Class Compromises in an Uncompromising Political Economy: Rent-setting and The Swedish Tenants’ Union

As the Swedish parliamentary year came to a close at the end of June 2021, a proposal to introduce a form of market rents in new rental housing constructions led the Left Party to withdraw its support for the government. As a result, the minority government led by the Social Democratic Party (SAP) was dissolved. The Left Party’s decision was preceded by an intense public debate and large-scale grassroots mobilisation by Nätverket Nej till Marknadshyra (The Network ‘No to Market Rents’) and other social movements. The proposed legislation was considered a direct and concrete threat to tenants (representing almost 30 percent of the population) the unique Swedish model of corporatist rent-setting and the Swedish Tenants’ Union with its half a million members. Ironically, the SAP government fell because they tried to dismantle a rent-setting system they had themselves built up 50 years ago: a classic social democratic class compromise, consistent with the Swedish model of sector-based union negotiation with minimal state intervention.

The focus on the threat of market rents overshadowed the fact that the rental housing system had already changed in decisive ways over the last 20 years. But unlike the debate in 2021, the introduction of cost-based rents in new rental housing in 2006 (presumtionshyror), and the marketisation of municipal public housing companies in 2011 (Allbolagen) had both been implemented without significant resistance or public debate. In both cases, and in stark contrast to the discussion about market rents, the legislative changes were formulated as legal-technical and economic issues – so-called ‘expert matters’ – not as political problems (Kjellström, 2015, p. 15). Instead of opposing the measures, representatives from the Tenants’ Union stayed in the negotiating rooms with the private and public landlord associations.

In this text we look at some recent changes to the rent-setting system in relation to changing relations of class power in Sweden during this period. We argue that the Tenants’ Union has undertaken these compromises in order to ‘save the system,’ and maintain minimal state intervention, in spite of the adverse effects it has had on tenants. This is consistent with Social Democratic crisis management since the 1970s (Meidner, 1993).

From winning positive class compromises to selling out

Prior to the 1930s Sweden had some of the worst housing conditions in the industrial world, with severe overcrowding, poor housing conditions and exceptionally high rents (Dickens et al, 1985). In the post-war years, a highly regulated housing industrial complex encompassing the production, exchange and distribution of housing was developed to address the housing crisis. A key aspect of this system was the unique rent-setting system based on use-values, negotiations and a strong right of possession. This rent-setting model was developed in the late 1960s and 70s, in the context of growing discontent among emboldened private property owners toward the provisional post-war rent regulation which had been in place since 1942.

The original purpose of the use-value value system was to ‘imitate’ a market system, while at the same time securing tenure protection and constituting a barrier against ‘unreasonable’ rents, especially during times of housing shortages (Bengtsson, 1992). The rent of an apartment was not to be considered reasonable if it was significantly higher compared to that of apartments considered as having equivalent use-values in the public housing stock. This meant that the rents in the non-profit, cost-based public housing became the yardstick for all rents: a kind of implicit rent ceiling. In the case of disagreement, tenants had the statutory right to legally try their rents in public rent tribunals.^[1]

A few years later, in 1978, an expansion of the legislation established that all rental conditions, including rent increases, should be negotiated between the landlord and a local Tenants’ Union.^[2] The amendment provided the Tenants’ Union with more power and was seen as a means to equalise the power relationship between individual tenants and landlords (Bengtsson, 2022). The legislation also granted the Tenants’ Union compensation for their negotiation work through the implementation of a rent-setting-fee. Since 2012, the fee has been 12 SEK per apartment and month, and in 2021 it amounted to approximately 200 million SEK in revenue for the Tenants’ Union (Ahlstedt, 2021), or 26% of their total budget in 2020 (Hyresgästföreningen, 2020).

The post-war gains for tenants came to an abrupt end in 1991, when a liberal-conservative government was elected in Sweden. The new government acted decisively to roll back many of the gains of the post-war era – housing included. While the initial roll-back was made by the conservative coalition government, the succeeding SAP government elected in 1994 eagerly took over the torch and continued the dismantling of the welfare state (Altermark & Plesner, 2021). Post-war housing subsidies were almost entirely phased out during the 1990’s (Blackwell, 2019) and as a result the annual construction rate dropped sharply from 36,000 completed rental units in 1991 to 7,800 by 2005, a drop in pace from which it  is yet to recover (SCB, no date).

With public financing gone, housing benefits slashed, and the Ministry of Housing abolished in 1991, the first significant change to rent setting came with the introduction of presumptive rents in 2006. The new legislation opened up the possibility of deviating from the use-value system for new rental housing construction. In contrast to use-value rents, a presumptive rent is negotiated based on the landlord’s costs to produce the apartment, together with a ‘reasonable’ return on capital i.e., profit. On this basis, a landlord and a tenants’ association can agree on a rent that is presumed to be fair for a certain period of time. During this period, which was initially 10 years, and extended to 15 years in 2013, tenants do not have the possibility to try their rents in tribunal (SOU 2017). When the presumption rents expire, they are meant to merge into the use-value rent system.

