“The solution to Stockholm’s housing shortage is obvious; get well-intended government (mostly) out of the housing business. If you deregulate and let the competitive marketplace meet the demand for housing via market rents and increased housing stock, this problem will fix itself!!!” Mike Perry
Stockholm’s Housing Shortage Threatens to Stifle Fast-Growing Start-Ups
By MARK SCOTT
Fritjof Andersson, chief of a social media start-up in Stockholm. Because of a housing shortage, he has struggled to bring engineers to the city. Credit Martin Edström for The New York Times
STOCKHOLM — Tyler Faux thought finding a place to live in New York City was tough.
But when Mr. Faux, a 24-year-old New York native, moved here recently to work for one of the city’s fast-growing start-ups, he was in for a rude awakening.
Faced with Sweden’s labyrinthine rules on renting apartments and a decades-long waiting list for government housing, Mr. Faux, a Harvard computer science graduate, repeatedly came up empty when hunting for housing — no matter how much he was willing to spend.
“In New York, there are ways to find a good apartment if you’re willing to pay,” said Mr. Faux, who eventually signed a short-term lease for a one-bedroom apartment in the center of Stockholm for $1,700 a month, much less than what most New Yorkers pay for a similar apartment. “But in Sweden, that doesn’t exist. It’s difficult to find a place here.”
Mr. Faux’s housing troubles are becoming a common refrain in Stockholm and other technology hubs around the world. The Swedish capital has emerged as one of Europe’s most attractive tech centers in recent years, luring thousands of workers and developers to companies like Spotify, the popular music-streaming service that was started here.
In Stockholm, real estate developers are seldomly allowed to build skyscrapers. Credit Martin Edström for The New York Times
But the city also has become a cautionary tale about the troubles that arise when a booming tech sector runs head-on into city planning rules that have not changed for decades.
Swedish rent controls and other housing restrictions in place since the 1960s make it almost impossible for people to lease out apartments to foreign tech workers. And a backlog of new construction means that only 10,000 new homes are expected to be built annually over the next 15 years, though Stockholm’s local government has fast-tracked some new residential developments.
In contrast, roughly 40,000 people — both from inside Sweden and outside the country — are now moving to the city to work for tech companies, financial firms and other Swedish businesses each year, according to Stockholm’s city government.
“The system is completely broken,” said Billy McCormac, an American who moved to Sweden in the 1990s and now campaigns for housing reform as head of the Stockholm branch of the Swedish Property Federation, an industry group. “We can’t build a tech cluster here if people don’t have anywhere to live.”
The lack of housing was a regular hot topic of discussion at one of Stockholm’s co-working spaces — where early-stage tech companies swap ideas over games of Ping-Pong. On the fifth floor of a modern building in the main shopping district here, engineers at the space, called SUP46, grumbled that they could not find places to live.
“Renting something is almost impossible,” said Fritjof Andersson, 33, over a cup of coffee at the shared office. Mr. Andersson started his first tech company more than a decade ago, but now cannot afford to bring international developers to the Swedish capital to expand his small team.
“We don’t have the financial muscle to help them find an apartment,” he said, adding that he was recently forced to limit a search for new coders to people already living in Stockholm. “If the city wants to attract start-ups, someone needs to fix the housing problem.”
Many people in Stockholm welcome the new workers. But critics say the newly arrived, who often have salaries that dwarf local residents, should not be given priority over people who have lived in neighborhoods for decades.
“Rents going up will only force people to move out of their homes,” said Marie Linder, chairwoman of the Swedish Union of Tenants, which represents the rights of existing renters, many of whom live in low-cost government housing. “People will have to leave their apartments, but where will they go?”
The complaints are echoed in other cities with a heavy concentration of tech companies. In San Francisco, local residents have complained bitterly that 20-something engineers and developers have transformed entire neighborhoods, where upmarket wine bars and expensive yoga studios have replaced down-on-their-luck bookstores and family-run coffee shops.
Yet as the average salary rises in many cities, local planners say the often-rapid gentrification can benefit the majority of a city’s population.
In London, one of Europe’s largest technology centers, local tech companies are expected to create almost 50,000 jobs and add $19 billion to the local economy over the next decade, according to Oxford Economics, which provides economic forecasting.
Some of that money, though, is returned to the tech industry in the form of tax breaks for people starting businesses and government grants for local start-ups. That has led some urban policy researchers to argue that a level of inequality is inevitable if policy makers focus their attention on attracting people from a single industry over other priorities.
“In cities, competition for space and resources is fierce,” said Richard Florida, a professor at the Rotman School of Management at the University of Toronto, who tracks how cities like New York, Berlin and London have handled the tension between new industries and existing residents. “If you want to offer the right incentives to attract tech companies, you’re not going to maintain an equitable society.”
Local residents have felt the pinch in many cities with a growing tech industry.
In Shoreditch — a once run-down working-class community in East London — house prices now regularly top more than $1 million, roughly a 50 percent increase over the last decade. And as Berlin continues to be hit with a steady tide of tech workers, the country’s government has said it will now set price caps on rental apartments to protect existing tenants.
“In Berlin, there’s a tremendous amount of grumbling about foreigners moving in,” said Alex Farcet, a co-founder of Startupbootcamp, which offers short-term mentorship programs for tech entrepreneurs in places like Berlin, Amsterdam and London. “It can be super-difficult for people to find housing.”
The tension between the so-called global technorati and cities’ residents is a relatively new phenomenon. Tech giants like Apple, Microsoft and Nokia have long operated primarily in business parks located in the suburbs, or on the outskirts of a city.
But in recent years, a new generation of start-ups, like Twitter and King Digital Entertainment, the Anglo-Swedish game company behind the Candy Crush franchise, have elected to set up shop in the heart of a metropolis, catering to workers who crave easy access to a city’s fashionable bars, public transportation and quirky apartments, as much as stock options and six-figure salaries.
“I want to live close to where I work. I don’t want to commute very far,” said Lovisa Nilsson, who traveled from Uppsala, a city roughly an hour north of Stockholm, to her tech job in the Swedish capital for more than a year before finally securing a short-term contract for a small apartment here that she now shares with her boyfriend.
“I was lucky to find somewhere to live,” Ms. Nilsson said. “I wanted to move a lot earlier, but had almost given up.”
A version of this article appears in print on December 15, 2014, on page B3 of the New York edition with the headline: Stockholm’s Housing Shortage Threatens to Stifle Fast-Growing Start-Ups.