannot discriminate against tenants in ways that contradict the Discrimination Act (diskrimineringslagen).

Ending a Tenancy and Notices

Tenants may terminate leases at any time with statutory notice—usually three months. Landlords also have a 3 month notice requirement and can only terminate for reasons such as non-payment of rent, anti-social behaviour, or illegal activities and must generally go through the Rent Tribunal or District Court before eviction is possible. Notably, landlords needing to use or live in the property themselves is not typically an accepted reason for eviction.

Rights and Responsibilities During Tenancy

Tenants have strong protection against arbitrary entry—landlords may not enter the unit except for necessary repairs or inspections, and with appropriate notice. Major repairs and general maintenance (including wallpapering and repainting every ~12 years) are the landlord’s responsibility, though some public housing offers “tenant-controlled maintenance” in exchange for lower rents.

Tenants can carry out basic changes like painting or installing blinds, and have a right to bring in family members as cohabitants, as long as it doesn’t disturb other tenants or damage the unit.

Operating Costs

In most cases, rents are inclusive of utilities like heat, water, and garbage collection. Electricity, broadband, and optional services are usually contracted separately by the tenant. Pass-through of operating costs is restricted to limited situations—such as single-family homes or units with individual metering—and must be specified in a bargaining agreement or tenancy contract.

Condominium fees and local service charges cannot be passed through to tenants unless individually agreed upon.

Key Impacts and Policy Tensions

Sweden’s system clearly prioritizes tenant protection and affordability—for those who can get into the system. But this has created several distortions:

Limited tenant choice: Newcomers — including young people, immigrants, and mobile professionals — face significant barriers to entering the regulated rental sector. First-hand contracts are scarce and access is primarily determined by length of time in the queue system, not by need or ability to pay. In Stockholm, wait times often exceed 9 years—sometimes up to 20 or more for centrally located units—leaving newcomers reliant on short-term rentals, shared housing, or temporary sublets for years

Supply constraints: Strict rent caps make it difficult for private developers to earn adequate returns. New construction has declined, and many builders have shifted focus to condominiums or avoided rental altogether. Sweden also happens to have very high construction costs, especially in urban areas and this is a challenge with growing urbanization. Studies also show that rate of construction for new rental supply also has almost no relation to the length of waitlists.

Inefficient allocation: Below-market rents discourage existing tenants from moving, even when their housing needs change. This “lock-in” effect leads to underutilization of larger or more central apartments. Coupled with low vacancy and long waitlists, dynamic allocation fails—those who need smaller or less central units cannot access them, and those who could utilize larger units stay in place due to artificially low rents. Furthermore, according to one study, only 0.5% of primary rental contracts in Stockholm is returned to the housing agency when the tenants wants to move – instead, tenants typically sublet, trade their leases, or sold on the black market.

Large black markets: Unmet demand has fueled a large informal rental sector—often illegal, overpriced, and unregulated. In Stockholm, “second-hand contracts” (sublets) are pervasive: tenants in this shadow market often pay significantly more than regulated rates. Reports estimate the black market for rental contracts to be worth €110 million annually, with one in five young tenants in Stockholm having paid for such arrangements.

Inefficient renovations: As only building upgrades qualify as a mechanism to increase rents because of the ‘utility-value’ framework, some property owners tend to over-invest in building upgrades as opposed to building maintenance. This is especially true in core areas with big gaps between market and allowed rents. This cost-plus framework leads to excessive renovation by landlords to try and achieve closer to market rents. Essentially, the Rent and Tenancy Tribunal which regulates rents underprices location and overprices the physical building standard.

