Housing Minister concerned about research alert

Article in SvD April 2017

Peter Eriks­son, Housing Minister (Sweden), is concerned about the research alert issued by the Royal Institute of Technology (KTH) regarding sustainability being completely discounted during the construction of tenant-owner apartments. “New associations may need a totally independent party on the constructing board,” he said. The construction companies do not recognise the researchers’ criticism, but the insurance industry regards this as a ‘huge problem’.

As reported by SvD yesterday, the production of tenant-owner apartments accounts for 60 per cent of all new apartments in metropolitan areas. In this situation, Hans Lind and Per Lundqvist, Professors at KTH, and researcher Jonas Anund Vogel are sounding the alarm about the lack of qualitative review for the tens of thousands of new tenant-owner apartments being produced.

The Housing Minister has now responded.

“It is extremely serious if this leads to widespread pro­blems. However, it is difficult to know how extensive the problem is, as very few associations want to talk openly about, for example, having to carry out renovation work at an early stage,” says Peter Eriksson.

According to the experts at KTH, the normal relationship between the client and supplier has been eliminated for the production of tenant-owner apartments. The construction sphere around a prospective tenant-owners’ association not only acts as the producer and vendor but also the building inspector. Thus all of the financial incentives become maximising profit before selling everything to laypeople. This results in a risk of neglect and that expensive, sustainable materials are completely ignored, something usually discovered by the laypeople managing the building when it is too late.

“Not having completely separate roles between the company carrying out the construction work and the tenant-owners’ association placing the order causes problems,” admitted Peter Eriksson, Housing Minister.

Experts contacted by SvD say that some new associations may be forced to carry out renovation work within the next ten to fifteen years. However, large construction companies do not recognise the situation described in the research alert from KTH. According to these building giants, their brand is too important for them to take risks by choosing sub-standard materials or being careless in respect of tenant-owners’ associations.

“JM has a brand that requires a durable final product. We are building for 100 or even 150 years ahead,” commented Pär Vennerström, Business Manager at JM Bostad Stockholm.

At Lindbäcks Bygg, based in Norrland – known, among other things, for its municipal contracts for affordable homes – they are also of the opinion that serious stakeholders want to maintain the reputation of their brand. However, Stefan Lindbäck, CEO, warns at the same time that right now there are many new start-ups exploiting the opportunity to maximise in a red hot housing and construction market.

“Indeed we have an extreme boom with a considerable amount of building work. Unfortunately fortune seekers can be seen entering this market who are not thinking in a long-term way.”

Rikard Öijermark, CEO of Brim AB, a reinsurer within the construction sector, paints a very serious picture. He testifies to wide-ranging deficiencies that will have an impact on many private individuals.

“It is odd that the banks have still not reacted, as they are lending out such a lot of money for these properties. My work has covered this for the past 25 years and I can say that it is a very dramatic problem. And it is appalling that this will hit people who are already highly leveraged,” he explained.

According to the academics at KTH, there are thus financial incentives for producers of tenant-owner apartments to discount invisible yet essential values such as sustainability particularly in respect of tenant-owner apartments. The construction company actually assumes the role as its own client by establishing the association for which the company is building. And the managers are laypeople who often buy a pig in the poke.

Peter Eriksson thinks there are a couple of different potential remedial measures. He suggests a clearer delineation of roles between the interim board of the association and the construction company so that the same sphere of influence do not make decisions on their own. He also suggests that it should be possible to tighten the role of compliance officer in the Planning and Building Act, i.e. the municipalities should assume a greater supervisory responsibility.

 

However, Peter Eriksson wants to wait before issuing information about how he will act, pending the ‘Tenant-owner Inquiry’ concerning improved consumer protection to be presented on 26 April.

“There is a risk of this becoming even bigger,” Peter Eriksson concluded.

Jonas Anund Vogel, researcher at KTH, points out that the current production of tenant-owner apartments fits in very badly with green ideals such as sustainability and the good use of resources. There is also cheating with energy consumption in new tenant-owners’ associations through usage often being calculated on a purely theoretic basis – there is no risk at all for the builders if the energy calculation bears no relation to reality.