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PROPERTY

How to avoid being ripped off when you’re renting in Sweden

More and more people who live in second-hand rentals in Sweden are claiming they have been illegally overcharged by landlord. The Local speaks to an expert to find out how prices have changed, why, and how renters can avoid being ripped off.

How to avoid being ripped off when you're renting in Sweden
A large number of internationals in Sweden are believed to be renting apartments on the unregulated black market. File photo: Helena Wahlman/imagebank.sweden.se

Rent controls apply to many properties in Sweden, but in the larger cities the queues for these so-called first-hand contracts are so long that many people wait more than ten years for an apartment. These leaves many people relying on sublets or “second-hand” (andra hand) rentals, particularly since a tightening of requirements to get a mortgage has made it harder for Swedish residents to buy property.

And the cost of these second-hand rentals has soared over the past decade.

Figures shared with The Local by the National Board of Housing (Boverket) in 2019 showed a steady increase in the price of second-hand rentals when it came to houses, rooms, and sublets of both owned and rented apartments. The increase was most significant among sublets of owned apartments, and in the major cities where the housing shortage is particularly acute.

Assar Lindén, a lawyer at Boverket, told The Local that the groups most likely to need second-hand rentals were young people, students, and recent immigrants, particularly those who move for work or as an asylum seeker, rather than those who move to join family members.

“A lot of people have come to Sweden in recent years. We had a housing shortage before then, but this has made things really difficult, and we know that a lot of people are paying a lot of money to live in the places they want to live,” Lindén told The Local.

The housing shortage is particularly acute in Sweden’s major cities, making second-hand rentals more common there. Lindén noted that the historic university cities of Lund and Uppsala have a large supply of student accommodation, whereas this is in shorter supply in Stockholm and Gothenburg.

“You can find people from all demographics struggling with housing, but it’s mostly the young, newly arrived people and foreign workers,” he explained.

“Then there are many people being recruited to Sweden [for work]; some companies have arrangements for finding housing but if your company doesn’t offer this, you’ll have a hard time. We know there’s a substantial black market, but it’s very hard to map this.” 

Second-hand rentals are more expensive than first-hand contracts because the landlord is able to charge a premium, which increases if the property is furnished. However, the Swedish law sets a limit on exactly how much extra landlords can charge, and figures suggest many are asking for much more money than they should.

The average second-hand rental is around 65 percent more expensive than an equivalent first-hand contract, according to statistics from Boverket. And tenants who rent from a property owner pay on average 138 percent more than an equivalent first-hand rental. 

When it comes to avoiding illegal rentals, Lindén has two key pieces of advice.

The first is to make sure the landlord has permission to rent the apartment, therefore avoiding black market rentals and ensuring you have access to the proper channels in the event of any dispute.

Secondly, renters should be aware of what kind of apartment they’re renting.

“If you’re renting from someone who has a first-hand contract, they are not allowed to take more money from you than they pay themselves, unless it’s furnished and then they can add ten to 15 percent more,” he says.

“If the landlord owns the apartment, there’s a different law and it’s pretty generous [towards landlords] because they have the right not only to cover their own costs but also to cover the cost for loans and financing. This applies even if they don’t have any loans, for example if you inherited the apartment; you can still charge the tenant the amount of what the loans would be. There’s not a lot you can do about that, and in an expensive area they can charge quite a lot.”

It is possible for tenants to dispute unfairly high prices, and in fact more and more are doing so. In 2018 alone, more than 300 people complained about being overcharged for their rent, and Boverket has warned of a highly unregulated second-hand market.

But the true number of people being overcharged is likely to be much higher. Lindén told The Local that when cases go to court, “the price is seldom the only issue”.

“A lot of people are paying much more than they should, but the general impression is that they seem to accept this to a large extent. When people do make a fuss or go to court, it’s almost always when another conflict has arisen and they think they may as well complain about the high rent at this point as well,” he said.

For members

MONEY

How you can lower the monthly cost of your Swedish mortgage

It’s no secret that mortgages in Sweden have become more expensive over the last year or so, as interest rates have risen following high inflation. But did you know there’s a way you can lower your monthly mortgage cost?

How you can lower the monthly cost of your Swedish mortgage

Essentially, when you take out a loan in Sweden, the government gives you a discount on the interest you pay, in the form of a tax rebate.

This doesn’t include interest paid on all types of loans – for example, student loans are not included – but it does include your mortgage.

In order to qualify for the discount, referred to as ränteavdrag (interest deduction) or skatteavdrag (tax deduction), you need to fulfil some requirements: 

  • You’ve paid income tax and at least 1,000 kronor in interest in the last taxation year
  • You have a capital deficit (meaning that your interest costs must be greater than any capital income you’ve earned through interest or dividends)
  • You are either partly or wholly responsible for the loan or mortgage in question

If there are two of you who are both named on the mortgage who fulfil these requirements, you’ll each receive 50 percent of the total tax rebate.

The interest deduction is automatically subtracted from your yearly tax and listed in your yearly declaration, if you fulfil the requirements, meaning you’re likely to get it back as a lump sum when tax season rolls around in April.

How much do I get?

The actual sum you get back varies depending on how much tax and interest you’ve paid during the year, but there are some general calculations which can give you a guideline of what you might get.

You’ll get 30 percent of your interest costs back on the first 100,000 kronor you pay in interest over a year, and 21 percent on anything over 100,000 kronor. 

If there are two of you, you each have your own individual tax deduction, even if you’re paying the same loan, so as a pair you’ll get back 30 percent on the first 200,000 kronor, as well as 21 percent on anything over this figure.

To figure out how much you’ll get, you need to first find out how much interest you’ve paid during the year your declaration covers and subtract this figure from your capital income earned through interest or dividends.

If your figure is negative, that means you can subtract this figure from your tax paid during the year. Bear in mind that if you owe tax, then your interest deduction amount will be used to pay it back first, lowering the total amount you receive.

You can also change the proportion of the deduction applied to each partner if you share a mortgage, dividing it 60/40 or 70/30, for example, if you don’t share the mortgage 50/50. You can do this through your bank or by manually changing the figures in your tax declaration.

I don’t understand. How does this make my monthly mortgage payments cheaper?

Here’s where something called skattejämkning comes in. This literally translates as “tax equalisation”, and it’s a way you can spread your tax rebate for interest costs out over a year, lowering your mortgage costs each month rather than of getting a lump sum in the form of a tax rebate during tax declaration season.

In order to equalise your tax, you’ll need to contact the Tax Agency directly, filling out a form with the catchy title of SKV 4302 – Jämkning (ändring av preliminär A-skatt) or using their Jämkning online service.

To do this, you’ll need to have in-depth figures on things like your salary, pension payments, sick pay and any other income like unemployment benefit or maternity or paternity payments, as well as capital income and any business income for the tax year you’re applying for, as well as your expected income for the rest of the year.

If your application is accepted, the Tax Agency will tell your employer to subtract less tax from your payslip each month, effectively meaning that you get your tax rebate for interest costs back in your monthly pay instead of getting it paid out all at once.

Bear in mind that if you do go down this route it’s important that your calculations are correct. If you accidentally overestimate your interest payments or underestimate your tax owed, you could end up being hit with a hefty tax bill once your declaration comes through.

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