The legislation was implemented with the aim of stimulating new production of rental units and was based on the assumption that the only way to increase the supply is through market mechanisms. However, the legislation robbed tenants of one of the fundamental protections provided by the use-value system: the right to try if their rents were reasonable. The change took place in the context of growing right-wing discontent with the use-value rent system, and the Tenants’ Union supported the deregulation, possibly, to protect the negotiation system and pre-empt calls for market rents (Luthander, 2006). Yet, presumptive rents have led to rapidly rising rents in new rental housing and in some instances the rents have been as high, or even higher, than what tenants can afford (Claesson, 2019). It is also unclear how the presumption rents will be merged into the use-value system when they expire, without pushing up rents in the rest of the housing stock (SOU 2017).

The second significant change to rent setting in 2011 was preceded by a drawn-out conflict between the Property Owners’ Association and the Tenants’ Union starting in 2002. The conflict ignited when the former made a complaint to the European Commission (EC), that the rent-setting system and the public housing companies’ non-profit principle was incompatible with EU competition rules and distorted free market competition. In response to the complaint, the government established a commission on the matter. The final report presented in 2008 proposed two alternatives to resolve the supposed problems of unfair competition: either the municipal public housing corporations could become run as commercial profit driven businesses with the explicit goal to maximise profits or the municipal housing companies could continue to be cost-based (SOU, 2008). Regardless of the alternative chosen, the commission recommended the abandonment of the public housing companies’ rent normative role (Kjellström, 2015), i.e. the elimination of the implicit rent ceiling.

The Tenants’ Union and the umbrella organisation of public landlords (Sveriges Allmännytta) initially opposed both alternatives as well as the abandonment of public housing companies’ rent normative role. They believed the first option would lead to market rents and that the second could lead to a social housing model in Sweden – which would erode the universality of the Swedish housing system. They drew this conclusion despite the fact that the commission did not propose the development of a social housing sector, i.e. a subsidised selective housing sector for households with lower incomes. In fact, the 2008 report explicitly stated that the cost-based alternative proposed should “rent out housing on equal terms to all people” (SOU 2008, p. 28). However, the case never reached the EU courts, and the cost-based principle was never legally tried.

Instead, the Tenants’ Union and Sveriges Allmännytta jointly developed a third alternative, which became the basis for the Act on Public Benefit Municipal Housing Corporations – known in Swedish as Allbolagen – which was introduced in 2010 and became law in 2011. This Act meant that public housing companies were forced to abandon the cost-based management and conduct their business according to commercial business principles. As part of the negotiation, the Tenants’ Union agreed to give up the public housing companies’ normative role in rent-setting. Ironically, only a few years earlier, the Tenants’ Union ran a campaign ahead of the 2006 election warning that this “will most likely lead to large rent increases, particularly for those of us living in privately owned rental apartments” (Hyresgästföreningen, 2006, our translation).

Before 2011, there was a clear yardstick for rent setting, but now the basis for the use-value rents has become increasingly unclear. This has left more room for the judgments and praxis of individual negotiators and landlords – distinct in different parts of Sweden. It has also opened up entirely new avenues for landlords to raise rents. This poses a peculiar situation where the Tenants’ Union (which ostensibly should work for the benefit of tenants) made the choice of pushing for the introduction of a system that undermined and worsened the position of tenants – despite the fact that there was an alternative that did not spell major changes to the cost-based public housing system. To make matters worse, according to legal scholar Anders Kjellström (2015) it is unlikely that the Swedish public housing sector would have been considered inconsistent with EU competition law if it had reached the EC courts.

The effects of these changes are already being felt by tenants and the housing crisis for renters has escalated since 2011. The ‘right of possession’ granted by the Swedish rental system remains in the law but does not mean much in practice unless the tenant can handle a 50 or 60 percent rent increase. Renoviction is today not the exception or the result of some exceptionally greedy landlords. It is the logical result of landlords who follow the minimum legal requirements to the letter in the now eroded rent-setting system (Polanska et al, 2022).

The Logic of Social Democratic Self-deception

The Tenants’ Unions’ role in the dismantling of the more favourable (for tenants) rent-setting system, parallels SAP’s role in the dismantling of the welfare state. Starting during the economic crisis of the 1980’s, the idea that the traditional means of crisis management were not working anymore started to take hold in the SAP ranks. Public expenditures had to decrease in favour of private profits. This political shift, hostile to workers, became what political scientist Niklas Altermark and economist Åsa Plesner (2021) dub the SAP mantra: “[w]elfare can only be saved through cutbacks’’ (p. 31). By the mid 1990’s, the idea that private sector growth was necessary for continued welfare became increasingly hegemonic. The dismantling of the welfare state was carried out with the consent of SAP and in many cases they even led the charge. According to sociologist Göran Therborn (2018),

“It was a social and economic counter-reform carried out in the historical Swedish manner of major political upheavals: well-controlled from above and carried out gradually through discreet negotiations between a limited few, ending with the leading representatives of the losers voting for their own downfall against the promise of to see and to even participate in the winners’ game”(p. 45, author translation).

