Social housing finance in Sweden

Sweden historically had a highly subsidised housing construction and rehabi litation, Subsidies were mainly channelled through an interest subsidy syst em, which reduced initial capital expenditures. A boom in the housing marke t in the late 1980s turned into a 'bust' in the early 1990s, This was due t o a combination of factors: a lower inflation rate, a deep economic recessi on and reduced interest subsidies in combination with a tax reform, The eff ect was to create a large price fall, vacancies, a low construction rate an d large defaults. The bank crisis was counteracted by a tighter credit mark et, with a more thorough screening of borrowers, Municipal housing companie s lost their protected position on the credit market in the early 1990s, Ma ny of the companies were severely hurt by an increasing number of vacancies , and had an insufficient safeguard in terms of a low equity. It is thus an ticipated that municipal housing companies will be an important target for bank screening in the future, and it is anticipated that banks will develop more sophisticated risk-management techniques in the housing market, which also will include municipal housing.