The influence of building age on rent in a regulated market : A study on the Swedish rent market using data for the period 2016-2023

Sweden's housing market is facing significant challenges, particularly in major cities. There are long housing queues, and housing prices have risen sharply over a long period despite rent regulation policies. This makes it important to determine whether other factors are driving rent prices, beyond the regulations that have put pressure on demand, quality, and housing affordability. This study investigates the elasticity of rent with respect to building age in Sweden, using data from 2016 to 2023 and a dataset of 5600 dwellings spanning major cities and small municipalities. Descriptive analysis and regression models, such as simple linear, multiple, and log-log regressions, are used to examine how rent responds to building age. Potential confounding variables, such as household income and urban status, were controlled for. The rent elasticity analysis shows that rent decreases as buildings age, despite Sweden's rent regulation policy. The estimated elasticity indicates that a 1% increase in building age is associated with approximately a 0.2% decrease in rent, with no statistically significant difference between urban and non-urban areas. Although rent levels in Sweden are regulated, the results suggest that building age still influences rental prices, which may, in turn, affect housing queues, especially in urban regions. The policy implication is that this combination of low rents and high demand might, according to economic theory, contribute to underinvestment concerns, as landlords may lack strong incentives to renovate if rent increases are constrained. This research suggests policy measures, such as renovation subsidies, that could help preserve the quality of in-demand older housing stock.