Sweden's housing market: structural challenges Hanna Aspegren DG Economic and Financial Affairs European Commission Stockholm, 23 October 2018
Supply side characteristics: Construction aspects: Construction costs? Zoning and planning processes? Competition in the construction sector? Rental market: Limitations of utility value system? Rental market reforms? Taxation aspects biased towards ownership? Use of current housing stock: Capital gains tax capping removal chain? Limited availability of rental units drive young and urban households to over-indebtedness?
Construction aspects: high construction costs Price level index for residential construction Source: European Commission (Eurostat)
Construction growth reaching an inflection point? Residential investment as % of GDP in Sweden and EU peers Since the crisis in the 1990s, construction steadily edged upwards with an average of roughly 20 000 completed dwellings per year over 1994-2012. After a peak in 2017 at 51 000 completed dwellings, (49 percent rental units and 51 percent tenant-owned) levels are now expected to come down (10% drop in housing starts in H1 2018 compared to H1 2017). Source: European Commission (Eurostat)
Housing starts versus projected need Housing starts, including net conversions, versus projected need Source: Boverket, Statistics Sweden
Labour productivity in construction Labour productivity in construction sector, Sweden and selected EU countries Source: European Commission
Rental housing supply Cumulative change in rental housing stock in Greater Stockholm Source: Boverket, Statistics Sweden
Relative indebtedness of households Debt-to-income ratio for different groups of mortgage borrowers (September 2017) (*) Source: Riksbank; Statistics Sweden (*) Based on disposable monthly income excluding tax-free income sources such as child allowance
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Affordable housing in Sweden Hans Lind Formerly at KTH
How to evaluate the housing situation? How easy is it to find any rental housing with a relatively low rent (less than 30% of low income after tax, appr 4500 SEK/month)? How easy is it to enter the suburban ownership market? Can you get a loan Can you afford 1-2% amortization?
Observation Serious problems today in all cities with 50 000 people or more Housing shortage, defined in terms of cannot find housing easy at reasonable terms Insider - outsider Weaker - stronger
Why important to do something? General welfare, freedom Aspects related to labour market and higher education Avoid an increasing black market and an increasing black economy
Fundamental explanation Supply (in whatever form) has not increased in line with demand Supply has only targeted higher income groups, which was rational up to around 2005.
What to do? State has to reduce national interest Must trust local decision-makers about trade-offs Municipalities has to increase supply of land and plan to target different income groups Forced by the state? Forced by the market (by the state)?
Social housing? Defined as rents below normal level and accessible only if low income Might be necessary until supply has increased enough Might be necessary if want to reduce segregation in areas that is popular among high income groups
Is new housing policy likely? Against: Large majority has no problem with their housing situation Difficult to change role of municipality For: Historical tradition to co-operate and solve serious problems Necessary if welfare state as we know it shall survive
Sweden s Housing market: Structural Changes October 23, 2018 Bengt Hansson
On the face of it no problem! Average number of inhabitants per dwelling Average number per dwelling in Sweden, 1960 to 2017 2,6 2,5 2,4 2,3 2,2 2,1 2,0 1,9 2,9 2,7 2,5 2,3 2,1 1,9 1,7 1,8 DE FI NO SE DK IRL US ES AUS UK 1,5 1960 1970 1980 1990 2000 2010
Index 2005=100 Housing construction performs well 250 Index of completed dwellings SE 200 AUS DE NO 150 FI CA UK 100 NE DK 50 US IRL ES 0 2000 2005 2010 2015
Index Strong housing demand in Sweden 200 Real house prices 180 160 140 120 100 80 60 40 CA SE NO AUS FRA DK FI DE UK US NE IRL ES 20 0 2000 2005 2010 2015
Change in the ratio of housing investment to GDP The Swedish Construction industry performs the best The reaction of housing investment ratios to changes in real house prices, between 2000 to peak year 80 70 60 50 40 30 20 10 NE NO US FI CA DK SE IRL FRA ES UK 0-40 -20-10 0 20 40 60 80 100 120 AUS -20 DE -30 Change in real house prices
Change in the ratio of housing investment to GDP The reaction of housing investment ratios to changes in real house prices, after the financial crisis 80 SE 60 NE NO US 40 20 UK DK AUS DE IRL CA 0-60 -40-20 FI 0 20 40 60-20 FRA -40 ES -60-80 Change in real house prices