Comparison between Sweden and BC

In some ways the Swedish and Canadian housing systems are similar in that they both favour homeownership through tax policies i.e. capital gains relief (both) or mortgage interest deductions (Sweden). Both also have similar percentages of renters: ~35%. Both also face high construction costs especially in urban centers. On rental housing regulation Sweden is unique in the way rents are set – not according to the market but rather what is essentially government regulation, which is only possible because around half the rental stock is owned by municipal housing companies. Notably though, this has created large distortions in market leading to inefficient allocation of housing, undersupply of rental, and large black markets. BC, and Vancouver, has moved in some ways towards Sweden’s model with the increased focus on below market’ rental housing supply, social housing, and strict rent controls. This has similarly created inefficient allocation of housing as there is a huge disincentive for tenants in housing units far below market to move. Similarly, it has likely also created a reduction in market priced units and raised the rent for new market rate leases – comparable to secondary rentals in Sweden. It remains to be seen what happens with the below market housing units and social housing as part of inclusionary zoning that cities like Vancouver are requiring. If the Swedish experience is any guide, it may lead to black markets, long waitlists, inefficient allocation of housing, and undersupply of rental.

Sources used in no particular order, where otherwise not cited:


Steve Lafleur – What We Can Learn from Sweden’s Rent Control Disaster
A critical overview of Sweden’s rigid rent control system, with 10–30 year waitlists, heavy municipal ownership, and limited rental housing in a low-growth context.
https://thehub.ca/2024/02/27/steve-lafleur-what-we-can-learn-from-swedens-rent-control-disaster/

100 Years of Rent Control in Sweden – Betonit.ai
Details a 35–55% rent gap between market and regulated units; describes low new rental construction and a large black market of subletting at market rates.
https://www.betonit.ai/p/100-years-of-rent-control-in-sweden

University of Manitoba – CP 2020 Report (Fox)
Academic paper discussing structural failures in Sweden’s housing system, particularly in the context of regulatory and planning constraints.
https://umanitoba.ca/architecture/sites/architecture/files/2023-02/CP_cip2020_Fox.pdf

BBC News – Sweden Housing Shortage
Explains how the housing crisis forces residents into unofficial markets or far-flung areas. Notes that tech companies like Spotify may exit due to housing access issues.
https://www.bbc.com/news/business-58317555

FEE – Rent Controls: A Well-Intentioned Disaster
Compares Sweden, Berlin, and San Francisco as case studies of rent control failing to deliver affordability or adequate supply.
https://fee.org/articles/rent-controls-a-well-intentioned-disaster/

Lawline.se – Can a Landlord Terminate to Reclaim a Unit?
Explains that Swedish landlords generally cannot end a lease simply to reclaim the unit for personal use without tribunal approval.
https://lawline.se/answers/kan-en-hyresvard-saga-upp-ett-hyresavtal-pa-grund-av-att-hyresvarden-vill-nyttja-lagenheten-for-eget-bruk?

Terner Center – Swedish Housing System Memo
Outlines Sweden’s housing model, including the role of public housing, rent setting, and the consequences of supply inelasticity.
https://ternercenter.berkeley.edu/wp-content/uploads/2020/11/Swedish_Housing_System_Memo.pdf

Epicenter – How Rent Controls Damage the Housing Market
Quantifies the scale of Sweden’s informal rental market, especially in Stockholm, and the distortive effects of rigid rent caps.
https://www.epicenternetwork.eu/wp-content/uploads/2024/01/Epicenter_How-rent-controls-damage-the-housing-market_web.pdf

Urban Matters – Class Compromises in an Uncompromising Political Economy
Discusses history and parties in Sweden’s rent setting system.
https://urbanmattersjournal.com/class-compromises-in-an-uncompromising-political-economy-rent-setting-and-the-swedish-tenants-union/

Disclosure/Disclaimer:
This blog is published by Habit8 Property Management, licensed property managers in British Columbia. The information provided is for general informational purposes only and does not constitute legal, financial, tax, or other professional advice. While we strive to ensure accuracy, the content reflects our understanding as of the date of publication and may not account for future changes in laws, regulations, or market conditions. You should consult appropriate professionals before making any decisions based on this content.