Negotiated rents and the fall of the Swedish government

John Hörnquist

Swedish Left wins game of chicken over rent deregulation by bringing down government

In the past week, a long game of chicken over the deregulation of rents culminated in the fall of both the government and its proposal, an increasingly popular Left Party and an open question on who will form the next government.

On 21 June, the day of the no-confidence vote against the government, Prime Minister Stefan Löfven said: “The Left Party today united with the right-wing conservative parties in a no-confidence vote against the government, forming a temporary majority. To prevent this, the government and its partners proposed a way forward in line with the Left Party’s own proposal. I regret that the Left Party turned this down. I too, like the Left Party, reject market-based rents.”

Left Party leader Nooshi Dadgostar painted a much darker picture of the government’s direction:

“The government has made it clear that it intends to implement a proposal of market-based rents. This would be a seismic change in Swedish housing policy. But if Stefan Löfven and [Centre Party leader] Annie Lööf want to implement the system of market rents, it will not be on my watch, nor that of the Left Party. What we are about to do today has not come lightly. We have done everything in our power to reach a solution. But since no one else has been open to negotiations, we are here today—and we will keep our promises.”[i]

To understand the two contradictory claims, the downfall of Sweden’s once stable social-democratic political hegemony, and how this battle is essential to understanding the Left Party’s attempts to fill the void and save the Swedish welfare state, we need to step back in time a little.

How the rise of the far-right Sweden Democrats changed Swedish politics

The Social Democratic Party became successively weaker following its neoliberal turn around 1990, and when the far-right Sweden Democrats entered the Swedish parliament (Riksdag) in 2010, the country experienced a constantly hung parliament—or rather structural right-wing domination of 55–60 percent—for the first time since the early 1900s. At this juncture, however, no party in the Riksdag was willing to form majorities with the far right, but when the Red-Green block remained marginally stronger (thanks to a growing Left Party) in the 2018 election, while the Sweden Democrats surged to 17.5 percent, the Moderates (neoliberal conservatives) and the Christian Democrats gave in to the temptation of seeking power with far-right support.

The inconsistencies of the January Agreement formed after the 2018 election:

1. A Ulysses pact tying a Red-Green government to radical neoliberal reforms

Because of this the Social Democrats and the Greens, could only after four months of negotiations manage to form a new minority government, but with two very contradictory conditions. The government had to negotiate future budgets with the two liberal parties, the Centre Party (the most neoliberal but also the least conservative right-wing party) and the Liberal Party. They also agreed on an extensive 73-point programme called the January Agreement. This included some moderately progressive proposals, but also radical neoliberal reforms like privatisation of large parts of the state employment service, weakened labour protection laws and a deregulation of negotiated rents. As a result, the Red-Green government was tied to a neoliberal Ulysses pact.

2. The Left Party made both king maker and potential king slayer

Paradoxically, the January pact also required the acceptance of the Left Party, even though the agreement specifically stated that the Left should have no influence over Swedish policies. The January parties had enough seats in parliament to get their budgets through without Left Party support, provided the right- and left-wing oppositions did not unite. But for the government to be appointed, or remain in office, it also needed majority acceptance in the Riksdag. The Left Party had to either tolerate the Red-Green government, or risk a right-wing government with far-right support. It opted for the former, but also declared that it would vote for its own proposals and withdraw its acceptance of the government if it crossed either of two red lines stated in the January Agreement: liberalisation of labour protection laws and liberalisation of the system of negotiated rents.

Why the Left Party could not accept liberalised rents despite risks of a right-wing government

In recent years, the Left Party has increasingly aspired to take up the abandoned legacy of the Social Democrats, keen to prove that they are the ones who are not only defending the social-democratic welfare state but also pointing out a way to update it. Especially since the election of its new leader Nooshi Dadgostar in October 2020, the party has underlined this by pushing hard for an ambitious industrial green deal, challenging the Social Democrats not only on equality and welfare provisions, but also on jobs and the economy. This aims, among other things, to shift the political debate from immigration and law-and-order issues to questions of jobs, equality and welfare provisions.

There were predictions that the January Agreement would marginalise the Left Party, making these plans unrealistic, but in fact the opposite happened, especially once the battle over regulated rents intensified, bringing social questions around housing and rents to the centre of the political stage. On several occasions, the right-wing parties’ willingness to weaken the government enabled the Left Party to act as majority leader, forcing the government to change course on important matters: partially blocking privatisation of the employment service and changing the January parties’ state budgets to provide billions in additional funding for the welfare sector. But when it came to the two red lines, no help could be expected from the right wing. Labour rights and negotiated rents are both cornerstones of the Swedish welfare state. The former limit employers’ right to fire staff without proper cause while the latter form the foundation of Sweden’s unique housing policy, which has no social housing for poor people, like in many other countries. Instead Swedish housing policy makes it mandatory for both public and private landlords to negotiate rents with the 500,000-strong tenants’ union, resulting in regulated rents not only for its members but for everyone with a first-hand rental contract. This, combined with massive investment programmes, resulted in Sweden historically achieving a huge stock of relatively modern and reasonably affordable rental apartments. Today, around 36 percent of Swedes are living in such rentals.