Housing is becoming more affordable 1,60 Rents in rental apartments and houses to disposable income per capita 1,50 1,40 1,30 1,20 1,10 1,00 0,90 0,80 0,70 0,60 New Old House 1980 1985 1990 1995 2000 2005 2010 2015
Rents in new houses to existing rents 1,8 1,7 1,6 1,5 Housing shortage Excess supply of housing 1,4 1,3 1,2 1995 2000 2005 2010 2015
Monthly average rents in Sweden 2017 1 room and kitchen 3 rooms and kitchen Subletted owner-occupied apartment % % Sweden 10660 172 13200 95 Greater Stockholm 13243 186 15920 110 Greater Göteborg 7421 81 12800 89 Greater Malmö 6765 60 10960 49 Municipalities with > 75000 inhabitants* 6437 71 10000 50 Municipalities with < 75000 inhabitants* 4961 48 8080 32 Subletted rental apartment Sweden 7544 92 9638 43 Greater Stockholm 10537 127 13114 73 Greater Göteborg 7626 86 10744 59 Greater Malmö 6765 60 9638 31 Municipalities with > 75000 inhabitants* 6314 68 8611 29 Municipalities with < 75000 inhabitants* 5166 54 7189 17 Rent per apartment in new buildings Sweden 6053 54 9975 48 Greater Stockholm 7636 65 12722 68 Greater Göteborg 7412 80 11043 63 Greater Malmö 5540 31 9644 31 Municipalities with > 75000 inhabitants* 5856 56 9925 49 Municipalities with < 75000 inhabitants* 4824 44 8712 42 Rent in rented apartment Sweden 3921 0 6759 0 Greater Stockholm 4635 0 7569 0 Greater Göteborg 4107 0 6764 0 Greater Malmö 4241 0 7374 0 Municipalities with > 75000 inhabitants* 3758 0 6674 0 Municipalities with < 75000 inhabitants* 3356 0 6137 0 *Excluding metropolitan areas Source: Boverket, Statistics Sweden and Valueguard
The housing crisis is self-inflicted. Housing construction and investment not a problem The supply elasticity in Sweden perhaps the highest in OECD On average quite a number of houses. But. Substantial lock in effects. Rent regulations To high capital gains tax and to low property tax Interest rates deductions make borrowing to attractive Households are overindebted due to a weak amortization culture Prices of houses and owner-occupied apartments at unprecedented levels Difficult to get a loan unless substantial equity There is an affordable housing problem Low-income and young households cannot access entry-level housing
The Swedish Public Housing companies Affordability seminar 23.10.2018 Susanna Höglund SABO
High construction costs 1. Poor competition for construction and materials 2. Favourable treatment for tenant ownership (Bostadsrätt) 3. Appeals process (Överklagande)
What we do 1. Serial production the Kombo House 2. Foreign constructions companies 3. New business models
Thanks! Susanna Höglund susanna.hoglund@sabo.se
Affordable housing where does Sweden stand and what can it learn from other countries? Austria: The example of Vienna Stockholm, 23rd of November 2018 BKK-3 Susanne Bauer, Wiener Wohnen Kundenservice GmbH
The City of Vienna General Facts and Figures Dimension and Size Area: ca. 415 km² Inhabitants: 1.840.266 (2016) Metropolitan Region Centrope: ~ 7,2 Mio Inhabitants Administration and Organisations Capital and Federal State 23 districts, UN, OPEC, OECE, etc. Stefan.lefnaer Economy and Wealth 1st place in Quality of Living Ranking since 2009 by Mercer GDP/capita: 47.700 (Dez. 2016), average age: 40,5 years; 185.000 students;
Overview: Housing structure in Vienna Housing stock property Rights 35 30 25 20 15 10 5 0 33,3% 20% 25% 12% 6% 4% Datenreihe 1 Source: Statistik Austria, Mikrozensus 2015, Neues Hochrechnungsverfahren ab 2014
Share of socially rented flats - in the stock of primary residences spatial distribution Source: Statistik Austria, Registerzählung 2011
Important Legal Framework in Vienna: (a selection:) Viennese Housing Promotion and Renovation Act Limited profit Housing Act Rent Act Mietrechtsgesetz (MRG)
Wohnfonds_Wien: Vienna Building Fonds MA 50 Referat für Wohnbauforschung und internationale Beziehungen
Statistics refurbishment since 1985 / guarantee until 31.12.2016 MA 50 Referat für Wohnbauforschung und internationale Beziehungen
Statistics new buildings since 1995 MA 50 Referat für Wohnbauforschung und internationale Beziehungen
Use of subsidies: Subsidised new construction about 266 Mio. Euro Vienna Housing Subsidies 2018 Object funding about 430 Mio. Euro Total: 532 Mio. Euro Subject funding about 102 Mio. Euro Subsidised renovation: about 164 Mio. Euro Source of funds: Contribution of employees and employers 0,5% each MA 50 Referat für Wohnbauforschung und internationale Beziehungen
Limited profit housing associations (LPHA) MA 50 Referat für Wohnbauforschung und internationale Beziehungen
