Housing Studies

ISSN: 0267-3037 (Print) 1466-1810 (Online) Journal homepage: http://www.tandfonline.com/loi/chos20

The significance of Swedish rental policy: Cost

renting: Command economy versus the social
market in comparative perspective

Jim Kemeny

To cite this article: Jim Kemeny (1993) The significance of Swedish rental policy: Cost renting:
Command economy versus the social market in comparative perspective, Housing Studies, 8:1,
3-15, DOI: 10.1080/02673039308720746

To link to this article: http://dx.doi.org/10.1080/02673039308720746

Published online: 12 Apr 2007.

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 Housing Studies Vol 8 No I pp3-15

The Significance of
Swedish Rental Policy:
Cost Renting: Command Economy versus
the Social Market in Comparative
Perspective
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Jim Kemeny

Abstract
Recent literature on the Swedish rental system has missed the central significance of the Swedish
system for international comparative purposes by neglecting the rent-setting system and by
unwittingly adopting an Anglo-Saxon perspective. In this paper I attempt to rectify this by
developing a comparative conceptual framework for the analysis of rental systems. I outline the
post-war history of the Swedish rent-setting system, and argue that this constitutes an example of a
unitary social rental market in the making, whereby public and private renting are integrated and
public renting expands to become market leader for rent-setting purposes. According to this model,
public renting is allowed to compete with private renting such that its cost structure increasingly
determines the rent levels on the rental market as a whole. This 'market strategy' constrasts to the
Anglo-Saxon model in which public renting is segregated from private renting, its growth
suppressed (or even reversed through discounted sales) to prevent public renting competing with
private renting and owner occupation. The 'command policy' uses the principles of the command
economy to achieve the goal of sheltering both owner occupation and private renting from
competition from a non-profit form of rental housing. Other countries where a market policy has
been adopted, such as Germany and the Netherlands, are also discussed.

with its own legislation and institutional frame-

Introduction
The way in which public rental housing is
organised, in Anglo-Saxon and many European
countries, is to retain it as a separate sector,
kept clearly apart from the privately owned
profit-oriented rental market and owned
primarily by municipalities or other public and
semi-public bodies or by non-profit or chari-
table housing organisations. Public and private
renting thereby comprise two separate and
distinct markets, where finance, public sub-
sidies, access and allocation, conditions of
security of tenure and rent-setting principles
are organised on quite different lines, each
work. Renting in most western countries can
therefore be described as 'dualist' in organisa-
tion and structure, with discrete and parallel
public and profit-oriented sectors kept apart
by legislation and other policy measures.
Typical for dualist rental systems is that, while
private renting is unsubsidised and largely
unregulated, public renting is organised along
command economy principles with strict
centralised political control over key entre-
preneurial decisions such as levels of invest-
ment and rent-setting, and with a bureaucratic
allocation system. The net effect of this is
precisely the same chronic shortage of public
renting as exists in a socialist command

3
 Housing Studies V0I8N01
economy with the important difference that
keeping the supply of public renting sup-
pressed so as not to compete with private
renting and owner occupation is often, if not
always, an explicit political aim.
The rental system in Sweden is remarkable
precisely because housing policy is oriented
to overcoming dualism by moving away from
the command system that was in place before
the Second World War, and creating what I
have termed a unitary rental market (Kemeny,
1982) in which private rental housing is inte-
grated with public rental housing in such a
way as to create a single rental market. A key
feature of this unitary rental market is that
rental housing run by municipal Housing Com-
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panies acts as market leader in terms of
housing standards, security of tenure, and,
crucially, rents. This unitary rental market is
therefore better described as a unitary social1
rental market, since private renting is in
receipt of state subsidies - or alternatively is
subject to net negative subsidies (taxation) -
comparable to those applying to public renting
and owner occupation and, most important,
the market is based on bringing private renting
into line with public renting by making private
rents follow public rents.
This distinctive rental market structure,
together with Sweden's acknowledged
vanguard role in housing policy, gives Sweden
a special significance that makes the monitor-
ing of changes in Swedish housing policy of
far greater significance than merely one more
report on another national housing system. So
when work is done on Swedish housing policy,
special attention has to be paid to the implica-
tions of the analysis for the success or otherwise
of the unitary social rental market policy.
There have been two articles in recent
years evaluating in one respect or another the
performance of Swedish social rental housing:
a discussion of social housing in Housing
Studies (Elander, 1991) and a more conceptual
piece in the International Journal of Urban and
Regional Research (Lundqvist et al, 1990).
Despite the fact that these are but two articles,
their importance is not to be underestimated.
They are written by prominent Swedish
housing researchers and published by two of
the leading European journals in the field of
housing research. The interpretation they
provide of Swedish social rental housing is
therefore likely to be influential in contributing
to any future assessment of the success or
otherwise of what is widely seen as the ultimate
4
test case of comprehensive and radical housing
policy.
The deficiency these articles have in
common is the way in which the fundamental
issue of the long-term development and re-
structuring of the social rental sector, and most
particularly the deep underlying problems of
Sweden's unique rent-setting system, have
been neglected. Their narrow focus leads
them ta the somewhat lame conclusion that
what they term social housing in Sweden has
had a mixed record in one way or another
over the last decade or so. By posing the issue
in terms of the degree of success' of Swedish
social housing policy, a comfortably familiar -
and treacherously misleading - interpretation
is provided for non-Swedish researchers that
ignores the radical policy strategy towards
housing embodied in Sweden's unitary social
rental market. Such a conclusion does not do
justice to the strategic importance of Sweden
for housing research.
Given the unique position of Swedish
housing, such a major lacuna gives cause for
considerable disquiet. For it is the long-term
development of the social rental sector and
the radical nature of the rent-setting system
used to achieve this which marks off Swedish
social renting from those of the great majority
of European and Anglo-Saxon countries. Most
important, problems caused by the rent-setting
system underly and define the problems of
the social rental market as a whole. There is
now a real danger that the significance of the
Swedish housing experiment will be lost
through the misunderstanding that results from
the neglect in recent analyses of the long-term
structural development of social renting and
its associated rent issues.
In this discussion I want to attempt to redress
the balance by developing an alternative per-
spective on Swedish social rental housing that
adopts a conceptual view of the development
of renting and that also takes into account the
far-reaching impact of the rent-setting system
for the problems facing the rental market
today. I propose to begin, therefore, with a
presentation of research and data on Swedish
rental housing published in both English and
Swedish - ignored in the above-mentioned
articles - in the context of a broad overview of
the nature of the Swedish unitary social rental
market, its development over the post-war
period and its current problems. I then place
the Swedish experience in a broader con-
ceptual and comparative framework.