The Red-Green government did its best to stall and manipulate the process around these red lines, making it harder for the Left Party to use them as a basis for no-confidence votes. Close to an election, the right wing would have little reason to bring down a Red-Green government that was about to push through unpopular liberalisations, when the chance of grasping power would soon be at hand anyway. Through the threat of legislation, the January parties managed to pressure large parts of the trade union movement into agreeing a defensive deal on labour rights in December 2020, thereby making it hard for the Left Party to push for a vote of no confidence on this question.

It seemed the January parties were trying the same tactic to prevent the Left from blocking liberalised rents. On 4 June, a government inquiry proposed that rents for newly built or heavily renovated rental apartments would no longer be negotiated, but initially set by the market. A similar reform had been pushed through in Finland, leading to an increase of between 26 and 42 percent in rents in general, not only for new flats, in Finland’s capital Helsinki. Both the tenants’ and the property owners’ organisations believed that a similar development was to be expected in Sweden. Though the January parties denied this, the Centre Party’s housing spokesperson also confirmed it.

When the January parties repeatedly refused to negotiate on this issue, on 15 June the relatively new Left Party leader Nooshi Dadgostar gave the government 48 hours to declare that it would either: 1) drop the proposal, or 2) leave it to the tenants’ and property owners’ organisations to negotiate whether they wanted any improvements in the legislation on rentals. However, this negotiation could not be based on the proposed legislation: there should be no such threat overshadowing the talks.

The January parties ignored the ultimatum, so the Left Party, not having enough seats in parliament to call for a no-confidence vote, appealed to the Moderates and Christian Democrats to initiate it with them. Both parties were hesitant, but the Sweden Democrats were eager to beat them to it and initiated the vote themselves. The rest of the opposition followed through the same day. The day before the vote, the January parties finally proposed that tenants and property owners could negotiate—but added that, if they did not agree, the proposed legislation would be implemented anyway. Both the tenants’ organisation and the Left Party rejected the proposal.

“There can be no equal negotiation when one of the parties has a gun pointed to its head,” Dadgostar objected.

Continued turbulence, forming of a new government and rising support for the Left

Consequently, on Monday, 21 June the government fell. Immediately, the Liberal Party leader declared that the January Agreement was now history (the party having already said that it wanted to join a right-wing government after the next election). Shortly afterwards, Centre Party leader Annie Lööf finally agreed to drop the proposal of abandoning negotiated rents and proposed a renegotiated January Agreement. The Left Party had been clear all along that it would not support a right-wing government, instead wanting Stefan Löfven to return, but without any proposal on deregulation of rents. Since the Liberal Party was now out of the equation, a new agreement would need the Left Party to be able to get a budget through. The Green Party proposed a June Agreement that would include the Left Party, but this was rejected by the Centre Party. Finally, on Monday, 28 June the prime minister decided not to call an election but instead asked the speaker of the Riksdag to investigate who could form a new government. The speaker has four attempts at proposing a new prime minister able to form a viable government. If all proposals fail, there will be a fresh election.

At his last press conference, however, the prime minister placed all the blame for the turbulence on the Left Party, even though the Centre Party could have prevented the fall of the government if it had changed its mind on liberalised rents just two days earlier than it did. This seems to indicate that the Social Democrats are again hoping to form a new government in close cooperation with the Green Party and the Centre Party, with some kind of minimal support from the Left Party. The plan seems shaky, but not impossible, since there is still a slim majority in parliament who do not want a far-right-leaning government, but the influence of the Left is the touchy question. If the Centre Party were to accept a right-wing government instead, this outcome would prevail, but a vast majority of the party’s voters resist a far-right-leaning government. Blaming the Left seems precarious as well. While some Social Democrat-leaning journalists have been extremely critical of the Left Party and Dadgostar, several left-leaning Social Democrats, not to mention the tenants’ union, have spoken out in support of the Left. The voters seem happy too, with polls giving the Left its highest support in 19 years, at 12 percent, and public confidence in its newly elected chair, Nooshi Dadgostar, has surged to 32 percent, almost level with the prime minister. What’s more, the conflict over regulated rents has strengthened an already ongoing trend of increasing support for the Left among blue-collar workers, who in recent years have increasingly migrated from the Social Democrats towards the Sweden Democrats. Since the Left is also the only party that has not adjusted its immigration policy in response to the Sweden Democrats, criticism of teaming up with them does not resonate well. In fact, some journalists and voters speak approvingly of Dadgostar as “a new type of politician who stands up for what they say and believe” and leaves no one indifferent but “makes people’s blood boil and their hearts beat faster”.

It seems that more political turbulence lies ahead for Sweden: not only until the issue of government is resolved, but also until the vacuum of political hegemony left behind by the Social Democrats has been replaced by either an increasingly nationalist right, or a strengthened popular left. On both sides there are clear ambitions in this direction, from the newly formed right-wing block of conservative and nationalist parties on the one hand, and on the other from a growing Left Party, looking to attract more backing from still viable Swedish social movements and progressive youth and to tap into widespread popular support for the welfare state. Throughout the Western left, the Swedish or Nordic example of an efficient and equal welfare state is both idealised and looked to for inspiration, despite the neoliberal turns that have weakened the model in recent decades. The conflict over regulated rents might very well prove a turning point in the battle over Swedish political hegemony, not only affecting the colour of Sweden’s next governments but also helping to determine whether an updated Swedish model will continue to provide inspiration for the Western left in the future.

About the author

John Hörnquist is Political Secretary of the left party Vänsterpartiet in Stockholm, Sweden.