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Sweden’s Collective Bargaining for Rents Must Be Defended

In Sweden, rents aren’t set at landlords’ whims but through collective bargaining with the tenants’ union. The system is a reminder of Swedish social democracy’s once-great reformist measures — but also how vulnerable they are in an age of neoliberal counterreforms.

Refurbished Million Program homes in Rinkeby in Stockholm, Sweden. (Holger Ellgaard / Wikimedia Commons)

In late June, Sweden’s Social Democratic Party (SAP) prime minister lost a no-confidence vote in parliament, with the decisive backing of the Left Party. Throughout history, the Social Democrats could traditionally count on this small left-wing party’s support whenever a right-wing government risked coming to power. This time, however, a red line had been drawn, with the Left Party now under the leadership of Nooshi Dadgostar, an MP concerned with housing issues who has a background as a housing activist. The Swedish model of centrally bargained rents was under threat, and the Left Party had vowed to protect the country’s 3 million tenants from a new model that would strip them of bargaining power and thus produce skyrocketing prices.

In bringing down the government, the Left Party moved to protect a model that had been built up over a century’s struggle — and, in the past, institutionalized and guarded by the Social Democrats. Yet in recent decades, the issue of housing reform has been much on the political agenda, with Sweden facing an ever-worsening housing crisis. The crisis has its roots in a series of far-reaching changes to how housing is financed and provisioned, pushed through in the early 1990s under what was at the time an uncommon right-wing government. While these earlier moves saw an aggressive tearing down of large parts of the system built up over generations, the latest reforms threatened to be the final nail in the coffin.

People who rent their home have fared poorly over recent decades, as private ownership and mortgage holding has been favored by a series of “reforms.” The almost 30 percent of Swedes who live in a rented apartment (half of them in public housing) have seen rents go up and conditions worsen. But because Sweden has a peculiar way of setting rents, they have been somewhat protected. Independent of ownership, rents are not unilaterally set by the landlord, but rather decided though negotiations between the landlord and the once mighty and still powerful tenants’ union.

The system resembles the way wages are set in Sweden, conducted through broad sector-based negotiations between organized labor and employers’ organizations. The current system relies on the principle of bruksvärde, or “use-value.” The use-value system is designed to both “model” market rents and secure fixed tenure and “reasonable” rents for tenants. The rent is set based on factors such as the size, design, location, and physical standard of the apartment in question. The outgoing government’s proposal would have gradually abolished this system and eliminated the role of the tenants’ union by letting the landlord decide the rents without their involvement. Again, the bargaining system had to be fought for — just as it was upon its creation.

A Long Struggle for Housing

Indeed, the history of Swedish housing creation, provision, and financing is a tale of broad and transformative successes that were won by mass organizing across the country. The movement that resulted in today’s system can be traced back to the 1850s, when the first tentative steps were taken to organize around homes built for the growing urban working-class population. But it was not until the 1880s that this tenant movement picked up speed. By the 1920s, it had become a serious force battling the then-dominant high-price and low-standard housing provision, helping to alleviate an acute housing shortage. This was done in part by organizing to finance and build housing for the working class, and in part by forcing the government to do so.

The tenant movement in Sweden was highly confrontational and, unlike local struggles elsewhere, had a nationwide focus. This type of organizing bears resemblance to sector-based labor organizing, in creating broad organizations and solidarity across workplaces. Rent strikes, rent blockades, and mass cancellations of contracts were some of the methods the tenants’ organizations habitually used. But the most successful way of gaining power over capital was through building housing on a mass scale — practicing the right to the city and limiting the possibility of profits from rent extraction. The labor and tenant movements as well as the free church and temperance movements mobilized large swaths of the country’s population throughout the twentieth century, eventually resulting in vast housing cooperatives. Pooling resources to build houses for their own members, these organized civil society groups lay the foundation for the modern Swedish city.

This all happened in a context of growing dominance for the labor movement’s parliamentary wing — the social democratic SAP. In 1920, it formed its first one-party government. The first years of the SAP’s long reign were characterized by ideological debate on the issue of the abolition of private property and ways to go about socializing the economy. Socialization — and not nationalization — was the preferred method for these early Social Democrats, who quickly established an official “Socialization Committee.” This committee’s two decades of work from 1920 to 1941, however, wound up presenting “lame recommendations’’ that “disappointed its supporters and delighted its bourgeois critics.”

Nevertheless, the extraparliamentary forms of organizing for creating more housing would also influence the Social Democrats’ approach to socialization. This meant favoring “more syndicalist forms of organization, cooperatives, and sometimes the extension of public control without ownership.” This approach was meant to formalize what longtime finance minister Ernst Wigforss termed “public enterprises without owners” (samhällsföretag utan ägare). These would operate as public foundations, pay fixed interests on loans, not issue shares, be run by industrial democracy, and have consumer representation — meaning “public enterprise as being distinct from state bureaucracy.”

Still today, 20 percent of Swedes technically live in a cooperative, run and managed by the people who live there. This form of housing, which fundamentally altered the mode of house construction and provision in Sweden — launched by labor and tenant organizing and institutionally backed by the Social Democratic state for almost a century — is, however, more akin to the condominium than the “public enterprise” it once was.