Sweden's unitary rental market
strategy and the rent question
The post-war history of rental policy in Sweden
can be understood as a sustained movement
towards the integration of the private and
public rental sectors. Just how goal-consciously
and explicitly formulated this has been as a
policy is open to considerable interpretation.
Post-war rental policy has evolved to some
extent out of the need to solve an acute and
immediate house-building crisis during the
Second World War, and there has been a
considerable element of improvisation and
short-term policy making in general throughout
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the post-war period However, quite apart
from the issue of whether the modem Swedish
rental system is the result of conscious planning
or not, the practical effect has been to move
Sweden some way along the path from a
dualist to a unitary rental market. This process
can therefore be analysed and described
without necessarily ascribing to it any fully
reasoned and explicated grand ideological
masterplan.
Irrespective of the extent to which the policy
was deliberately constructed or not, undoub-
tedly the most vexatious problem has been -
and continues to be - that of the harmonisation
of public and private rents in order to eliminate
misfits between demand and supply and facili-
tate the maximum degree of residential - and
hence labour - mobility. Because housing has
such a long life and housing stock acretion
takes place so slowly, rent harmonisation con-
stitutes the central long-term problematic that
must be dealt with in order to produce a
market in which the demand for housing with
different characteristics and in different loca-
tions accurately reflects the rents that are
charged while ensuring that the benefits of
historic costs - or at least most of them -
accrue to tenants and not landlords.
There are various ways in which a unitary
social rental market can be created. In its
purer form, no profits that reflect current
capital values are allowed to be made, and
rents in both public and private housing are
set in such a way that total rent receipts do not
exceed total historic debt charges plus main-
tenance and other non-capital-related current
costs. Rents could then be determined by rent
pooling that transferred surpluses made on
cheaper (and often older and therefore
privately owned) housing to more expensive
The Significance of Swedish Rental Policy
(often newer and public) housing in such a
way as to match demand to supply.
Such a radical non-profit unitary housing
market has never been considered in Sweden.
Instead, the aim - at least since the mid-1960s
- has been to place public housing in the
position of market leader so that private rents
follow public rents, and so because public
rental housing is newer and more expensive
in general than private rental housing, allowing
a degree of current capital value-based profits
for private landlords, but retaining a consider-
able proportion in the form of lower rents to
tenants. Such a profit-limited1 solution reflects
the 'historic compromise' between labour and
capital as it has developed in terms of tenants
and landlords on the rental market and as
such may be understood as the application of
the Swedish Model' to the housing sector.
The development of Sweden's unitary social
rental market is therefore a long-term project
that, whilst, in the medium run at least, falling
short of a purely non-profit market, neverthe-
less comes a long way towards it. Given the
slow growth and long life of housing stocks,
the development of this particular form of
unitary social rental market can be expected
to take decades, even generations, to accom-
plish and it crucially centres around issues of
rent harmonisatioa It presents policy makers
with the need to develop and follow through a
long-term strategy for change; a strategy that
must be constantly overseen and modified in
the light of rates of inflation and as the debt
profile of the housing stock matures and ages
now faster now slower as it responds to periods
of heavier and lighter front-end loading result-
ing primarily from new build and renovation
programmes, especially in public rental
housing. The problem may be summarised -
in the Swedish context at least - as essentially
one of the timing of harmonisation such that
municipal housing becomes the market leader
when its debt structures has matured to the
extent that moving to basing private rents on
municipal housing company rents does not
allow too large profits to be extracted by
private landlords. I have considered this
harmonisation process extensively and in
general terms elsewhere (Kemeny, 1978; 1980;
1981a; 1982; 1983; 1987a; 1989). For the
purposes of this paper I limit myself to a brief
summary outline.
The move towards an integrated public-
private social rental sector began in Sweden
in response to the massive flight of investment
5
 Housing Studies V0I8N0 1
from housing to war industries that took place
during the Second World War. The deal that
was offered to private landlords was that they
would be eligible for subsidised state housing
loans in return for which they would have to
accept the same rent regulations and offer
comparable housing standards and security of
tenure as the municipal housing companies.
The rent-setting system that was introduced
was one based on the principle of covering
the incurred historic capital costs of individual
rental buildings plus running, maintenance,
administration and other costs, but excluding
returns on the cunent capital values of pro-
perty. This produced a rent structure in the
housing stock that in English is normally
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termed "individual historic cost rents' and in
Sweden is called rent-splitting1, because of
the way in which rents vary between dwellings
in proportion to their costs. Rents in such a
system tend not to bear any direct relationship
to use values and hence demand, but tend,
instead, to mirror indebtedness, being lower
for less debt-encumbered, and hence
generally older, housing even if such older
housing has a more attractive (eg city centre)
location and could therefore command higher
- not lower - rents.
This system remained in force for a quarter
of a century and during that time, because of
inflation, rents of older dwellings rose more
slowly than those of newer dwellings, creating
increasingly acute distortions in demand as
older cheaper flats became more sought after
than newer more expensive ones. During this
period, too, the stocks of municipal housing
companies expanded dramatically, so that by
the mid-1960s the rental market was composed
of about equal proportions of privately owned
and municipal housing company-owned
housing: though, of course, the age profile of
municipal housing was much younger and so
its debt structure was heavily front-end loaded.
But the much lower rents of older housing -
which was, of course, disproportionately
owned by private landlords - skewed demand
increasingly towards the older stock and artifi-
cally depressed the demand for new housing.
This in turn meant that less rental housing was
built than would have been the case had
demand for new housing not been depressed
by its high rents relative to older rental
housing. Of course, since rents were sub-
sidised, demand for new housing was sustained
and even heavy, in part because it became
increasingly difficult to obtain an old cheap
6
flat, and so the high cost of renting a new flat
became seen by • many as the 'price' for
entering the tenure, much as in owner occu-
pation. Its benefits accrued only later when
inflation reduced the real value of the housing
loans component of the rent, though how much
later depended on how fast inflation - and in
particular the inflation of incomes and new
build rents - rose to reduce the value of the
rents of old dwellings as a proportion of
income.
The rent-setting system that is in force today
was first established in 1968 when the use
value principle was extended from the muni-
cipal housing companies (to which it had been
applied since the late 1950s) to private rental
housing and when the current rent-setting
machinery was established. A more complete
description of the rent-setting system is avail-
able in Boberg et al (1974), Turner (1988) and
Kemeny (1989), and will not be presented
here. Suffice it to say that the intention was to
move away from individual historic cost rents
towards a form of 'market-sensitive' rent pooling
by the municipal housing companies; that is
along what today might be termed rnarket
socialist' lines (Le Grand and Estrin, 1989).
The guiding principle of this system was that
municipal housing company rents should
reflect use values but without violating the
non-profit principle embodied in the municipal
housing companies' charters. This meant in
practice that the municipal housing companies
would charge above cost-covering rents on
those dwellings in their stock that had high
use value but low costs and use the surplus to
lower the rents of those dwellings in their
stock that had high costs but low use value
and so would not command rents sufficient to
cover costs.
What was novel about this system was that
the market-sensitive pooled rents arrived at in
the municipal housing company stock were to
be used as guidelines in determining the rents
of all the stock including those owned by
private landlords. In other words, the muni-
cipal housing companies were to become
"market leaders' in determining rent levels for
the rental market as a whole. The move from
individual historic cost rents to rents reflecting
variations of demand but not to exceed the
pooled costs of the municipal housing com-
panies represented a dilution of the non-profit
principle. The reasoning behind the 1968
system of use value rents cannot be understood
without wider considerations of the changing

