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Broken how, exactly?

Sweden has made its choice and must live with the consequences. Two years ago almost to the day, after a vote that attracted unprecedented public interest, Sweden introduced a new national flower. It is Campanula rotundifolia, a.k.a. the Harebell or Small Bluebell. No one ever says what happens to the old national flower on these occasions. Does it sit in its bed glowering at its successor, like Ted Heath, or does it try its hand at hosting a TV show like Harold Wilson? Those were the days, when nubile young couples sat up in bed as soon as an ex prime minister came on the telly. But if poor Mr Wilson was confused by that opening sequence, think how a flower would feel.

The only reason I got onto the subjects of harebells and Harold Wilson and pollination being flower-nookie was so that I could make a joke about how Brett Christophers, professor in the Institute for Housing and Urban Research at Sweden’s Uppsala University, spends most of his Guardian article tiptoeing around the Campanula rotundifolia. Er, that was the joke. Here’s the article.

“From poster child to worst performing EU economy: how bad housing policy broke Sweden”

Bad housing policy. The policy is bad. Very bad. The article says that the housing policy is bad.

This, ultimately, is the nub of the matter. What Sweden is facing up to today is massive, long-term political failure to sort out its housing market.

On the one hand, Sweden has continued to substantially subsidise home ownership, pouring unnecessary fuel on the fire of the housing bubble. Most notable here is tax relief on mortgage interest. Decades after such relief was jettisoned elsewhere – even the famously homeowner-friendly UK got rid of it in 2000, Gordon Brown rightly describing it as a middle-class perk – it remains in place, absurdly, in Sweden.

On the other hand, Sweden has a fundamentally broken rental system,


which for a variety of reasons


comprehensively fails to make affordable accommodation widely and readily available in the largest cities, especially for those with greatest need and least resources. The effect of this lack of viable rental accommodation has been to further inflate demand for home-ownership, putting additional upwards pressure on house prices and debt burdens.

Back in 2015, the Guardian was more honest: “Pitfalls of rent restraints: why Stockholm’s model has failed many”

Half a million are on the waiting list for rent-controlled flats in Stockholm, meaning a two-tier system, bribes and a thriving parallel market

10 comments to Broken how, exactly?

  • bobby b

    Since the first of this year, it has trebled.” Wesley Mouch is exasperated: “I can’t help it! I can’t help it if people refuse to cooperate. I’m tied. I need wider powers.” Eugene Lawson is vengeful: “But it is their own fault,” he scolds. “It’s their lack of social spirit.”


    Now it’s the Swedish hairballs’ turn. They need stricter rent control, stricter interest rate control, stricter . . . everything they can think of. The markets must be forced to perform.

    (I hope “hairball” has the same connotation over there as it has in the US. If it does not, the joke is lost.)

  • Fraser Orr

    A couple of things:

    1. High interest rates (everywhere) are not some magick cyclic event, like Haley’s comet or solar flares. The governments of the world have spent the past three years spending money with utter abandon, and high interest rates are us paying back this profligacy through a massive tax on wealth, which is to say a massive devaluation of our currencies.

    2. The housing market is a mess because it is massively regulated. Where, what, when, how much, pricing, rental pricing, service agreements, building codes, green zones, all of these things massively impact and mess with the normal competitive pressures that would properly control costs. I mean rent controlled apartments? Why not just aerial bombing or defunding the police — the only worse ways to destroy a city.

    3. And here — a rare compliment for the US financial culture. In the US the large majority of mortgages are fixed rate, and so not impacted so much by the vicissitudes of the central bank. My mortgage payment is exactly the same as it was before. To me adjustable rate mortgages are nothing short of gambling with your home. I mean, why not put your retirement savings on red down at the local casino? “Mr Homeowner, sure I’ll lend you the money to buy your home. What’s that you say? How much will the loan cost? No idea, and BTW we have a legal right to change it to whatever we want whenever we want. Just sign here on the dotted line.”

    BTW, to balance out the nice things I said about the USA, how many people know that there is practically no private mortgage market in the US? Nearly every domestic mortgage in the USA is owned by the government, one way or another. FFS, they stealthily nationalized the whole mortgage industry and nobody noticed.

    And another side note about national flowers — as a Scottish person I look at my native land and wonder what the hell happened. It used to be a land of salt of the earth, work down the mines, work on the docks, practical, no nonsense, no bullshit type of people. A bit too lefty for my taste, but still, honest, decent, hardworking people. Since I left it seems to have turn into this land of weak kneed, spineless, follow-the-latest-weird-fetish-fad big-brother-is-your-friend crazy land. What the hell happened? I am thinking that our national flower the thistle, — tough, bristly, but having its own rugged beauty — needs to be replaced by something more suitable to modern Scotland. Perhaps a daisy, organic of course, which identifies as a lilly, perhaps. Or one of those plants that has both female and male parts? Yeah, that is what they need.

