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Social Housing Finance in Sweden

Institute for Housing Research, Uppsala University, Box 785, 80129 Gävle, Sweden, bengt.turner{at}ibfuu.se

Sweden historically had a highly subsidised housing construction and rehabilitation. Subsidies were mainly channelled through an interest subsidy system, which reduced initial capital expenditures. A boom in the housing market in the late 1980s turned into a 'bust' in the early 1990s. This was due to a combination of factors: a lower inflation rate, a deep economic recession and reduced interest subsidies in combination with a tax reform. The effect was to create a large price fall, vacancies, a low construction rate and large defaults. The bank crisis was counteracted by a tighter credit market, with a more thorough screening of borrowers. Municipal housing companies lost their protected position on the credit market in the early 1990s. Many of the companies were severely hurt by an increasing number of vacancies, and had an insufficient safeguard in terms of a low equity. It is thus anticipated that municipal housing companies will be an important target for bank screening in the future, and it is anticipated that banks will develop more sophisticated risk-management techniques in the housing market, which also will include municipal housing.

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