Reducing Housing Subsidy: Swedish Housing Policy in an International Context

Swedish housing policy was dramatically changed during the 1990s. A traditional formally tenure-neutral and generous subsidy system has been replaced by much lower levels of assistance, more directed at lower-income households and depressed areas. This paper sets the Swedish policy in an international context as part of a much more general pattern of reduced and rebalanced expenditures associated with liberalisation and the transfer of risk. The paper then addresses the direct and indirect impacts of the Swedish 'grand restructuring', concentrating on the extent of the cutbacks; rents and prices; levels of output; and the potential for increased segregation. The evidence suggests that the policy changes, together with their effect on expectations, significantly modified the housing system. They reduced demand for new building, particularly in less-pressured areas; increased vacancies, especially in the social sector; transferred risk to both the social and private sectors; and increased outcome differentials between the well-off and those with fewer resources—both in terms of individuals and areas. The analysis presented here provides evidence against which the Swedish policy can begin to be evaluated. It also suggests lessons for other industrialised economies that are addressing similar issues.