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How does increased competition on the housing market affect rents?: an empirical study concerning Sweden
KTH, Superseded Departments, Real Estate and Construction Management.
KTH, Superseded Departments, Real Estate and Construction Management.ORCID iD: 0000-0003-4841-5056
2004 (English)In: Housing Studies, ISSN 0267-3037, E-ISSN 1466-1810, Vol. 19, no 1, 107-123 p.Article in journal (Refereed) Published
Abstract [en]

The aim of the study is to investigate if more competition leads to lower rents on the housing market. Data about the rent level for similar apartments in 30 cities in Sweden were available. Three hypotheses were formulated: (H1) Increased 'internal' competition, measured by the market share of the municipal housing company (that dominates the market and is price-leader according to the Swedish system of rent regulation), leads to lower rents. (H2) Increased 'external' competition measured by the price level on the market for single-family owner occupied housing, leads to lower rents. (H3) Lower capital expenditure in the municipal housing company leads to lower rents. The statistical analysis showed a strong correlation between the rent level and the level of external competition, but no relation was found for the level of internal competition and the level of capital expenditure. A possible conclusion is that policies that make it easier for households to leave the rental market are important for increasing the pressure on the firms in the rental sector and reducing rents.

Place, publisher, year, edition, pages
2004. Vol. 19, no 1, 107-123 p.
Keyword [en]
rental housing market, rent level, competition, public housing
National Category
Economics and Business
URN: urn:nbn:se:kth:diva-23116DOI: 10.1080/0267303042000152195ISI: 000188453800006ScopusID: 2-s2.0-0842269248OAI: diva2:341814
QC 20100831Available from: 2010-08-10 Created: 2010-08-10 Last updated: 2010-08-31Bibliographically approved
In thesis
1. The effect of competition and ownership policies on the housing market
Open this publication in new window or tab >>The effect of competition and ownership policies on the housing market
2005 (English)Doctoral thesis, comprehensive summary (Other scientific)
Abstract [en]

This dissertation consists of five studies presented in seven essays. The overall objectives are to investigate the extent and consequences of competition on the rental housing market as well as the importance of national government policies for the substitute good, i.e. owner-occupied housing. However, each essay also has specific objectives.

Due to the characteristics of the housing market, one should not expect competition to be very fierce. The market characteristics are, for instance, capital-intensive, complicated and time-consuming construction processes as well as a limited supply of land in many areas. In fact, firms have a lot to gain from colluding and to avoid e.g. price wars. It is therefore theoretically more likely that housing companies will engage in “functional” or “strategic” competition such as the quality of housing services.

Essay I and IV analyze the unique municipal housing market in Sweden where apartment rents are determined by negotiations between the local municipal company and the local Union of Tenants. A regression analysis is applied on data from 30 municipalities. There was a strong correlation between apartment rents at local municipal markets and the level of “external” competition (measured by the price level on the market for single-family owner occupied housing), but not with “internal” competition (measured by the market share of the municipal housing company) or the capital expenditure of the municipal housing company (presumed to reflect historical construction and renovation costs for the apartments).

The dissertation also investigates the consequences on rents (essay II) and on the quality of housing services (essay III) from a local Swedish municipal housing company selling a substantial part of its apartment stock (15-40 percent) and thereby theoretically creating more competition. These essays use a quasi-experimental methodology whereby the development of the housing market in a privatization town is compared with the development in a very similar comparison town. It is found that privatization has lead to lower rents in the short- and medium-term in six out of seven privatization towns. The development of the quality of housing services was more related to the performance of each individual company and not a specific category of companies. In essay V, these results are merged and developed further.

Essay VI presents a wide range of policies available for governments wishing to increase access to home ownership for low-income households and thereby increasing the pressure on rental housing companies to reduce rents. A systematic overview of policies is provided based on the four distinct time periods of a typical ‘housing career’ of a household; i.e. down payment accumulation stage, transaction stage, ownership stage and selling stage. It is found that many policies are required to meet the specific and differing needs of households for governments wishing to encourage home ownership.

Essay VII describes that home ownership rates have increased in almost all industrialized countries during the period from World War II until mid-1990s. The essay analyses the implications of government policies and some other factors (e.g. national wealth, income distribution) on home ownership rates in 13 industrialized countries during the period 1970﷓2000. A fixed-effect model is applied on a panel data set. The most important result is that a statistically significant and positive correlation between government support and home ownership rates was found although this is only a preliminary conclusion since data was scarce.