Income thresholds subsidised and municipal housing Gross and net annual income (arithmetic mean) of employed persons in Vienna 2016 Gross: 32.374 Euro (F: 27.925, M: 36.544) Net: 22.458 Euro (F: 19.877, M: 24.876) MA 50 Referat für Wohnbauforschung und internationale Beziehungen
Further Initiatives 1: - WBI: Vienna s housing initiative 2011 6.250 units will be built additionally to subsidised public housing. 1.600 units will be built in Seestadt Aspern, Vienna s lake side. Private partners are encouraged through financial means - Gemeindebau NEU New municipal housing The construction of further 4000 municipal flats by 2020
Further Initiatives 2: SMART Housing complete, compact, costefficient 1/3 of all new construction is SMART, Apartments that combine a compact ground flor plan with innovative, socially sustainable architecture 7,50 /m 2 foto: kallingerprojekte Slim Building Action Programme for Prefabricated Buildings (Sofortprogramm Schnellbauweise), Temporary living, flexible floorplans, additional communal areas
Vienna Housing Action Plan 2016-2018
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Affordable housing can Sweden learn from Denmark? Stockholm 23rd of October 2018 Torben Liborius, Director at the Danish Construction Association
Stockholm vs. Copenhagen, differences, similarities and inspiration What is affordable how is affordable housing to be supplied? Cheap housing in Copenhagen is a rent less than SEK 4000 pr. month The demand for cheap housing is higher than the supply in both cities Construction activity is high in both cities highest in Stockholm Development in prices on owned apartments - puts pressure on the rental market Apartment sizes Stockholm have a higher share of small apartments Distribution of ownership by sector Other factors, regulations etc.
Apartment prices are high in both Stockholm and Copenhagen 62 000 Sqm. prices in SEK (current exchange rate, not PP-adjusted) 58 000 54 000 50 000 46 000 42 000 38 000 34 000 Stor-Stockholm (Greater Stockholm) København by (City of Copenhagen - 4 municipalities) Region Hovedstaden (Greater Cph Region) Source: Finance Denmark and Svensk Mäklerstatistik
Rental legislation in Denmark in favor of the tenant Legaly, a market rent can only be agreed for residential properties that were put into use for the first time after 1991. For older properties, the rent is determined either by the value of the rental or by the reasonable operational costs associated with the property. The housing rent court has very low valuation of acceptable rent. Substantial renovation can make way for a rent increase With out the 1991-rule, only standard contract law would protect against unreasonably high market rents on rental properties. 1991-rule means more affordable housing in the pre-1991 buildings But does it curb the supply by slowing down the moving frequency?
Fewer small apartments in Copenhagen than in the largest 3 cities of Sweden the answer can be the 95 sqm-rule Apartment sizes in Copenhagen (as a share of total number of apartments), 2018 11,2% 7,3% 9,5% Apartment sizes in Sweden s biggest 3 cities (share of total number of apartments), 2017 5,4% 3,2% 26,1% 31,2% 28,1% 43,8% 34,1% Less than 50 sqm. 50-74 sqm. 75-99 sqm. 100-124 sqm. More than 124 sqm. Source: Statistics Denmark Up to 50 sqm. 51-70 sqm. 71-100 sqm. 101-120 sqm. More than 120 sqm. Source: Statistics Sweden
Social ownership of apartments in Copenhagen Distribution of ownership, 2018 1,2% 6,2% 24,8% Only about ¼ of apartments in the city of Copenhagen are privately owned. 34,0% 12,6% Privately owned Companies (A/S, ApS and other) Public authorities Source: Statistics Denmark 21,3% Social housing organisations Private housing cooperatives Other, n/a Social housing organisations (21,3 %) and private housing cooperatives (34,0 %) accounts for a large proportion of residential apartments in Copenhagen.
Social housing ( almene ) sector in Denmark The sector supplies a large share of the affordable segment of housing The 25 % rule in relation to new residential areas Base capital supplied by the municipality = 10% Construction of new dwellings are subject to a sqm-cost limit increased use of prefab and modular houses Balanced rent, annual total of 3% of construction costs, public subsidy for further costs The National Building Fund
Further food for thought Conversion of older commercial buildings to housing Land in temporary use New building technics to hold costs down AlmenBolig+ a concept where the tenants co-build and participate in the up keep What are the effects of (further) introduction of market based rent? A bigger supply or higher rent: OECD vs. The Danish National Tenants Organisation
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