Swedish watchdog slams home builder contracts

Sweden's consumer watchdog has criticised 15 small house builders for unfair contract terms, the agency announced on Tuesday.

Swedish watchdog slams home builder contracts

The Swedish Consumer Agency (Konsumentverket) scrutinised 15 single-unit house builders over allegations of unfair contract terms. The 15 companies represent about 80 percent of small house production in Sweden.

In most cases, the contracts run contrary to existing legislation. The agency has now demanded the industry clean itself up or face legal consequences.

“It is unclear whether the housing companies are ignorant of the laws and current legal situation or if they simply ignore it. It is very serious,” Gunnar Larsson, director general of the agency and the the Consumer Ombudsman (Konsumentsombudsmannen, KO), said in a statement on Tuesday.

“This implies that the entire industry shape up or we will be forced to take legal measures to resolve the problems,” he added.

About 7,000 self-contained homes are built in Sweden every year.

According to the agency, conditions should be fair and there should be a balance between consumer and the homebuilder. However, the agency’s review of the terms offered by Sweden’s 15 largest home builders showed that none of the companies live to these standards.

“It is deplorable,” said Mari Gremlin, an agency lawyer.

The agency highlighted the nine terms that are unfair and directly contrary to law. All the terms restricted consumer rights in different ways in relation to the home builders.

A common and illegal term is the appointment of the surveyor by the insurer. When a consumer buys a single-family home, it often includes faulty construction coverage. Switching can be expensive for the consumer.

After passing the final inspection, there are often some construction faults that exist. As such, consumers have the legal right to withhold the final installment to the firm to ensure their demands.

“However, there are conditions that say one must immediately pay the final sum,” noted Gremlin.

In some cases, the claim is valid for only seven days. By law, contracts should last up to two months after the fault has been detected.

In addition, 13 of the 15 companies have terms stating that prices will increase according to a delay index – regardless of who caused it.

“The consumer suffers, both in waiting for a delayed house and getting a price increase,” said Gremlin.

Kent Johansson, CEO of Älvsbyhus, one of the companies scrutinised and criticised by agency, could not explain why there are many gaps in the industry.

“Our agreements, and almost the entire industry’s, have been like this, for many years,” he said.

However, he pledged to follow through with the agency’s recommendations.

“We will try to find the points that concern us and we will simply make the changes that we believe that the Consumer Agency wants,” said Johansson.

The agency will follow up with the companies in the spring and review the terms.

“If they have not changed, we will demand that they do so. If they do not do it voluntarily, it may go to market court,” said Gremlin.

The Swedish Homeowners Association (Villaägarnas Riksförbund) recommends getting professional help when buying a house from a construction consultant or specialist lawyer.

“This is really bad. You cannot go in and buy a house and believe that the agreement presented under your nose is the most optimal for you,” said the association’s chef lawyer Ulf Stenberg.

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OPINION: Sweden’s ‘historic investment’ has failed to solve the housing crisis

Five years after Sweden's government promised to solve the country's housing crisis with a "historic investment", things are as bad as ever, David Crouch argues. Radical action is needed.

OPINION: Sweden's 'historic investment' has failed to solve the housing crisis

Forced to move house 20 times in the past eight years, Maria’s situation was desperate. She and her daughter had arrived in Stockholm from Latin America in search of a better life. She found work, no problem – but housing was impossible.

“Sometimes I was paying 12,000kr in rent and it was very hard because I only had 15,000kr in monthly salary,” says Maria (not her real name). So she took a high-interest loan of 240,000kr and tried to bribe someone in the Housing Agency to get to the front of the queue for affordable housing.

But she was caught. Her fate is unknown. And she didn’t even get an apartment.

This recent story, in the excellent newspaper of the Tenants’ Association, sums up the problems facing people who move here to work. The market for rental accommodation is tight as a drum. Finding a home means competing with Swedes, but with all the disadvantages of being an outsider. So people find themselves pushed into short-term, insecure rental contracts at inflated prices.

It wasn’t supposed to be this way. Five years ago this month, the government announced a “historic investment in housing”, including subsidies for construction companies, easing restrictions on building permits, and making more land available.

The housing situation at the time was grim. Spotify had threatened to leave Sweden if things didn’t improve – how could the company attract skilled young people to a city where there was nowhere for them to live? More than half Stockholm’s population – 600,000 people – were in the queue for a coveted rental apartment, because strict regulation meant these rents were low. But it took as long as 20 years to get to the front of that queue.

The result was a thriving rental property black market, with large bribes changing hands. Many tenants exploited the situation by sub-letting their homes, or parts of them. “It is almost impossible for immigrants and new arrivals to penetrate this market – it is all about who you know and how much money you have,” said Billy McCormac, head of the Fastighetsägarna property association, in 2015.


So what has been the outcome of the grand promises the government made five years ago? House-building at the time was already rising steadily, and it has continued to do so. Look around you in the big cities and you will see that new apartment blocks have sprung up here and there.

But we shouldn’t go only on appearances. To understand the reality, we need to look at some numbers.

The gap between demand for housing and the existing housing stock has indeed started to shrink. “As housing construction has gradually increased and population growth has begun to slow down, the gap has decreased since 2017,” Stockholm’s Housing Agency noted in December.

The Agency has broken records four years in a row for the number of rental homes it has provided. The proportion of young adults living independently has also increased somewhat, the Tenants’ Association found, probably due to the pace of construction.

But this smidgen of good news is outweighed by an avalanche of bad.

The average queuing time in 2021 for a Stockholm apartment was more than 9 years; for somewhere in the city centre you have to wait 18 years. Only 936 homes came with a waiting time of less than one year. More than three-quarters of a million people are now registered in the queue for housing – a big increase on five years ago.

The rate at which the housing shortage is shrinking is nowhere near fast enough to alleviate the huge accumulated demand.

Assuming that the current pace of construction can be maintained, it will be the end of this decade before any significant dent is made in the deficit of homes, according to Boverket – the Swedish National Board of Housing, Building and Planning. The current rate of construction is “only marginally more than the long-term need”, it says.

The challenge is even greater when it comes to producing affordable housing, Boverket says, especially for the young and those entering the housing market for the first time. Almost one in four young Swedes up to the age of 27 are forced to live at home – the second-highest figure since the measurements began.

There are already signs that housing construction is actually slowing down, owing to higher building material prices, rising interest rates and an incipient labour shortage. Construction prices rose by more than 8 percent last year, and there is concern in the industry that war in Ukraine will further affect costs, in turn slowing the pace of building.

There is another fly in the ointment, a consequence of the collapse of Sweden’s governing coalition in November. The new, minority administration was forced to adopt the opposition’s budget, which halted investment subsidies for house building, throwing the construction industry into confusion.

In short, the “Swedish model” for providing people with a roof over their heads is failing. The folkhemmet, or “people’s home”, has not enough homes for its people.

Swedes themselves understand this: in a survey last month, nine out of ten voters said they thought that politicians did not take the housing shortage seriously.

We have waited too long. It is time for fresh thinking and radical action to solve the housing crisis.

David Crouch is the author of Almost Perfekt: How Sweden Works and What Can We Learn From It. He is a freelance journalist and a lecturer in journalism at Gothenburg University