Housing for all and Construction for Profit: A Swedish Oxymoron

Sammanfattning: This thesis examines the effect of nya Allbolagen on the quantity of rental dwellings built by municipal housing companies. Nya Allbolagen is a law that was enacted in 2011 with the goal of aligning with EU competition law by leveling the playing field in the Swedish housing market. The law revoked preferential financing conditions granted to municipal housing companies and coerces them to act in a business-like way. We conduct multiple fixed effects difference-in-differences regressions, for a variety of specifications. Using debt-to-equity ratios, we argue that many of the municipal housing companies acted in a business-like way prior to the law and use them as a control group. Using a theory of mixed oligopolies we predict that the supply of rental dwellings provided by municipal housing companies should decrease as a consequence of the law. Evidence of compliance with the law is found, but the resulting effect on the quantity supplied is evident only in the first two years after implementation, and disappears when extending the post-treatment period. The results we find are robust, significant, and in line with our theoretical predictions. Additional data is needed to better capture the mechanisms municipal housing companies used to adapt to the law.