In Sweden, Rent Control’s Doing What Rent Control Does

By Scott Lincicome of Cato.

"Cato scholars (and the vast majority of economists) have long opposed rent control policies, and Sweden’s housing situation — which The Economist reports has just caused Stefan Lofven to become the first Swedish prime minister to lose a no‐​confidence vote — provides the latest example of why:

Housing is a sensitive political issue everywhere, but in Sweden it is especially touchy. Over two‐​thirds of the country’s municipalities say they have housing shortages. Authorities estimated the total shortfall at 160,000 units in 2018, in a country with 5m dwellings. The price of a villa in Stockholm has risen 19% in the past year. All the country’s rental units, whether public or private, are subject to rent control, making everyone’s rent a matter of government policy.

Housing shortages are, of course, the utterly predictable outcome of a national rent control law. And, to Lofven’s credit, he and several other Swedish politicians are seeking to reform (albeit modestly) Sweden’s system by permitting “free‐​market rents on new private developments.” However, opposition from the Left (whose leader — gasp! — “saw this as a dangerous step towards deregulating the entire market”) and messy domestic politics have imperiled those reform efforts. Thus, Mr. Lofven’s job and, more importantly, Sweden’s housing mess remain very much in doubt.

Hopefully, American politicians, many of whom are flirting with rent control mandates yet (presumably) want to keep their jobs, will take note."