How does increased competition on the housing market affect rents?: An empirical study concerning Sweden

The aim of the study is to investigate if more competition leads to lower rents on the housing market. Data about the rent level for similar apartments in 30 cities in Sweden were available. Three hypotheses were formulated: (H1) Increased 'internal' competition, measured by the market share of the municipal housing company (that dominates the market and is price-leader according to the Swedish system of rent regulation), leads to lower rents. (H2) Increased 'external' competition measured by the price level on the market for single-family owner occupied housing, leads to lower rents. (H3) Lower capital expenditure in the municipal housing company leads to lower rents. The statistical analysis showed a strong correlation between the rent level and the level of external competition, but no relation was found for the level of internal competition and the level of capital expenditure. A possible conclusion is that policies that make it easier for households to leave the rental market are important for increasing the pressure on the firms in the rental sector and reducing rents.