A study from Sweden examines how municipal housing companies can afford to renovate homes without causing steep rent increases to tenants. The research by Kristina Mjörnell, Jenny von Platten and Kicki Björklund looked at an initiative to offer tenants choices in what improvements they wanted, for what cost.
Although the housing is owned by local councils, housing companies are required to act in a ‘businesslike’ way, ensuring they don’t run up deficits. The ‘businesslike’ requirement has led to incidents where tenants were ‘displaced’ on finding they couldn’t afford the renovations to their homes. Local housing companies cannot access government funding for renovation.
In addition, companies must consult tenants on any renovations involving quality upgrades that lead to rent increases. Although tenants in theory have some influence in the negotiations, the courts have almost always ruled in favour of the landlords where disputes arose.
In this case, tenants in a socially disadvantaged area were offered a range of options on new kitchens and bathrooms. The choices went from a ‘maintenance’ option of basic improvements with an average 1.7% rent increase, to a full replacement involving an average 49% rent increase (depending on the size of the flat).
Just over half of the tenants opted for the maintenance upgrade, with the lowest cost increase. However, for the scheme to be financially viable, the company had hoped only 20% would choose this option. The remaining higher increases would cover some of the cost of the maintenance refurbishment.
In the event, some tenants moved out so empty flats were refurbished to the highest standard with the new letting covering the cost. This meant that, overall, the company could say the return on investment – though very low – was enough.
The study has implications for the way improvement of Swedish municipal housing is tackled. Much of the stock is in need of upgrading but the resultant cost to tenants can be prohibitive. Tenants in the study very much appreciated being given choices and control over the works carried out to their homes. But with low incomes many could only afford the basic option.
If too many tenants on other schemes were to choose a basic option, schemes could become unviable. One suggestion to deal with this difficulty is to offer all tenants in low-income areas such an option, but to offer those in better-off areas only the more extensive upgrades. Thus costs would be balanced out across the whole stock.
Balancing social and economic sustainability in renovation with an affordable option for tenants? A pilot study from Sweden
