A Study of the BRF 2.0 Concept - The Impact of Radically Increased Leverage in Swedish Housing Cooperatives

Sammanfattning: The dysfunctionality of the housing market in Sweden has attracted substantial interest from media, researchers, and politicians the past decade. Young adults that fail to meet the credit restrictions are unable to purchase an apartment, and long queues often keep them out of the rental market. This is a market problem of large proportions in the Swedish society. This paper analyses the yet unlaunched concept of BRF 2.0, which seeks to solve this problem. The BRF 2.0 takes on a higher amount of debt than regular BRFs, which results in a lower purchase price and a higher monthly fee for buyers. In particular, this paper aims to explore how the concept will be priced on the open market, with special focus on consumer pricing of the increased fees. Through the use of the Hedonic Price Model, almost 12,000 transactions from the municipalities of Järfälla and Sollentuna are analysed in order to understand how apartments are currently priced. The study shows that buyers currently undervalue the present value of fees at 88% of their fair value, according to the Hedonic Price Model. In terms of the BRF 2.0 concept, this indicates that the market could pay a premium of up to 72% compared to the apartments' fair value. Lastly, while the BRF 2.0 seems to partially solve the identified market problem, its effect may be reduced if companies start charging buyers according to the market value suggested by this paper.