On to the third installment of my three-part blog series. Today's lecture will cover subletting an apartment in Sweden, and then wrap up the three-day series by looking at some of the social benefits that Swedes get to enjoy thanks to the unheard of number of housing rules.
First rule of subletting: An apartment owner may not sublet his or her apartment for more than six months, and the subletting of an apartment must be approved by the owner's association. Contracts over six months are only approved when the apartment owner moves abroad with the intention to move back into the apartment sometime within the next three years.
For the most part, the first rule is usually ignored, but it is important as we will see shortly.
Second rule of subletting: An apartment owner may not charge more than 10% above the association fee, 20% if the apartment is even partially furnished. A typical association fee here in Stockholm is between $400 and $600 a month, while interest on loans is typically two to three times those amounts. So if you want to sublet your place and you do not own the apartment, you are required by law to take a loss as there is no way to cover your monthly payments.
I think it is fair to say that the second rule of subletting is ignored 100% of the time. In fact, as the supply of rental units is far less than the quantity of apartments on the market, apartment owners are able to charge enough to cover the association fee, their mortgage and then still make a nice profit. When somebody needs a place to live, they really don't have any option but to pay for whatever is available.
It gets interesting when the two rules are combined. If you rent an apartment for more than six months at a rate higher than 10% (or 20%) above the the association fee, and have a rental contract to prove how much you pay each month, you can sue the apartment owner for overcharging you. The contract is all the proof the court needs. Nobody will rent their place without a contract, so it's a risk the owner takes when they choose to sublet. That's the one item in the whole story that actually puts some power in the hands of the renter. I can't imagine what type of person would actually take the owner to court, but it seems like everybody in Sweden knows one person who has been that jerk.
I've done my best to paint a picture of a pretty difficult housing market for a foreigner to enter. Difficult to buy, even more difficult to find a decent place to rent. So why doesn't Sweden do something? It seems like everybody knows there's a problem, but there's also something about Swedes that they just like to go with the flow. I'm guessing the homeowners like the 10% annual increase in their property values, and like homeowners in the US were just a few years ago, they are in denial that there could be any possibility of a bubble. The government has also decided to offer incentives for new developments instead of trying to promote new rental units.
If you look at the system from the flip side, you see that there are some social benefits that come out of all of this. The first is that to date, most owners have accumulated a large amount of equity in their apartments. The next is that almost everybody has a vested interest in their apartment. You know that everybody in your apartment building wants to keep the building nice, that way the value of their apartment doesn't drop. Every building in the city is like this, so if you look around Stockholm, you won't find any run-down housing, disinterested landlords or anything even close to a slum.
In the end, it's a tough system to enter, but you're in good shape once you get past the subletting and the initial barriers to buying or renting first-hand. Maybe that's what the government actually has in mind, everything is designed to protect the Swedes that are in the system, and creates difficulties for new entrants, who are probably foreigners that the Swedish government has no reason to serve anyway. Seems pretty similar to other obstacles Miranda and I have faced getting set up with IDs and the like. While I wish there were better options for me personally, I also like living in such a clean country, where rough areas of town seem nonexistent, and nothing is run down or dirty. I guess I have to give the Swedish rules a lot of credit for keeping the Swedish cities looking so nice.
It's been difficult for Miranda and me to figure out what route to take as 18 more months is a very short horizon to buy, but finding an apartment for such a period is proving to be just as tough. We have decided to continue searching for an apartment to rent, and in the time since I started this draft five days ago, we actually got a decent lead on a place up in Uppsala. I'm crossing my fingers for this one, and crossing the fingers on my other hand for an even better place that I'm still waiting to hear from. This is the first time in months that we've even found ads that meet our requirements, and the first time ever that somebody has responded to one of my inquiries. We'll keep you posted as we learn more. Until then, wish us luck!
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