nature of the Swedish model and its social
bases. This derives from the dynamics under-
lying the historic compromise between labour
and capital and the manner in which the state
has acted as a balancing mechanism between
these: in the case of rent setting and the
construction of a unitary social rental market
between tenants and private landlords. That
larger issue is beyond the scope of this dis-
cussion and so cannot be dealt with here (see
Kemeny, forthcoming). I therefore limit myself
to a brief description of the system and the
problems that it met.
The procedure that was chosen for setting
the rents of municipal housing companies was
not left, as it is in unregulated markets, to
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administrative decree, but was based upon a
negotiation model that was to some extent at
least inspired by the successful Swedish
wage-negotiation system underlying the
Swedish model. The procedure chosen is
Byzantine in its complexity, but is essentially
based on negotiations between local Tenants'
Unions and municipal housing companies
within guidelines negotiated at the national
level between the umbrella organisations of
the municipal housing companies and Tenants'
Unions, with special local authority - and
cross-local authority - harmonisation pro-
cedures, Tenants' Union and private landlord
association negotiations over private rents,
and a complex appeal and review system.
Extensive empirical research has been
carried out on the rent structure that has re-
sulted from the introduction of use value rent
setting, all of it in Swedish (see Bergenstrahle,
1984; Turner, 1979; 1983). Turner (1979) carried
out an analysis of census and municipal housing
company data in four medium-sized local
government areas. Turner (1983) was based
on data on internal municipal housing company
rents drawn from a nationwide one-in-three
random sample of medium and small municipal
housing companies complemented by rent
data on private housing in the town of Gavle.
Bergenstrahle (1984) collected a stratified
random sample of the rents of both municipal
housing companies and private housing in the
three Swedish cities: Stockholm, Gothenburg
and Malmo. The conclusions that all these
studies drew confirm a lay impression that a
major factor - and perhaps the single most
important factor - in determining the differ-
ences in rents between dwellings of similar
size and amenity was not use value but age of
dwelling. They clearly showed that individual
The Significance of Swedish Rental Policy
historic cost rents remained the basis of price
differentiation in the rental stock, and that,
while some movement had taken place toward
pooling, the 1968 reform had not resulted in a
fully use value-based rent-setting system
The reasons for this remain unclear until
research on the negotiation system can be
carried out. I wish to argue here that the
Tenants' Union have been the principal
opponents of rent pooling. To appreciate why
this should be so it is necessary to understand
the manner in.which the rent-setting system
established in 1968 works. The guidelines for
determining rents were left vague and the
only clear obligation placed on the parties
was to reach agreement. This has meant in
practice that reaching agreement over-rode
the need to achieve use value rents, and so, in
order to achieve a settlement each year, the
municipal housing companies felt it necessary
to compromise on moving towards use value-
determined rents. Some pooling has been
achieved but far short of that needed to bridge
the gap between rents and use-values. The
law was formulated in this way on the mistaken
assumption that the Tenants' Union would not
oppose municipal housing company rent
pooling. The rent-negotiation system therefore
placed considerable veto power in the hands
of the Tenants' Union, giving it unprecedented
influence over the rent-setting powers of the
municipal housing companies, however limited
its ability to determine the level of rents may
be in a wider perspective. This is a position
which it has used with great effect.
The Tenants' Union .has faced a dilemma.
Since implementing use value rents would in
the great majority of cases mean cross pooling
from old to new municipal housing company
dwellings it would increase the rents of the
old stock and decrease the rents of the newer
stock. This was, of course, one of the prime
aims of the system. However, since public
housing was disproportionately new while the
private rental stock was disproportionately old,
the market leader position of the municipal
housing companies would mean that the rents
of privately owned rental housing would rise
substantially. Individual private landlords
could, of course, cross pool within their own
stocks between old and new housing just like
individual municipal housing companies.
However, there was no mechanism under the
new rent-setting procedures for pooling be-
tween municipal housing companies, let alone
for pooling between private and municipal
