Smaller Municipal Housing Companies Face Greater Financial Strain and Higher Vacancy Rates in Sweden

A recent Kommuninvest report highlights the financial difficulties confronting smaller municipal housing companies across Sweden. These companies, typically managing fewer than 2,000 apartments, face vacancy rates exceeding 3-4%, compared to 1-2% among larger counterparts. Over the past five years, vacancy increases have been most pronounced in these smaller firms, which also exhibit lower financial solidity—around 20% or below—versus 30% for larger companies and about 40% for the biggest ones.

Economic pressures on municipal housing companies stem from inflation, rising interest rates, and the aging housing stock, with 60% of public housing over 40 years old, requiring urgent renovations. The share of interest costs relative to rental income has more than doubled from roughly 5% to 11% in the last three years.

Despite these challenges, Johan Grip, head of research and education at Kommuninvest, stresses that smaller housing companies can achieve financial stability through effective long-term management and strategic decision-making. Key success factors include active property portfolio management aligned to demand, strategic planning to enhance flexibility, prudent long-term debt strategies focusing on predictable costs, and supportive local political engagement.

These recommendations come as many smaller companies operate in municipalities facing population decline and weaker employment, further complicating their situation. Nonetheless, the report underscores significant variability at the company level, indicating that strong leadership can overcome adverse external conditions.