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The effect of rent regulations and contract structure on renovation: A theoretical analysis of the Swedish system

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  • Lind, Hans

    (Department of Real Estate and Construction Management, Royal Institute of Technology)

Abstract

The standard view is that rent regulation leads to reduced maintenance as the landlord will be able to find tenants at the regulated rent even if the level of maintenance is low. In this article it is shown that the rent regulation system in Sweden interacts with a contract structure where the rent is allowed to increase only if the standard of the apartment is raised compared to when the apartment was new. Ordinary maintenance is included in the rent, and the rent is therefore not allowed to increase when such maintenance is carried out. It is shown that when there is a housing shortage this system creates economic incentives for increasing the standard of the apartment even if this reduces total welfare. The result can be that quality is increased more than in a market system, and that it can increase gentrification compared to such a system. Policy proposals are also presented.

Suggested Citation

  • Lind, Hans, 2014. "The effect of rent regulations and contract structure on renovation: A theoretical analysis of the Swedish system," Working Paper Series 14/10, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    • Handle: RePEc:hhs:kthrec:2014_010
    as

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    References listed on IDEAS

    as
    1. Lind, Hans, 2012. "Pricing principles and incentives for energy efficiency investments in multi-family rental housing: The case of Sweden," Energy Policy, Elsevier, vol. 49(C), pages 528-530.
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    More about this item

    Keywords

    rent regulation; maintenance; renovation; Sweden; gentrification;
    All these keywords.

    JEL classification:

    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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