Rent control and potential underutilization of housing resources

Purpose - Rent control may lead to inefficient use of subsidized apartments. This paper aims to empirically investigate if this phenomenon exists under the Swedish rent control regime. Design/methodology/approach - The quantitative part of the study uses data from Statistics Sweden to calculate, for all municipalities in Sweden, the fraction of residential rental units where no one is living permanently. The qualitative part augments the quantitative results with a survey where representatives for 14 municipal and four private property companies in small, mid-sized and large municipalities were interviewed. Findings - This paper finds that a surprisingly large fraction of the rental housing stock, about 9.4% on a national level, is underused in the way that rent is paid but no one is living permanently in the apartment according to the official Swedish population register. The underutilization rate is negatively correlated to the median rent in a municipality. Research limitations/implications - The study is limited to Swedish data. This paper does not explore the potential effects of regional economic and demographic conditions on the measure of underutilization. Practical implications - A policy implication of the present results is that underutilization of the Swedish rental housing stock can be reduced by limiting the supply of rent-controlled housing to households that are in economic or social need. Originality/value - Numerous papers have analysed various aspects of rent control. However, few papers have empirically analysed how a general rent control system where all tenants, irrespective of economic or social need, have access to rent controlled apartments may contribute to housing inefficiencies. This research contributes to the empirical literature on rent control by analysing the relationship between non-targeted housing subsidies and underutilization of housing units.