In 1934, the Social Democratic government ordered a major, parallel commission on housing, with the aim of developing long-term solutions and institutional reform to support housing provision. Their work continued for fourteen years, during which a series of reports that became legislation were published. In 1942, parliament passed a major rent reform shaped by the demands of organized labor and tenants, and tenant unions grew stronger over the decades that followed.

After 1945, when the final report was published, national government policy came out in favor of the cooperative and public-rent forms of housing provision — making this into one of the “cornerstones in the construction of the postwar welfare state.” This approach originated from ideas coming out of the successful experiments in socialization in Austria, where ownership was organized in “Gemeinwirtschaft Betriebe” — non-capitalist and collectively owned companies that are supposed to contribute to the public good.

The large cooperatives, which had now developed into vast and efficient organizations, were tasked with developing municipal public housing corporations — the commission’s favored type of tenure. This was key in the construction of “the long golden age of Scandinavian housing policy” lasting between 1945 and 1990.

Later, in 1968, a reform of the 1942 rent regulation was passed by parliament, introducing the “use-value system” that is still around today. In this system, rents are not regulated by law as before, but rather negotiated based on certain factors such as location, services, and attractiveness. All this is meant to mimic a market without introducing the rental form to all-out market principles — a Social Democratic compromise. Rents in this system are not allowed to be “unreasonable”; if any party so wishes, they can be evaluated by a specially purposed “rental board.”

Today’s Housing Crisis

Gradually, the state took over the production and financing of housing from civil society and organized labor — a process that culminated in the execution of the Million Homes Program (Miljonprogrammet) from 1965 to 1974. Of these 1 million homes, 40 percent were public rentals. In Sweden, this means they are municipally owned, run as independent enterprises without any means-testing and with rents determined by central negotiation between tenants’ unions and landlords.

The use-value system for setting rents worked well when it was combined with a massive production of housing and generous benefits for those who saw their rents rise in this system. But without an ample supply and financial support for tenants, the system was vulnerable.

Right now, Sweden is going through a housing crisis. It affects low-income groups most, but it also impacts the wider social majority, as 74 percent of the Swedish population now lives in a municipality with a shortage of affordable housing. The roots of the crisis lie in a flood of neoliberal deregulations, privatizations, and rollbacks of various social programs that started in the 1990s. The administration that took office in 1991 — the first liberal-conservative-led government since 1930 — broke up the unitary system into small parts and then abolished them one by one. This started a period of rapid and radical privatizations, deregulations, and cuts in social spending — and the housing sector was especially hard hit.

During the 1990s, housing construction nearly ground to a halt following an almost total abolition of state subsidies for it that turned an annual 30 billion krona in spending into a 30 billion krona surplus. One of the immediate effects was rent hikes — increasing by 122 percent between 1986 and 2005 — that have only continued since. Moreover, housing benefits were cut by 40 percent between 1995 and 1998 and a further 36 percent between 1999 and 2008, in two decisions that pushed yet more low-income households toward or into poverty. Between 1990 and 2014, public housing, which had for half a century acted as a brake on rent hikes, decreased by 11 percent as a share of the total housing stock, as large swaths of the municipally owned stock were privatized. After public housing firms were forced by law to turn into for-profit enterprises in 2010, rents have only continued to rise.

Following the closure of the Department of Housing, a whole swath of legislation protecting housing from commodification was abolished. In 1993, as subsidies and housing allowances were wholly or almost entirely discontinued, taxes on rental properties increased. Only one aspect of the rent regulation survived, albeit in altered form, namely the use-value system.

According to the Swedish Fiscal Policy Council, if this last remnant of protective legislation was replaced by a deregulation of the rental market, this would lead to rent hikes in Stockholm of between 30 and 70 percent. This means that, without the use-value system and a tenants’ union negotiating rents for its members, the rent hikes would have risen even faster from the 1990s onward. The system thus still plays the role of putting a brake on the rent-setting process. The proposal that led to the collapse of the government in June would have eventually removed such restraints.

Fragile

The historic Swedish city, produced by social movements and the working class and later managed by the state, has been largely (re)appropriated by the interests of capital. This might have been expected, as the social relations of capital were not overcome by Social Democratic reformism. However, as the tenants’ movement of the late nineteenth and twentieth centuries shows, one of capital’s intrinsic contradictions is the class conflict it produces.

While the SAP may have been naive with regard to the stability of the system it long managed, the proponents of this model were themselves aware of its fragility. Social Democratic intellectual Gunnar Adler-Karlsson understood that there were no guarantees for the longevity of this system. As he wrote in 1967 in Funktionssocialism, the simple election of “a government with a conservative orientation, aiming to stop or roll back the development that Sweden long has been going through, towards increased equality and great freedom for each human,’’ could be its end.

However, Adler-Karlsson’s analysis maintained that such an outcome would reignite class struggle and the power balance would be rebuilt. This reignition has yet to materialize on a mass scale — but the Left Party might show a path forward.

Deciding to withdraw its support for the government over this proposed reform, the Left Party stuck out its neck for the system that had previously been supported and managed by the Social Democrats. A deregulation of the Swedish housing sector was stopped, as the proposal was declared “dead” short afterward. This decision has resulted in soaring support for the Left Party and its leader, Dadgostar, and people have flocked in their thousands to become members of the party.

Now the Social Democrats are back in office, after a few weeks of formal procedures and negotiations in parliament. This time around, they know they need to take the Left Party seriously when it threatens their power.