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

Abstract: Over 71,000 rental contracts mediated through a public housing queue in Stockholm, Sweden, between 2003 and 2023 are analyzed. As rents are set substantially below market-clearing levels, the average required time in the queue reached 19.6 years in the city center in 2023. Two consequences of the longer required time in the queue are identified in this paper: First, the fraction of apartments leased to young tenants, defined as those between 18 and 30 years of age, has declined sharply during the period, while the fraction of old tenants, defined as those being 60 years of age or older, has increased. In the most attractive geography, the city center, 4.4% of new leases went to young tenants in 2023, compared to 12.7% in 2003. Meanwhile, the fraction of old tenants increased from 4.9% to 22.2%. Similar trends are observed in the inner and outer suburbs. In the former, the fraction of young tenants declined from 30.9% to 3.5%, while the fraction of older tenants increased from 2.6% to 12.2%. In the outer suburbs, the fraction of young tenants declined from 41.6% to 15.6%, and the fraction of old tenants increased from 2.6% to 12.2%. Second, as older individuals accrue more time in the queue, they are able to obtain apartments that are more subsidized compared to younger tenants. For leases signed in 2022 and 2023, older tenants pay 28.4% less in rent per square meter for a two-room apartment in the city center. This effect is present outside the city center as well, as older tenants pay 16.6% and 17.6% less compared to young tenants in the inner and outer suburbs, respectively. The analysis shows that, over time, queue-based allocation of apartments with below-market rents will benefit older households at the expense of younger households.

Keywords: rent control; housing supply; housing demand; housing misallocation

JEL-codes: D40; R21; R28; R31

Language: English

32 pages, June 24, 2024

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