Windfall Gains on the Swedish Housing Market: The Effects of Queueing for a Cooperative Dwelling

Abstract

The cooperative housing sector in Sweden consists of one market for new dwellings where the downpayment and rent is fixed, and where the dwellings are allocated through a queue, and one market for used dwellings, where all units are bought and sold freely with a transaction price determined by market conditions. As the transaction price usually exceeds the down‐payment, substantial windfall gains accrue to those achieving a dwelling through the queue. Regression analysis reveals that this ratio is on average nearly three. The ratio varies, however, depending on the local housing market situation. It is argued that the ratio is a better indication on the demand situation in the local housing market than is provided through information on the length of the queue at the municipal exchequer.A logit analysis is used to find out which households receive these windfall gains. It is shown that the probability of acquiring a dwelling through the queue, and thus capturing the windfall gain, is positively correlated with income and family size. The conclusion is that the cooperative queues do not have a redistributive effect on wealth in society, quite opposite the housing policy intention upon which the Swedish cooperative movement was founded.