What determines rents in public housing in Sweden?

Rents are controlled in Sweden, and set by negotiations between the local organisation of tenants and landlords on the rental market within the use-value system. The outcome of these negotiations, regarding rent level and rent structure, is studied. About 50 per cent of the variation across municipalities is explained by differences in physical and economic conditions. Other types of explanations, such as differences in managerial skill and various factors that influence the conditions in the rent negotiation process, seem to play an important role. It is also concluded that in some municipalities, there exist an age-dependent rent difference that is not justified by the use-value principle. Finally, the actual rents are compared to simulated market rents. We conclude that actual rents are lower than simulated rents in larger metropolitan areas as e.g. Stockholm, but is small or negative in other municipalities. The overall impression is a surprisingly good overall fit between actual rents and market simulated rents.