Sweden’s Social Democrats Got No-Confidenced Because They Tried to Remove Rent Controls

Sweden's Social Democrat-led government is in crisis after its defeat in Monday's no-confidence vote. It lost its left-wing support after it moved to abandon rent controls — showing how the neoliberalized wing of social democracy is undermining its own past achievements.

Nooshi Dadgostar, leader of the Left Party, speaks during a press conference after the no-confidence vote against Sweden's prime minister in the Swedish Parliament in Stockholm on June 21. (Nils Petter Nilsson / TT News Agency / AFP via Getty Images)

On Monday, Sweden’s long-embattled Social Democratic prime minister, Stefan Löfven, lost a no-confidence vote in parliament. With the country’s politics increasingly fractured and unstable, this should not come as a particular surprise. Prime minister since 2014, Löfven has headed a weak minority government since the fall 2018 general election returned a hung parliament.

What has surprised many observers, both inside and outside the country, is the nature and timing of this defeat. While the motion was put to parliament by the far-right Sweden Democrats, it was the country’s socialist Left Party that cast the deciding vote against Löfven’s administration. The issue at stake: housing. Or rather, the government’s refusal to withdraw its proposal to remove rent controls on new housing stock.

Without doubt, the Left Party’s decision is fraught with risks. It has pushed the country into profound political uncertainty — and even brought forward the possibility of a coalition between the center-right and far-right. But while that is clearly regrettable, taking a stand on this issue was also a necessity for the Left Party. Its move offers a unique, if perilous, opportunity to preserve the Swedish housing model — and, more fundamentally, shift the public political debate away from immigration and towards social justice.

Losing Confidence

The origins of this crisis go back to the fragmentation that followed the September 2018 general election. In that vote, Löfven’s incumbent Social Democrat-Green coalition performed dismally, its two parties losing 13 and 9 seats respectively. Winning only 28.3 percent of the vote, this election marked the Social Democrats’ worst performance since 1911; though, not to be totally outdone, their traditional adversary — the center-right Moderates — also lost 14 seats.

Alongside small gains for minor parties, the big winner was the Sweden Democrats, an anti-immigration party with explicitly neo-Nazi origins. It jumped from 12.9 to 17.5 percent support, gaining 62 seats out of a possible 349.

Out of the tumult that followed — including several abortive bids to form coalitions — negotiations between the Social Democrats, the Greens, the Centre, and the Liberals reached a 73-point policy platform commonly known as the January Agreement. This laid the groundwork for a Social Democratic-Green minority government headed once more by Löfven, propped up by the votes of minor center to center-right parties.

While the working agreement contained a few meekly progressive measures related to climate change, education, and elderly care, its overall policy bent was highly neoliberal, containing a litany of regressive tax cuts and deregulatory measures. Most notable among these was the removal of rent controls for newly build properties and the amendment of the Employment Protection Act (LAS), which governs hiring and firing in Sweden.

The establishment of the coalition also depended on the Left Party, or Vänsterpartiet. Yet not only was it completely excluded from the negotiation table, but the terms of the January Agreement explicitly precluded it from having any influence whatsoever over the political direction of Sweden during the remainder of the parliamentary term.

The Left Party naturally objected to being expected to vote for a coalition committed to a largely neoliberal program over which it was unable to exert any influence. Following 48 hours of tense negotiations between Löfven and Jonas Sjöstedt, the then-leader of the Left Party, Sjösedt finally agreed to let the coalition form by whipping his party to abstain on the vote.

This was, however, agreed only on the explicit condition that the government would refrain from any proposals either introducing market rents into the Swedish housing sector or undermining job protections. Should either of these two red lines be crossed, Sjöstedt vowed in his statement to the press, then the Left Party would issue a vote of no-confidence and “fire Stefan Löfven.”

Fast forward to June 4, 2021, and the Swedish government published a 461-page commission report proposing the introduction of free market rents on all residential properties completed after July 1, 2022 — that is, precisely the policy the Left Party had explicitly committed itself to oppose. On June 15 the party’s new leader, Nooshi Dadgostar, held a press conference in which she gave the government forty-eight hours to either scrap the legislation outright or to begin immediate negotiations directly with the Swedish Tenants’ Association to achieve a deal. With no response coming from the government, the Left Party publicly announced that they had lost confidence in the Löfven administration.

It was the Sweden Democrats who initiated the parliamentary process that brought down the government. Sensing a win-win opportunity to either bring down Löfven or else force the Left Party to humiliatingly backtrack, the far-right party’s leader Jimmie Åkesson proposed a motion of no-confidence in parliament.

On June 20 the government finally responded saying that they were willing to allow negotiations but that, unless the Tenants’ Association and the property owners’ association reached a consensus by September 1, it would follow through on the commission’s recommendations. In reality, the Tenants’ Association adamantly opposes any introduction of market rents and any such consensus is patently impossible — so this amounted to a roundabout way of saying the administration would press on with the plan.

Faced with this impasse, the Left Party followed through on their word and voted to bring down the government. The no-confidence vote passed with 181 in favor, 109 opposed and 51 abstentions.

“We have said clearly for two and a half years that we would withdraw our support from the prime minister should they pursue a proposal to minimize the influence of tenants in negotiating rents, we were ignored, and we have stood by our word,” Hanna Gedin, deputy party secretary of the Left Party, told Jacobin. “They underestimated us, but there would be no reason for us to exist if we did not take up the fight on the issues that really matter in Sweden, and limited ourselves to voting to the left of the Social Democrats.”