7
 Housing Studies V0I8N01
housing company stock. So, given that private
new build has historically been very low, much
of the surpluses of rental income over costs
deriving from older private rental housing
would be pocketed by private landlords. This
was politically unacceptable to the Tenants'
Unioa
The Tenants' Union has therefore resisted
the effective implementation of use value rents
simply by refusing to agree to increasing the
rents on low-debt dwellings. Thus, it has to a
considerable extent thwarted the strategy of
moving from individual historic costs rents to
use value rents based on pooled municipal
housing company costs. In this context one
reason for not simply allowing MHCs to set
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non-profit rents by administrative decree (as
is done by private landlords in unregulated
markets) is that MHCs lack the profit motive to
keep costs down. However, the watchdog role
of the Tenants' Union would seem to have had
the effect of hampering market sensitivity
rather than maximising cost-effectiveness. The
Tenants' Union have argued that the way to
reduce the rents of new build is not to subsidise
new build from the rents of existing tenants
(who comprise the Tenants' Union's consti-
tuency) but to subsidise it by an increase in
general subsidies. Thus, for example, in the
Tenants' Union 1980 investigation into the rent
negotiation system it was argued that It is
essential to hold rents down in newly produced
apartments but to do so by means of housing
policy measures and not through the rent-
setting system' (cited in Bergenstrahle, 1984, p
302, my translation). The problems that this
has resulted in are acute, and growing more
so as inflation increases the differential be-
tween the rents of old and new dwellings
(see, for example, Kemeny, 1987a; 1989;
Turner, 1988).
By the time it was becoming clear that the
use value rent system was not working the
Social Democratic Party was put out of
government for the first time for over 40 years.
During the years of the bourgeois interregnum
from 1976 to 1982 nothing was done in this
area When the Social Democrats regained
government in 1982 there was a lack of interest
in major housing reform. Although one of the
first acts of the new government was to set up
a commission of investigation into housing, it
was given a very narrow and cautious remit
which did not allow it to deal with the central
and controversial issues of rent setting and
mortgage interest tax relief.
8
The failure to change fully from individual
historic costs to use value-based municipal
housing company pooled rents has had both
advantages and disadvantages. Its advantage
has been that the delay has allowed municipal
housing company housing stocks to mature.
The municipal housing companies had spent
the period from the mid-1940s to the mid-
1970s rapidly expanding their stocks. This
period was therefore one of heavy front-end
loading. So when use value rents were intro-
duced in 1968 the municipal housing company
stock was almost as large as the private rental
stock (which made it possible to act as market
leader) but its cost structure was much higher.
Introducing use value rents at that time would
therefore have resulted in a high rate of profit
extraction by private landlords. Since the mid-
1970s the rate of municipal housing company
new build has declined dramatically, allowing
the cost structure of the municipal housing
company stock to mature rapidly, while exten-
sive (state-subsidised) modernisation pro-
grammes have increased the indebtedness of
the privately owned stock.
The disadvantage of the delay is that a
continuing large element of individual historic
costs in rents has perpetuated and indeed
exacerbated the skewing of demand for rental
housing. This in turn has increased political
pressure from landlord interests for an aban-
donment of the unitary social rental housing
policy and a return to the pre-war system of
untrammelled market rents. In addition, of
course, the market doctrine of deregulation as
the universal panacea that has such a strong
ideological grip in all the social sciences has
its supporters among Swedish academics
(Meyerson et al, 1990). Demands for the total
deregulation of the rental market have there-
. fore been becoming more strident: demands
which have carried all the more force because
of the increasingly acute skewing of housing
demand resulting from rents being still heavily
tied to individual historic costs and - crucially
- the lack of any alternative to the existing
system to those in favour of continuing to
develop a unitary social rental market. This
has placed the unitary social rental policy
under threat, by straining the housing equiva-
lent of the historic compromise. As recently as
the spring of 1991 a private landlord challenged
the low level of rents in older properties in a
court action, as being in violation of the 1968
use value rent laws, and won. A few days
later, the government appointed a Commis-

