This article is part of the series Home Truths: Europe's Housing Challenge.

STOCKHOLM — A battle over rent control is brewing in Sweden, one of the idea’s spiritual homes.

The country’s long-standing preference for government intervention in the housing market is facing its stiffest challenge in decades as Swedish parties flirt with deregulation.

“Serious and open-minded discussions on rent control are needed,” Stockholm’s mayor, Anna König Jerlmyr, a member of the center-right Moderate Party, said in an interview with POLITICO. “As always, policies need to be updated as societies change.”

Sweden’s housing market has been a political battleground for over a century. A precursor to the politically powerful Swedish Union of Tenants — or Hyresgästföreningen — organized one of Europe’s first rent strikes in 1916, after residents of Nynäshamn, a town south of Stockholm, complained of cockroaches, lice and bare earth floors.

The average monthly rent for a one-room apartment in Stockholm, of the sort a young couple might live in, is an affordable 4,910 Swedish kronor (about €460).

Rather than hand over their monthly rent checks, the tenants placed them on deposit with town officials, who agreed to hold the money until landlords improved the dwellings. Property owners soon relented and fixed the places up.

The strike was followed by a 20-year legislative tug of war over tenants’ rights, as lawmakers swung from favoring renters to supporting landlords, and back. The debate largely ended in the 1940s, after a series of decisive election wins for Sweden’s Social Democrats allowed the party to institute price controls on housing.

Those laws later evolved into the system Swedes now seem open to rethinking.

'Utility value'

Right-leaning lawmakers and a raft of economists say Sweden’s current system of restricted rent increases and expansive tenant protections has sparked an acute housing shortage and is unfair to many tenants unable to get a rent-controlled contract.

Left-leaning Swedish lawmakers and tenants groups say dialing down rent controls would push lower earners out of Stockholm and threaten the country’s prized ideal of social equality.

The debate in Stockholm is being watched closely outside Sweden, as city governments throughout Europe search for ways to curb spiraling housing costs. Berlin, for example, recently enacted a five-year rent freeze. “This is a big step forward for Berlin tenants, who will now have some breathing space,” said Berlin Mayor Michael Müller in mid-October.

Sweden’s unusual system for pricing housing is based on a key statistic called “utility value” — a calculation that bases a home’s value not on what the highest bidder would pay to rent it, but on characteristics like its size, design and location.

The utility system has successfully kept rents low for coveted “first-hand” rental contracts, in which the tenant deals directly with the property’s owner. The average monthly rent for a one-room apartment in Stockholm, of the sort a young couple might live in, is an affordable 4,910 Swedish kronor (about €460), according to the national statistics agency.

Should the couple need a a bit more space — a baby arrives, or your deadbeat brother “just needs a place to crash while he figures a few things out” — rents for first-hand properties rise modestly, to 6,525 Swedish kronor per month (€610) for a two-bedroom apartment.

First-hand contracts are strictly controlled, however, requiring renters to wait their turn in a public registry. Waiting times for these properties have reached two decades in some areas.

While queuing for the right to rent “first hand,” many Swedes live in “second-hand” properties — sublets. Subletting can cost as much as double for the same apartment, provoking a black market for rentals, with a large proportion of the profits going to the first-hand renter.

König Jerlmyr, the mayor, claimed the utility value system has distorted prices in Stockholm, allowing different properties to rent for similar amounts, even when prospective tenants see differences in their appeal. “That is not fair, I’d argue,” she said.

The system has also meant newer construction fetches lower rents, making Swedish builders reluctant to construct new housing.

“What is important is that we remain open-minded and do our best to ensure that we have a fair and efficient system for housing,” König Jerlmyr added.

'Total confrontation'

Last January, in a sign that Swedes may be readying for a change, the Social Democrat-led government and two centrist parties agreed to a limited program of property market liberalization, a move some worried was a first step toward dismantling the utility value system.

New construction was identified as a sector where rents based on market value could be applied. “The rental model will be reformed by, among other things, free rent-setting in the case of new-build,” Prime Minister Stefan Löfven said at the opening of parliament in January.

Supporters of Sweden’s current system have reacted strongly to the attempt to chip away at rent controls. Swedish Left Party leader Jonas Sjöstedt said he would seek to remove the government if it moved to introduce market-based rents.

“I have been clear that when they suggest things like market rents, which would make it hard for many people to find somewhere to live, then it is total confrontation,” Sjöstedt said earlier this year.

“It is not what a vulnerable person with nowhere to live can be forced to accept" — Käthe Eklund, rent negotiator for the tenants' union

The tenants’ union is also mobilizing. At a recent meeting of the central Stockholm branches, a rent negotiator for the union, Käthe Eklund, rallied members by telling them property owners and lobbyists were trying to replace “‘utility value” with “market value.”

Members of the packed crowd murmured their concern.

She said her job is often to explain how the two “values” differ fundamentally and reiterate her organization’s support for the “utility” and resistance to “market.”

“I tell them ‘utility value’ represents the general tenant’s valuation,” she said. “It is not what a vulnerable person with nowhere to live can be forced to accept.”

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