What happened in the Tenants’ Union is equally well captured by this quote. In both 2006 and 2011 the Tenants Union were part of negotiating the roll-back of protections for tenants. Their version of the SAP mantra had become the following: the rent-setting system can only be saved through concessions. 

The deregulation forwarded by SAP and the Tenants’ Union should not be understood as a break with the Social Democratic reformist praxis, but rather a logical extension of it. The post-war welfare model developed in Sweden had always hinged on the profitability of capital. Deregulation was seen as a way to ensure its continuation during the crisis of industrial monopoly capitalism in the 1970s and 80s. While capital was constrained during the peak of the Swedish welfare state, the realisation of capitalist interests was always one of the key premises for the compromises made in the time period (Listerborn and Molina, 2022). According to Therborn (1978/2008), the “basis of sustained class collaboration was the high profitability of big capital, whose expansion was then actively furthered by both state and trade unions” (p. 211). This was particularly true for the construction sector, where small-scale firms flourished in the post-war housing system to eventually become international mega corporations by the 1980s.

This corresponds to the mutually reinforcing relationship between the realisation of capitalist interests and the organised power of the working class as suggested by sociologist Erik Olin Wright (2015). Social democratic Sweden, during its corporatist heyday, did seem to show that “increases in working class power have positive effects on capitalist class interests, [and] generates conditions for positive class compromise’’ (Wright, 2015, p. 188). For the period when working class power was strong, class compromises were arguably positive for both the working class and capital – profits soared, and productivity gains were enjoyed by many workers in forms of extended vacations and increased salaries for example.

However, positive class compromises are only possible when the working class holds real power by having their threats backed up by organised mass movements. By the 2000s, the organised working class in Sweden had lost much of its former strength as well as its militancy. There are many reasons for this loss of power. A contributing factor was the growing distance between the social democratic elite on the one hand and the rank and file of the party, labour unions and social movements on the other. These organisations had in turn become increasingly institutionalised and professionalised, processes that intensified in the 1980s and resulted in a further separation of the interests of representatives and the represented.

As a result of this development, sites of class conflict moved from the spheres of exchange and production to concentrate on the sphere of politics (Wright, 2015, p. 192). In the case of the Tenants’ Union, it entailed a shift from local organising and rent strikes to more emphasis on managing the rent-setting system centrally and conducting centralised negotiations. This process of diffusing movements that could otherwise threaten the status quo, has been described as ‘accommodation’, by sociologists Gunvald Nilsen and Laurence Cox (2014) and can take the form of granting concessions, meeting demands and “coopting leaderships into positions of relative power while demobilising the movement’’ (ibid., p, 71).

The Institutionalisation of Class Conflict

The Swedish welfare state has in retrospect become viewed as a top down and state-led project. While there certainly is some truth to this, it does not tell the whole story. Social movements, including the labour, tenant, free-church, and temperance movements did not only help bring the Social Democrats to power during the early 20th century (Östberg, 2021), but they would also play a key role in the formation of the Swedish welfare state. An essential part of the SAP ideology was originally the support of “more syndicalist forms of organisation, cooperatives, and sometimes the extension of public control without ownership’’ (Tilton, 1987, p. 143). This is also reflected in the rent-setting system which developed in Sweden. 

The Tenants’ Union started out as a more or less radical set of groups that over the beginning of the 20th century amalgamated into a national organisation. They employed various methods of reaching their goals, with the more radical factions’ organising rent strikes and blockades, while also organising to build housing (Rolf, 2020). However, it was not until after the Second World War that the Tenants’ Unions’ role in the Swedish model of housing provision became fully institutionalised into the welfare state apparatus.

Soon after rent control was implemented in 1942, a preliminary version of the “corporatist” model of rent setting was established. While rent control held back rents, it was not unanimously supported by Tenants’ Union activists. According to the chair of the Tenants’ Union in the 1950s, Erik Svensson, rent control disincentivised landlords from maintaining and renovating the housing stock (Rolf, forthcoming). So, in 1957, rent control in the municipal public housing stock was abolished in favour of a collective bargaining model. But there was another less outspoken reason for introducing collective bargaining. The implementation of rent control was clearly desirable for tenants, but it had the adverse effect of making the Tenants’ Union increasingly redundant and limited to the rent tribunal bureaucracy (ibid.) A collective bargaining system gave the weakening Tenants’ Union institutional power and a new raison d’etre.