sion of Investigation into the rent system. The
initial judgement was later reversed by a
higher court.
The historic compromise between tenants
and landlords in the rental market is therefore
now under considerable strain. The Tenants'
Union would no doubt prefer a unitary social
rental market which was genuinely non-profit
in nature in that it would require some
mechanism for cross pooling between housing
irrespective of whether it was owned by
private landlords or municipal housing com-
panies, for example by the establishment of
local rent surplus funds or through the tax
system (see Kemeny, 1989; Turner and Berger,
1990). Private landlords appear to be increa-
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singly leaning towards a free - or at least freer
- market solution that would effectively create
a dualist rental market with private rents
unregulated and municipal housing company
rents based on pooled use values.
However, it is probable that some compro-
mise arrangement that more or less enforces
the 1968 use value rent reform will be reached.
Indeed, the bourgeois coalition government
that took office in 1991 has, surprisingly
perhaps and possibly for tactical reasons,
denied the intention to introduce market rents
and opted for the weaker solution of use value
rents with a larger element of locational factors
determining use values. This would be a
solution which - if it is not simply the first step
to introducing market rents - would reflect and
reinforce the historic compromise that under-
lies the Swedish social model. It would syphon
off much of the difference between individual
historic costs and use value into the pockets of
private landlords. However, as time passes
municipal housing company pooling will
increasingly erode the real value of these as
the housing stock of the municipal housing
companies ages and its debt structure matures
and so becomes more competitive in relation
to private rental stocks. A belated switch to
use value rents may therefore provide some-
thing of a windfall for private landlords in the
medium run - that is over the next decade or
so - but the greatest windfall during the 1970s,
1980s and early 1990s will have been prevented
while the maturation of municipal housing
company stocks will gradually counteract this
and so slowly increase the non-profit nature of
the rental sector over time. But this is specula-
tion. As things stand at present, the rental
sector in Sweden possesses a rent structure
that is still heavily influenced by individual
The Significance of Swedish Rental Policy
historic costs, and is therefore strongly non-
profit in nature.
Comparative social rental
housing strategies
How are we to understand treatments of
Swedish social rental housing policy that fail to
take account of wider systemic factors such as
the rent-setting system and its long-term con-
sequences, such as those by Elander (1989)
and Lundqvist et al, (1991)? There would
appear to be two major influences at work
here: the policy-reactive nature of much re-
search, and the dominance of an Anglo-Saxon
perspective on the nature of rental markets in
the international comparative literature. These
two influences combine to elicit research of
this nature.
Bengtsson (1991) argues that the policy
debates in Sweden during the late 1970s and
early 1980s (coinciding with the period of
bourgeois coalition government) over the
'crisis' of public housing, had no basis in the
financial situation of the municipal housing
companies, and so the crisis must be seen as
largely politically manufactured, taking the
form of what he terms a 'subjective crisis'. I
believe the recent spate of articles by Swedish
researchers critically assessing Swedish
housing policy, and in particular the social
rental sector, can be understood at one level
as a research response to the challenges raised
by the 'crisis'. Other work in a similar vein
includes Lindberg and Karlberg (1988) and
Lundqvist (1983), who also address the
problems' that faced the rental sector in the
late 1970s and what had been - or should be -
done to address these and overcome them.
Such research accepts the political agenda as
formed by the dominant national public
debates as the unquestioned starting point for
analysis, and in so doing reflects the adoption
of a policy-reactive1 research strategy that
accepts the definitions of what does or does
not constitute a 'housing problem1 (for a dis-
cussion of this in general terms see Kemeny,
1992, pp 30-33).
Such policy-determined research has a
definite place in housing research. But what is
also required - and what is badly under-
represented - is research that critically
challenges taken-for-granted policy debates
and that attempts to stand outside these in
9
 Housing Studies Vol 8 No I
order to take a broader and longer-term view
of the structure of the housing/market, not just