  • Snorri Godhi

    The situation in Sweden seems to be similar to that in Denmark (during my time there).

    There are non-profit rental agencies in the Netherlands, too, but there are also for-profit rental agencies there, relieving the pressure so that waiting lists for those who can’t (or won’t) afford to pay the market price are (or were) “only” a few years.

  • Fraser Orr

    @Snorri Godhi
    There are non-profit rental agencies in the Netherlands, too, but there are also for-profit rental agencies there, relieving the pressure so that waiting lists for those who can’t (or won’t) afford to pay the market price are (or were) “only” a few years.

    So you are saying that price controls led to long queues of people waiting for undersupplied goods? Who knew? They should put that in an economics textbook or something!!

  • Snorri Godhi

    Fraser: I did not need to say that. The article at the last link in the OP said it back in 2015. (And many people said it long before then, of course.)

  • Paul Marks

    That prices, including wages and rents (which are prices), should be set by supply and demand (the free market) is one of the most basic principles of economics – but it is rejected by the political (and academic) establishment in many countries, not just Sweden.

    And that subsidising something, whether housing, or medical care, or higher education, increases-costs-over-time is also a basic principle of economics – but people who support housing subsidies, or government backed “student loans”, or government medical subsidies (or whatever), will not admit that their policies just increase-costs-over-time.

    It is much the same with government backed “Collective Bargaining” – its supporters will not admit that government backed “Collective Bargaining”, if it increases wages and so on above what would have been the case without Collective Bargaining, must (MUST) increase unemployment over time.

    “Progressive” politics is, and has been from the start, a revolt against basic economics.

  • Snorri Godhi

    Regardless of his fudging* the issue of rent controls, Brett Christophers makes some good points, which i think it worth spelling out.
    (* if this is the right word)

    A. The Swedish gov. artificially restricts the supply of rental housing.

    B. The Swedish government artificially inflates the demand for owner-occupied housing.

    C. This led to a housing bubble, a misallocation of resources that damages the entire Swedish economy.

  • Paul Marks

    Snorri – yes, but this does leave out important point.

    The monetary system – even if the government did not intervene in rented and bought accommodation at all, if the money supply (the Credit Money) is expanded, then there would be a housing bubble (and a stock market bubble) anyway.

    The late 1920s in the United States is a good example of this – and also a good example of how a “Gold Standard” is different from gold-as-money. A gold “standard” allows the government and the pet banks to expand the money supply (leading to a boom-bust) whilst pretending they are not.

    This is why I always object when I hear or see the term “gold standard” – if gold (or whatever commodity) is the money there is no need for that word “standard” (which is a cover for institutionalised fraud).

    Hat tip to Richard Cantillon and David Hume for making this point some centuries before me.

    As for Sweden – like all modern countries it is not even “on a standard”, the “money” is openly fiat – which the government, and the pet banks, expand at will.

    This must lead to disaster – and it does.

  • Kirk

    The siren song of market intervention is always there. The politicians hear it, thinking it means votes. Which it does, in the short term. Then, when the whole thing inevitably blows up, they disavow ever having listened to it.

    A traditional market-based economy, sans interventions, is a resource allocation machine. In order for it to work, the resources have to be allowed to be distributed and dealt with as the markets dictate. It’s a vast network of decision-makers that you dare not disrupt by meddling in their communications. Things like rent control are basically futile attempts to get the markets to say something that isn’t true, in this case the false information is being spread that there is enough housing. That’s what rent control is doing, lying to the marketplace. Because of that, the signal never reaches the people that would normally be adding to the housing stock, and even if it did, they’d be damned unlikely to respond because there’d be little point to building new stock when they were going to lose their shirts due to all the distortions that rent control inevitably brings with it.

    If I remember right, Robert Heinlein once made an offhand remark about ecosystems, namely that you only wanted to try intervening in one if you had massive amounts of research and very sophisticated computers to run simulations on, and even then, the complexity almost certainly doomed you to failure.

    I think that’s also true of economics. I’ve yet to see anyone who could really explain what the hell was going on, out there. Let alone, effectively intervene.

    Looking back over my life, I don’t think any of these idiots running these things have ever managed to “get it right”, and the more interventions they bring in, the worse it gets. It’s like that joke about the guy who had a shrew problem, which necessitated bringing in ever-increasingly bigger predators until he was finally faced with a surfeit of gorillas… You try fixing something small, you inevitably wind up with bigger problems requiring more and more heroic interventions until the whole thing just collapses under the weight of the inherent contradictions.

  • Fred the Fourth

    Kirk, I believe that remark was made by Star in Glory Road, in response to Oscar’s annoyance at the existence of some local pest. Dragons, if I recall correctly.