"Everyone who's been near Stockholm's inner city knows that the concept of secure-tenure rental apartments (hyresrätter) just doesn't work there," Reinfeldt told the Dagens Nyheter (DN) newspaper.
"You're supposed to hand over your secure-tenure contract to the next tenant, but in reality a black market has developed," he said.
He pointed out that many rental contracts end up being used in apartment swaps.
The comments come following several articles published in DN recently highlighting the growing social divisions in Stockholm that come as a result of the city's difficult housing market.
According to DN, people with higher incomes occupy an increasingly large percentage of downtown Stockholm's housing stock.
In the last two decades, the income difference between residents living in central Stockholm and those in the surrounding areas has jumped from 5 percent to 29 percent.
Stockholm's system of apportioning rental apartments through secure-tenure rental contracts was developed as a way to guarantee all residents the ability to find housing.
However, as demand to live in Stockholm's city centre has increased, the system currently doesn't function as originally intended, resulting in artificially low rents for inner-city flats and providing incentive for tenants who hold contracts not to relinquish them.
"What Reinfeldt is saying is that secure-tenure rental apartments aren't a part of the regular rental market, which had led to secure-tenure rental being dead in principle in the inner-city. But newly produced rental apartments with market-based rents exist. And there is a market for them," said Hans Lind, a real estate professor with the Royal Institute of Technology (KTH), to the TT news agency.
"If a rental market means having floating rents, then market-based rents are a pre-condition. If you look elsewhere in the world, there is a market for sublets in the downtown areas of major cities," he added.
In other cities, apartments that aren't used by the owner are often rented out to one or several tenants, often young people or students.
"So in other large cities in the world there is actually room for two rental markets in the inner-city," said Lind.
The problem in Sweden, according to Lind, is that owners of tenant-owner apartments (bostadsrätter) can't sublet their properties at market-based rents, while in other cities there is a market for expensive, luxury rental apartments as well as one for more modest sublets.