Correlation between negotiated rents and neighbourhood quality:: A case study of two cities in Sweden

The aim of this paper is to analyse whether or not differentiated rents reflect differences in neighbourhood quality in housing of similar quality and age in two target cities in Sweden. The system for rent setting in Sweden is partly based on a process of negotiation in which the annual change in actual rents is an outcome of negotiations between the local branch of the Swedish Union of Tenants and local municipal housing companies. One possible outcome of these negotiations could be change to the rental structure in the different neighbourhoods within the municipality. By allowing differences in negotiated rent outcomes in different neighbourhoods, a better relationship of rent level to tenant perception of neighbourhood quality can be achieved. It is the understanding of the authors that in a number of local-housing-market rent negotiations over the last decade, the parties involved have agreed on the need for and have consciously aimed towards making such adjustments. In this paper, regression analysis has been used to analyse data about rent levels for residential units from two cities in Sweden, namely Gothenburg and Lulea. It can be concluded that differentiated rents are indeed present, hence the existing rent-setting system in Sweden can be used to improve the relationship between rental structure and neighbourhood quality.