Collaboration to achieve fair rent setting

Uppsala has no model for systematised rent setting. It is with this in mind that the local housing company Uppsalahem contacted the Institute for Housing and Urban Research.

What determines how much you are willing to pay for a rental apartment? Naturally, there are many different factors that come into play, such as number of rooms, which floor it is on, whether there is access to a balcony or patio, proximity to the city centre, the condition of the property, etc. 

Today, a method called the utility value system is used to regulate rent levels in Sweden. This system was introduced back in 1968 as a means of creating predictable rents without sudden changes, in the event of e.g. a recession or imbalance in supply and demand. 

Location and quality are highly valued

However, the utility value system has been criticised for, among other things, giving too little room for what tenants value. 

“It is mainly a matter of how location and quality are valued. In big cities like Stockholm and Malmö, rental apartments in central locations can cost as much as those well outside the centre,” says Cecilia Enström Öst, researcher at the Institute for Housing and Urban Research (IBF) at Uppsala University. 

This, in turn, has created deadlocks between property owner organisations and tenant representatives when it comes to agreeing on rents. To overcome this, local models have been created within the framework of the utility value system, such as the Malmö model, the Helsingborg model and Stockholmshyra. 

No systematised rent setting in Uppsala

Uppsala has no model for systematised rent setting. It is with this in mind that the local housing company Uppsalahem contacted the Institute for Housing and Urban Research. The purpose of the collaboration is to produce a research-based foundation that Uppsalahem will be able to use in its continued work to create a systematised rent setting system. The project also contributes to new research in the field. 

“We are interested in looking at how individuals value different housing characteristics in rental apartments, and how this corresponds to how the utility value system works today,” says Cecilia Enström Öst. 

To find out which parameters affect willingness to pay, the researchers interviewed both representatives of Uppsalahem and selected tenants. This resulted in a list of different housing attributes. Some of these are number of rooms, floor level, balcony/patio, age of the property, bathroom, proximity to green areas, etc. 

Hypothetical choice experiment

This information is now being compiled in a survey to be sent to 17,000 tenants. Designing the survey has proven to be both complex and technically advanced. 

“We want to weigh all attributes at all levels against each other to obtain the average marginal willingness to pay for rental apartments. At the same time, we need to adapt the survey so that it is not so extensive and complicated that respondents feel it is too much effort to complete it,” says Cecilia Enström Öst.

It will be a hypothetical choice experiment. This means that apartments with different attributes will be presented in the survey. The apartments are not real, but are still realistic enough for respondents to be able to decide which of the apartments they prefer when two apartments are compared. Per Johansson, Professor at the Department of Statistics at Uppsala University, is also involved in the design of the survey.

Great interest in the project

There is great interest in the project. This was particularly evident when it was presented at Bostadsmötet 2022 (a seminar for both researchers and actors in the housing sector). The actors Uppsalahem, Hyresgästföreningen, Fastighetsföreningen and Sveriges Allmännytta have partnered with IBF to apply for funding for continuation even before the project is completed.

“It is great to see such support. Ultimately, it is about creating predictability and security both for property owners and for residents and those seeking rental housing,” concludes Cecilia Enström Öst.