Social Housing Finance in Sweden

Summary. Sweden historical ly had a highly subsid ised housing construction and rehabilitation. Subsidies were main ly channelled through an interest subsidy system, which reduced initial capital expenditures. A boom in the housing market in the late 1980s turned into a `bust ’ in the early 1990s. This was due to a combination of factors: a lower in ¯ ation rate, a deep economic recession and reduced interest subsidies in combination with a tax reform. The effect was to create a large price fall, vacancies, a low construction rate and large defaults. The bank crisis was counteracted by a tighter credit market, with a more thorough screen ing of borrowers. Municipal housing companies lost their protected position on the credit market in the early 1990s. Many of the companies were severely hurt by an increasin g number of vacan cies, and had an insuf ® cient safeguard in terms of a low equity. It is thus anticipated that municipal housing companies will be an important target for bank screen ing in the future, and it is anticipated that banks will develop more sophisticated risk-management techniques in the housing market, which also will include municipal housing. 1