Scandinavian Working Papers in Economics

Working Paper Series,
Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance

No 21/4: Demand for rent-regulated apartments:The case of Sweden

Mats Wilhelmsson ()
Additional contact information
Mats Wilhelmsson: Department of Real Estate and Construction Management, Royal Institute of Technology, Postal: Royal Institute of Technology, KTH, Teknikringen 10B, 100 44 Stockholm, Sweden

Abstract: The Swedish rental housing market is characterised by, among other things, a form of rent control in which rents remain lower than market rate. This means that distribution of rental apartments is not based on the tenants' willingness to pay for a specific apartment. Instead, in most cases, distribution is based on a person's position in the housing agency queue. In Stockholm, many public and private housing rental contracts are set up via a common queue administered by the municipal housing agency. Individuals with much time in the queue can access a more extensive selection of rental apartments. The purpose of the following study is to estimate the demand for rent-regulated apartments. We do so by investigating the relationship between queue time and apartment attributes. A so-called hedonic waiting time equation will be estimated. The implicit prices of the rental apartment will be related to the tenant's income, and income elasticity will be estimated in a second step. The results indicate a significant willingness to pay for rent-regulated apartments, and that the demand for rental apartments can partly be explained by regulated rents, and partly by tenants' income.

Keywords: Rental housing market; Queuing time; Waiting list; Excess demand; Controlled rents

JEL-codes: R21; R23; R31

24 pages, July 1, 2021

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