in Sweden but in every country.
For rental housing, research on Sweden
looks the way it does partly because of the
way issues are defined in the comparative
housing research literature. In particular, there
is an absence of analysis of unitary rental
markets within comparative housing research.
Comparative research on rental housing tends
to adopt an Anglo-Saxon perspective that treats
the private rental market (eg Harloe, 1985)
and the public rental market (eg Harloe, 1988;
Emms, 1990) in isolation from one another, and
to retain the dualistic perspective while inter-
preting data suggesting other forms of organi-
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sation - notably along unitary lines - as
complicating deviations from the dominant
pattern which therefore remain conceptually
marginalised
The result is that national differences are
described in detail but within an implicit con-
ceptual framework determined by the experi-
ence of countries with dualist rental markets.
This tends to lead to the conclusion that,
although there are wide national differences,
there are underlying similarities and shared
problems between countries in the organisa-
tion of their rental housing. Such an approach,
which uses an implicit theoretical framework
and which I have termed elsewhere 'theorising
by innuendo" (Kemeny, 1992, p57), encour-
ages the ethnocentric interpretation that all
social rental housing possesses much the
same systemic characteristics irrespective of
country. Consequently by default, Anglo-Saxon
dualist models of rental housing with some
variation between countries becomes the
dominant research paradigm. Certainly, no
serious attempt has yet been made to con-
ceptualise, even in simple taxonomic terms,
the wide differences in the structuring of
renting and the impact of this on the organisa-
tion of different categories of renting.
How, then, can differences in rental housing
markets be conceptualised? The Swedish
case compared on its own to the Anglo-Saxon
system suggests a simple division of rental
housing systems into dualist and unitary-social
models. However, other countries do manifest
marked differences from both of these, though
this is not immediately apparent from the
existing literature because of the Anglo-Saxon
slant of analysis. In particular, the rental
markets in The Netherlands and Germany -
and possibly Switzerland and other countries
10
as well - make a much less clear distinction
between private and social renting than coun-
tries with dualist rental markets, while at the
same time lacking the comprehensive integra-
tion of the Swedish model. In Germany some
social rental housing is not subjected to re-
gulated rents while some private rental housing
is clearly to some degree social in that it is
both subsidised and non-profit or at least
limited-profit in organisation and rent setting.
In The Netherlands some private rental housing
is also social in that it is subsidised and rents
are regulated (Harloe, 1988; Emms, 1990).
These countries therefore appear to have
some private renting that is profit-oriented
and some that is not, and perhaps also some
social rental housing that is profit-oriented and
some that is not. They therefore seem to hold
a half-way position between dualist and unitary
social rental systems. They might perhaps be
termed fragmented rental systems in which
the boundary between social and profit rental
housing is blurred, with much overlap in terms
of function and aims between profit-oriented
and non-profit-oriented landlords, or, even
more complex, between landlords with dif-
ferent degrees and kinds of profit-orientation.
In the case of Germany, the phasing out of
subsidies and rent regulation may result in all
rental housing becoming profit-oriented, in-
cluding housing that was previously social
rental in organisatioa Should this happen -
and more research is needed on this point to
substantiate that claim - such an outcome
might result in what might be termed a unitaiy
proSt rental system. However, it is equally
possible that in such a rental market non-profit
rental housing companies would, by virtue of
their non-profit status, have a dampening effect
on private rents with results similar to those
. envisaged in the Swedish system. The total
deregulation of rents in a market where there
are a large number of cost rental housing
companies operating may, therefore, lead to
the long-run elimination of profit renting and
the ultimate establishment of a genuine cost
rental market - even if the short-term price is
market or near-market rents.
Here, then, we have already a number of
different ways of conceptualising social rental
housing systems, derived purely by reinter-
preting secondary sources (in the absence of
good comparative data). These different
models can be summarised as shown in Table
1.

