At the heart of the Sweden's economic and social crisis is a broken housing market

From the article (archive):

The two suburbs — Ursvik and Rinkeby on the outskirts of the Swedish capital — are physically separated by a four-lane highway. Yet the divisions are much wider than that in a country built on egalitarian ideals, but which now finds itself in the grip of an economic and social crisis. Some local politicians complain that the bridge, originally planned for public transport but now used as a pedestrian crossing for the residents from Rinkeby to visit shops on the other side, is damaging their property prices and that it could cause criminality to spread.

Several want it pulled down.

It is a reminder that while Sweden sits between France and Switzerland in a ranking of dollar billionaires, many poorer Swedes have seen the gap between the haves and the have-nots widen dramatically in recent times. The economy has been buffeted by rising inflation over the past 12 months, interest rate hikes and a slumping currency. The fallout has triggered Europe’s worst house price collapse and a drop in household consumption. Even with the upheavals from the Ukraine war denting other European nations, Sweden is the only economy in the region projected to contract in 2023.

At the heart of Sweden’s woes is a dysfunctional housing market, which has not only cemented social divides, but exacerbated them.

The country’s property boom — which saw prices increase by almost 250% in the past 20 years — was fueled by razor-thin borrowing costs and a shortage of rental properties. This lack of housing squeezed poorer families into overcrowded accommodation. And pushed others into buying — the total value of mortgages increased 459% in the two decades up to 2022. Before the latest crisis, household debt, including mortgages and consumer debt, had soared to more than 200% of disposable income, according to the OECD’s latest data from 2021. That is double the level in Germany.

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Rents are negotiated annually by landlords and the tenants association. Advocates say the system helps create a rental market in Stockholm where teachers, police officers, street cleaners and other public sector workers can afford to live alongside bankers, software developers and government officials. Yet supply hasn’t kept up with demand for decades. Average waiting times for a rent-controlled apartment is now 9.2 years, but can stretch up to 20 years in some parts of the capital.

That has sparked a black market in rental leases, which are now very valuable for those who hold them, but out of the reach of many of those who really need them. It has also opened the door to frauds like the one that ensnared Abdulahad.

This can be a lucrative business for those on the inside. They get a nice place for little money and can hold on to it for friends and family, or they can cash in by selling the lease under the table. But for migrants and others without the resources or connections to secure housing, they’re vulnerable and are forced into shady deals for rental apartments. One woman who needed housing for herself and her daughter paid $40,000 for one of these illicit rental leases in a suburb of Stockholm.