Raising the Roof

But what is really at stake here — and why are rent limits so worth fighting for? In short, the Swedish rental model is unique. Rather than rents being left to the tyranny of a market beset by speculation and monopolistic rent-seeking, rates are set in a manner roughly akin to a collective bargaining agreement. Under this system, prices are set through negotiations between landlords and the Tenants’ Association, an association with 500,000 paying members, tasked with representing the interests of an estimated 3 million renters.

While far from perfect, the model has long ensured that rent increases maintain an equitable relation to wages and living conditions, and afforded working people a level of security and dignity that is elsewhere denied. It provides an institutional mechanism through which tenants can democratically assert their collective interests. And it applies to all landlords operating in the market, including rental associations owned by municipal governments.

The proposed legislation would fundamentally undermine this collective bargaining model, creating an ever-expanding parallel housing sector that would likely exert upward pressures on the rents of properties covered by the old model and ultimately lead to the end of the current system altogether.

It’s important to recognize the historic retreat such a move represents. Sweden’s housing model did not fall like manna from heaven, nor did it emerge organically from some ancient Nordic tradition of egalitarianism, compromise, and fair play. Like every other redeeming aspect of Scandinavian social democracy, it arose out of the white heat of class struggle.

The Tenants’ Association was founded in 1923 as the Swedish Union of Tenants to oppose the upsurge in evictions and rent rises brought by the economic crisis following World War I. Combining militant rent strikes with the pursuit of municipal and national power as part of the broader social-democratic movement, the tenants’ struggle ensured that housing became a central plank of the Folkshemmet (“people’s home”) welfare model. The construction of social housing also became a key element of broader policy, with mass building projects — epitomized by the Million Dwellings Program — used to stimulate the economy. Meanwhile, the role of the Tenants’ Association was steadily expanded until the collective bargaining model was rendered universal under the provisions of the Land Code of 1970.

Undermining this model would be a disaster for the Swedish public, 36.4 percent of whom currently live in rental accommodation. According to a recent report that the consultancy firm Ramböll wrote for the Tenants’ Association, the wholesale introduction of market rents would lead to rent increases in almost all municipalities surveyed, with the greatest hikes taking place in Stockholm and Gothenburg, where some neighborhoods could see rents rise by over 50 percent.

These findings are even corroborated by a recent survey of landlords undertaken by Fastighetsägarna, Sweden’s real-estate lobby organization, which found that 80 percent of respondents believed all or some of their property portfolio is rented at below their true market value — highlighting an overwhelming appetite among landlords to increase rents. Coupled with this, opinion polling has consistently shown that most Swedes strongly oppose the introduction of market rents.

We don’t have to look far afield for a comparable example. In Finland, the private rental market was gradually deregulated between 1990 and 1995. At first, new buildings were exempted from rent controls in a manner similar to what is currently being proposed in Sweden, but eventually this was extended to the entire private rental market.

Between 1995 and 2000, average rents increased by 26 percent in Finland and 42 percent in the capital Helsinki, and they have since risen on average by 2 and 3 percent per year respectively, according to a survey by the Finnish Property Owners’ Association. While the deregulation did stimulate increased private investment, this fell far short of increased demand and present-day Finland faces a severe shortage of rental accommodation. This shortage comes in spite of the Finnish state’s mass social-housing program and system of rent subsidies — a system that currently does not exist in Sweden, in large part due to the long-term successes of the collective bargaining model.

The Finnish example, coupled with similar housing crises elsewhere in Europe, pours cold water on claims that market rents are necessary to stimulate investment and boost supply. Such proposals betray a willful lack of political imagination and a set of priorities that places the interests of capital over those of the public good. Alternative solutions to the current shortage of rental stock could be addressed through a plethora of other means, including a mass state-driven house-building plan akin to the Million Dwellings Program or incentives to private investment.

What Comes Next

With the no-confidence motion passed, Löfven has until Monday to decide whether to resign as prime minister, in which case the speaker of parliament would investigate which parties could form a new coalition, or call a new election, to take place by the end of September.

With intense political fragmentation and the outcome of fresh elections highly unpredictable, establishing any viable new coalition appears extremely difficult. Possible outcomes include an expanded version of the current coalition bringing together the Social Democrats, the Green Party, the Centre Party, and the Left Party, a grand coalition of center-left and center-right that excludes the Sweden Democrats, or a minority right-wing government of the Moderates and Sweden Democrats.

Faced with such a threat, the Left Party’s decision to back the no-confidence vote has been met with scorn by many leading Social Democrats. Yet this sentiment is not uniform among the Social Democrats, as Daniel Suhonen — cofounder of the left-wing Reformisterna movement within the party — told Jacobin.

“I understand the Left Party, they have been run over by the government and, for their own survival, they had to act,” Suhonen comments. “The real responsibility for this extremely unnecessary crisis lies with the Liberals and Centre Party who opposed all changes to the January Agreement and with the Social Democrats who completely misjudged the situation and refused to negotiate.”

For Suhonen, who is also head of the think tank Katalys, “There are now two alternatives, either the governing coalition cooperates to solve the situation or we face an election where the Right may very well win power with the Sweden Democrats.”

The stakes remain very high. There is a real sense in which this intervention has brought forward a situation that would have inevitably emerged in the scheduled September 2022 general election. Yet this way, the housing issue rather than crime or immigration figures center stage.

“I think the lesson is to pick fights on the issues that really impact people’s lives and working conditions, like rent and wages,” the Left Party’s Hanna Gedin told Jacobin. “What we find when these issues really dominate the public discussion is that the right-wing parties and Sweden Democrats have nothing to offer — and that on these issues we can engage with people who are normally supporters of the Right.”