Table 1 Models of social and private rental systems
Model Distinction between
Public and Private
dualist clear
fragmented blurred
unitary profit none
unitary social none
Swedish unitary none
A further conceptualisation may be posited
based on the relationship between whether
rental systems are cost-based or profit-oriented
and whether they are organised in terms of
market or state allocation. A central feature of
the dualist system as it has developed in
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Anglo-Saxon societies is that public renting is
organised in terms of highly centralised state
control often by the minister responsible for
housing or in some cases the cabinet. Typi-
cally, it is a state agency which decides annual
rent levels, rates of new investment, the terms
on which existing stock may be sold, and even
how sales receipts are to be disposed. As
indicated in the introduction, I term such a
public rental system a command system, in
contrast to market-based systems. Command
public rental systems may be either surplus-
generating: that is they are net contributors to
national and/or local exchequers (as is increa-
singly the case in British council housing) or
they may be internally cost-covering.
Table 1 and 2 must be seen as a very
tentative and preliminary attempt at systemati-
sation. It is likely that a closer examination of
the comparative organisation of social rental
housing will result in refinements or even total
reconceptualisation. In any event, a systematic
and conceptualised approach to the study of
comparative social rental housing systems is
urgently needed It is also possible that some
of the above types represent transitional
phases. Thus, for example, the fragmented
German social rental housing system may be
moving towards a unitary rental market on
profit-oriented principles (or even towards its
non-profit equivalent); or the inherent instability
Table 2 Market versus command systems of
renting in relation to profit
Profit-oriented Non-profit-oriented
Market unitary profit unitary non-profit
Command dualist surplus- dualist cost-
producing covering
The Significance of Swedish Rental Policy
Rent Historic Cost-determined
Private Public
none all
some some
none none
all all
partly all
of the dualist system may lead to increasing
suppression of public renting.
I have stressed, throughout my discussion of
the Swedish case and in my critique of the
recent Swedish work in this area, that the
Swedish model cannot be understood without
reference to the long-term dynamics of rental
stocks, and I have referred in several places
to the maturation of the debt structure of the
housing stock and the problems that differ-
ences between the private and municipal
housing company stocks pose in this respect. I
now want to consider the dynamics of change
in terms of maturation in a more general
sense in order to highlight deeper and longer-
term structural changes in the development of
rental systems.
Maturation and systemic change
The construction of a unitary social rental
market involves as a central element the
harmonisation of rents between dwellings
owned by profit-seeking and cost-rental land-
lords. This process in turn connot be under-
stood without considering the impact of the
changing burden of debt on housing costs
over extended periods of time. Rental housing
stocks are dynamic systems the cost structures
of which are heavily influenced by a combina-
tion of the rate of inflation of new build costs
and the rate of new build and renovation that
increase the front-end loading of debt. It is the
combination, over many decades, of the rate
of new house price inflation and the variability
of front-end loading, that largely determines
the extent to which historic cost-covering rents
(whether pooled or not) in social rental
housing can be kept low relative to unregu-
lated private rents. I have termed the growing
difference created by inflation between
average debt-servicing charges on existing
stock and debt-servicing charges on new build
as the process of maturation of the rent stock
(Kemeny, 1981a, p27).
11
 Housing Studies V0I8N01
The rate at which the process of maturation
takes place is complex and dependent on a
number of different factors. Maturation will be
speeded up during periods of low investment
in new build and renovation and slowed down
or even reversed during periods of high
investment: that is, there will be variations in
the extent of front-end loading from one year
to another. However, independently of this,
the rate of inflation of housing construction
costs can, on its own, result in a significant
maturation of the rental stock even if no change
in the rate of new housing investment in the
rental stock has taken place. Thus, for
example, when house prices are rising rapidly
this will accelerate the maturation of existing
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rental stocks quite independently of the extent
of front-end loading by increasing the gap
between market rents based on current con-
struction costs and the historic costs of existing
rental stock.
We have already noted the importance of
the maturation process for the development of
Sweden's unitary social rental sector. Matura-
tion determines at what point in time individual
historic cost rents begin to noticeably skew
demand and reduce residential mobility. Re-
lative rates of maturation in private and muni-
cipal housing company rental housing also
determine the level of profit extraction by
private landlords that will result from fully
implementing use value rents. And maturation
will also determine how rapidly such profits
will be whittled away as the municipal housing
companies' stocks mature.
But the process of maturation has similarly
far-reaching consequences in all rental
systems, though these will differ widely
depending on the nature of the rental system.
By way of illustration of how the maturation
process affects the dynamics of change in
rental markets I want to briefly overview some
of the effects of maturation on command rental
systems.
Command rental systems and
the maturation crisis
In earlier work (Kemeny, 1981b; 1981c) I have
argued that policy assaults on public rental
housing in Australia and other countries with a
dualist rental system must be understood - in
part at least - in relation to the maturation of
public rental housing which reduces its costs
12
and thereby reduces rents in real terms. This
in turn increases pressure on waiting lists, a
pressure that can be eased by increasing the
rate of new build but only at the price of
expanding the public rental sector. So other
strategies such as reducing or eliminating
subsidies, introducing market rents, or more
drastic measures such as asset stripping (eg
sales at heavily discounted prices) must be
understood, in part at least, as a policy reaction
to containing public renting in the face of the
way in which maturation increases its com-
petitive attractiveness.
Seen in comparative rental policy perspec-
tive, the command system of public renting
can be understood as a device to prevent the
emergence of a low-cost non-profit- rental
sector which would compete effectively with -
and perhaps ultimately eliminate - private
renting. This explains the strictly segregated
nature of dualist rental systems and the large
element of growth suppression that underlies
the political management of public renting. It
is ironic that societies which possess dualist-
structured command public rental sectors are
those in which the denunciation of the com-
mand economies of socialist countries is most
strident. Pot would seem to be calling kettle
black unless one assumes that command
economies are acceptable - even necessary -
as a means of sheltering the profit-based
market from non-profit competition by ham-
stringing potentially attractive and low-cost
non-profit alternatives. This in turn suggests
that profit-based markets can only thrive if
alternative non-profit forms, whether state-
owned or co-operative, are prevented from
competing with them and thereby undercutting
them. It may be, therefore, that for a private
rental market to thrive, non-profit rental forms
such as public rental organisations, cost-rental
companies and rental co-operatives require to
be prevented from becoming too competitive
or suppressed if they show signs of doing so.
At the same time, reliance on profit-oriented
market renting creates the need for a safety
net, hence the indispensibility of a public
rental sector, albeit as small as can be got
away with politically.
The dilemma facing those who run command
systems of public renting is that, as the
system's debt structure matures, ever more
extensive and far-reaching interventions to
counteract its competitiveness are required
For even with draconian eligibility restrictions
and forcibly low rates of investment, demand

