The return of the Swedish slumlord: Analysis of a recent case

Gunnar Blomé

ERES from European Real Estate Society (ERES)

Abstract: The housing standard is very high in Sweden and there is a strong legislative framework protecting tenants. It therefore came as a surprise when a number of rundown and badly maintained estates were given attention in the media. In this article we try to explain how this could happen in the specific case of a part of the HerrgÂrden area in Malmˆ. The explanation is split into two parts. The first question is how the landlord could attract tenants even though rents were higher and quality lower than in neighboring areas. Several contributing factors are discussed: Many households live on welfare and do not pay with their own money, some households value the ìno questions askedî policy of the landlord and engage in illegal subletting and other illegal activities and, finally, the real choice for many households were limited as they were new to the country and as there is a housing shortage in Malmˆ with queues to more attractive areas. The second question is how it can be a profitable strategy for the property owner to neglect maintenance as it reduces the property value considerably. Two ìexit strategiesî are discussed. The first is that it might be possible to sell the properties to a high price to some ìbigger foolî that are willing to pay too much for the properties. The second is that the managers and decision makers in the company are playing with other peoples¥ money, and that they knew that the strategy could end in bankruptcy with major losses of capital. Examples of both these strategies are presented in the article. The policy conclusion is that a stricter property management legislation is needed where the municipality and not only the tenants can take initiative to action against a landlord and also that is should be possible to force a landlord to sell the property when there are serious mismanagement of a housing estate and other measures have not helped.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2011-01-01
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