Abstract [sv]

Avhandlingen består av fem studier presenterade i sju essäer. Den övergripande målsättningenär att undersöka konkurrensens omfattning och effekter på bostadshyresmarknaden samtbetydelsen av statliga stödsystem för substitutvaran till hyresbostäder, nämligen olika formerför bostadsägande. Varje essä har också specifika målsättningar.Inledningsvis så bör man inte förvänta sig omfattande konkurrens på bostadshyresmarknadenpga dess särdrag, exempelvis så är byggprocessen kapitalintensiv, kompliceradoch långsam och tillgången på mark är ytterst begränsad på flera delmarknader. I själva verketså har företagen mycket att vinna från att samarbeta och undvika tex priskrig. Teoretiskt så ärdet därför mer sannolikt att bostadsföretag ägnar sig åt ”funktionell” eller ”strategisk” konkurrenssom exempelvis kvaliteten på bostadstjänster.Essä I och IV analyserar konkurrensen på den unika svenska hyresmarknaden där bostadshyrorsätts i förhandlingar mellan det lokala allmännyttiga bostadsföretaget och hyresgästföreningen.Data från 30 kommuner analyseras med hjälp av regressionsanalys. Resultatetvisade en stark korrelation mellan hyresnivån i allmännyttans bostadsbestånd på kommunnivåoch ”extern” konkurrens från liknande ’produkter’ (motsvarande prisnivån på egnahem), meninte med ”intern” konkurrens från andra bostadsföretag (motsvarande allmännyttans marknadsandel)eller allmännyttans kapitalkostnader (som antas främst motsvara byggkostnadernaför lägenheterna).Avhandlingen undersöker även konsekvenserna på hyra (essä II) och kvalitet (essä III) frånen försäljning av en omfattande del (15-40%) av en allmännyttas bostadsbestånd. Teoretisktskapar detta mer konkurrens. Dessa essäer använder sig av en kvasi-experimentell metodikvarvid utvecklingen på en konkurrensutsatt bostadsmarknad i en tätort jämförs med utvecklingeni en annan snarlik tätort. Det visade sig att hyresnivån i sex av sju konkurrensutsattatätorter hade sjunkit på kort och medellång sikt. Däremot visade sig kvalitetsnivån främstvara beroende på den enskilda hyresvärden och inte på hyresvärdens kategori (privat ellerkommunal). Essä V slår samman dessa resultat och utvecklar materialet ytterligare.Essä VI diskuterar ett stort antal medel (eng ’policies’) för en statsmakt som önskar attgöra ägande av bostaden mer tillgängligt för låginkomstgrupper och därigenom bl a ökapressen på hyrorna på bostadsmarknaden. Medlen är systematiskt beskrivna i enlighet med defyra distinkta tidsperioderna för en ’typisk’ bostadskarriär; nämligen stadiet när kontantinsatseninsparas, överlåtelsestadiet, ägandestadiet och försäljningsstadiet. Studien visade attdet troligen behövs ett flertal medel för att möta hushållens specifika och skilda behov omman avser att uppmuntra hemägande.Essä VII beskriver att andelen som äger sin bostad har ökat i nästan samtliga industriländerfrån andra världskriget fram till mitten av 1990-talet. Essän analyserar konsekvenserna avmyndighetsstöd och flera andra faktorer (tex BNP-utveckling, inkomstfördelning) för andelenhushåll som äger sin bostad i 13 industriländer under perioden 1970-2000. En fix-effektmodell appliceras på ett paneldataset. Det främsta resultatet var att det fanns en statistisktsignifikant och positiv korrelation mellan andelen som äger sin bostad och omfattningen påmyndigheternas stöd. Resultatet är dock endast preliminärt då tillgången på data varbegränsad.

Place, publisher, year, edition, pages
Stockholm: KTH, 2005. 52 p.
Trita-INFRA, ISSN 1651-0216 ; 2005:008
Environmental engineering and architecture, Competition, housing companies, public housing, rental housing, tenure forms, privatization, Konkurrens, privat bostadsföretag, allmännyttigt bostadsföretag, upplåtelseform, privatisering, statliga medel, Sverige, internationell
National Category
Civil Engineering
urn:nbn:se:kth:diva-140 (URN)91-975358-4-2 (ISBN)
Public defence
2005-03-11, Kollegiesalen, Valhallavägen 79, Stockholm, 10:00
QC 20100831Available from: 2005-03-03 Created: 2005-03-03 Last updated: 2010-09-10Bibliographically approved

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