The implementation of rent negotiations in the 1950’s – further consolidated in the 60’s and 70’s – institutionalised the role of the Tenants’ Union. According to Rolf (forthcoming), this meant the Tenants’ Union power basis shifted from “a more direct collective action-oriented challenge to becoming a more institutionalised member of the system” (p. 8). Internally, it shifted the focus of the organisation – from tenant mobilisation – to an increased focus on negotiation and legal advice. All in all, the legislation strengthened the Tenants’ Union’s formal role as it gained a seemingly permanent seat at the political table in matters of housing politics (as they became part of the SAP praxis), but it also meant a gradual deradicalisation and formalisation of the organisation.

This has led to internal reorganisation of the Tenants’ Union and an increasing specialisation and professionalisation of the staff since the 1980’s, which was seen as necessary to navigate the increasingly complicated rent-setting system which developed from the 1960’s onwards. The system made it increasingly difficult for a layman to understand and navigate the system, giving the Tenants’ Union monopoly control on the skills, knowledge and expertise to fight rent increases. Not only does it give the Tenants’ Union an interest in maintaining the system as it is, but it has also led to a professionalised and depoliticised leadership within the organisation that is removed from the rank and file.

It is not uncommon for the Tenants’ Union rent negotiators to ‘change sides’ and later take jobs as negotiators for the Property Owners Association, for example. The political leadership of the organisation has also moved closer to the economic elite, in line with developments within SAP since the 90s (Therborn, 2021). A large section of the Tenants’ Unions leadership does not live in rental housing anymore and has incomes far above the average renter (Syrén, 2021). These cross-class relationships and growing distance between leadership and grassroots would have been frowned upon in the 1930’s tenant and labour movements and are symptomatic of a larger shift in Swedish politics.

From an economic perspective, the implementation of collective bargaining also made the Tenants’ Union increasingly dependent on the rental negotiation fee. This has become a particularly important source of revenue in the face of dwindling membership numbers. However, the fee is mainly used to pay staff wages and does not benefit local associations or organisations. One of the main differences between the 2006, 2011 and proposed 2021 reforms to the rent-setting system is that while all reforms negatively impacted tenants, the first two did not challenge the rent negotiation system as such. Nor did they compromise the stream of revenue from the associated rent negotiation fee. Based on this one could argue that the Tenants’ Union is willing to compromise – as long as their monopoly control over rent negotiating remains unchallenged.

Concluding thoughts

During the heyday of working-class power, Swedish tenants had managed to secure vastly better conditions for themselves. But the system that emerged from this, based on negotiation, ultimately failed because class power relations shifted in favour of capital and tenants’ representation had been institutionalised beyond recognition. Lower rents, a growing public and cooperative housing sector, and more secure tenures were victories that were reversed when working class power had been circumscribed from the 1990’s and onward.

It is not only the rent-setting regulation that has been changed in favour of capital. The world and the balance of power between tenants and landlords has also radically changed. The meaning of a market adaptation or compromises with market players is different today than in the 1970s. Since the 1970s, the housing system has been deregulated and privatised, and housing inequality and segregation have increased. Any perceived neutrality between tenures has more or less completely disappeared (Christophers, 2013).

This situation places new demands on housing policy. Yet, the Tenants’ Union has weakened both in terms of the number of members and in terms of political strength. Instead of focusing on rebuilding power, the organisation has put their energy into negotiations and concessions, as a way of pre-empting a full dismantling of the negotiation system. Yet with every change, the rent-setting system becomes ever more hollowed out, moving ever closer to precisely this point of full dismantlement. When the attempted introduction of market rents was proposed they did react – but perhaps primarily because it would spell the end of their role and therefore their raison d’être. But also, because new militant tenant movements are emerging which are putting pressure on the Tenants’ Union to address renovictions and the ongoing and escalating crisis for tenants (Listerborn, et al., 2020). Beyond just the failure of the particular organisation and project that is the Swedish Tenants’ Union, we have also shown the limitations of class compromise more broadly. We cannot negotiate our way out of the current crisis. At any point in which capital is strengthened, previous concessions will rapidly be pulled back. The Tenant’s Union should revive its roots of mass mobilisation and regain its confidence to struggle for an altogether decommodified housing.

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^[1] When assessing the use-value of an apartment, the use-value rent should not consider the direct cost of the apartment, the preferences of the individual tenants or their incomes. Rather the perceived use-value of a unit would be based on the preferences of tenants as a group.

^[2] The law does not stipulate that it has to be the national Tenants’ Union but because this is the largest tenant organization in the country, it has almost by default granted them negotiation privileges for all rental housing.

COVER PHOTO: Demonstration against market rents organized by Nätverket Nej till Marknadshyra, September 18, 2021, Sergels Torg, Stockholm. Photo by Cecília Tümler

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