for public renting, expressed in terms of
heroic waiting list times and high rates of
homelessness, put pressure on the political
managers of the command system for increased
productioa Public rental systems need sub-
stantial subsidisation to lower costs to levels
that are affordable when the system is
immature. As the decades pass, maturation
lowers unit costs, allowing subsidies to be
reduced and even phased out, and possibly in
the not-too-distant future made negative. The
possibility of phasing out subsidies or even
taxing public renting does not, however,
explain the increasingly vitriolic and ideolo-
gical assault on public renting, nor the
implementation of measures to drastically
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reduce the size of - or even eliminate - the
sector. That can only be explained in terms of
the 'quantum leap' that rapid maturation has on
the competitiveness of non-profit renting and
the consequent need to ruthlessly prune back
the competition faced by profit-oriented rental
housing. Thus, for example, sales of public
rental stocks with massive discounts under-
mines the maturation process by removing
low-debt dwellings without receipt of capital
from the sale to compensate (besides changing
the social composition of public renting to
residualise it: see Forrest and Murie, 1988).
One interesting line of investigation would
therefore be to examine the timing of command
policy crackdowns on public renting in rela-
tion to the maturation process, both in terms of
housing stock debt structures and the maturing
impact of periods of very rapid house price
inflation. Malpass (1990) argues that the
growing hostility of Conservative governments
to council housing stemmed from the deregu-
lation of private renting in the mid-1960s, which
resulted in private rents rising to above public
rents for the first time. The move against
council housing which began in England in
the early 1970s, when the system of fair rents
which had applied to private rental housing
was also to be applied to council housing
(thereby moving towards the development of
a unitary profit-oriented rental market), there-
fore resulted not from the process of maturation
but from the competitive edge that council
housing now had over private renting. This in
turn came just before the first post-war period
of rapid house price inflation triggered by the
entrance on the housing market of the late
1940s baby-boom generation. That dramatically
increased house prices, which almost over-
night significantly matured council housing
The Significance of Swedish Rental Policy
stocks at a period in time when they were
anyway maturing as a result of their age
structure and declining new build following
the 1950s building boom This process might,
therefore, be analysed in terms of a maturation
crisis (Kemeny, 1981c), or, in Bengtsson's
(1991) terms, a 'subjective crisis' in policy
making. Such an approach would get us away
from treating policy towards social renting as
a conceptual 'given' and begin to examine it in
. dynamic interaction with long-term systemic
change.
Conclusions
The political management of • command
systems of public renting to resolve maturation
crises represents the central problematic of
dualist rental markets. The equivalent central
problematic of emerging unitary non-profit
rental markets is the long-term need to
accomplish the harmonisation of public and
private rents so as to create a mixed and
competitive sector that is both market-sensitive
and based on non-profit principles. The dif-
ference between the two approaches is that
maturation crises are recurrent because they
are based on the periodic suppression of a
highly competitive and potentially attractive
form of housing provision that becomes more
and more competitive as time passes and
maturation occurs, requiring more and more
draconian methods of suppression in a con-
tinual process of escalation. By contrast,
•harmonisation crises' in the development of
unitary non-profit rental markets are symptoms
of immaturity and, once harmonisation has
been attained, they provide the systemic basis
for stability. The problem with developing a
unitary non-profit rental market is that
achieving harmonisation between public and
private rents is much more difficult than the
periodic suppression of a command public
rental sector, both in the purely technical
terms of devising a workable solution (eg cross
pooling) and more importantly in political
interest-conflict terms. Each policy strategy
and each rental system therefore has its own
advantages and disadvantages, its strengths
and its weaknesses, and its characteristic
central problematic.
In this discussion I have tried to show how a
more strategic approach to the study of social
renting, that takes the rent-setting system into
account as a central issue, provides a more
13
 Housing Studies Vol 8Nol
adequate explanation than current perspec-
tives Recent work on Swedish social rental
housing policy has confirmed a tendency within
housing research to focus upon short and
medium-term policy evaluation that neglects
the central strategic issue of rents and the
costs that determine them Such an approach
misrepresents the problems feeing the social
rental market in particular and housing policy
in general, and, perhaps more seriously,
underestimates the international significance
of Swedish social rental housing. Work is now
needed on developing a more adequate con-
ceptual framework for collecting data on, and
analysing differences in, the international
structuring of rental markets, and on under-
Downloaded by [University of Pennsylvania] at 15:36 08 June 2016
standing the interaction between the dynamics
of rental stocks as they change and mature
over time and policy to channel and cope with
such changes.
Note
1
There is a widespread tendency in housing research
and policy to refer to public renting as 'social housing'
in contrast to 'market' housing such as private renting
and owner occupation. In this paper I define social
housing as all housing in receipt of state subsidies
(including owner occupation in receipt of mortgage
interest tax subsidies) and social rental housing much
more narrowly as all rental housing that charges un-
rebated rents that for whatever reason, are significantly
lower than they would be in an unregulated market.
This definition includes unsubsidised private rental
housing but does not necessarily presuppose regu-
lated rents. For the full significance of this definition,
readers are urged to return to it after having read the
paper.
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The Significance of Swedish Rental Policy
Jim Kemeny: National Swedish Institute for
Building Research, PO Box 785, 5801 29 Gävle,
Sweden.
Acknowledgements: This is a revised version
of a paper entitled The signiScance of
Swedish housing policy: From dualist to
unitary renting in comparative perspective'
presented at an Institute seminar 24 January
1992. I would like to thank the discussant -
• Bo Bengtsson - and other seminar partici-
pants for their helpful comments on this
paper, as well as the comments of two
anonymous readers.
15