The Effect of Attefall-houses – Can Attefall-houses assist to solve the housing shortage?

Abstract: In Stockholm, there is a great shortage of supply on the housing market and many newly established on the market find it hard to find a home. During 2014 the Planning and building act was changed, allowing for a new kind of small buildings, so called Attefall-houses, of up to 25 sqm to be built without building permit on single family housing units. This thesis evaluates the impact that Attefall-houses have on the housing shortage in Stockholm and how these houses could be property tax assessed. As a part of this, the profitability when those are let out have been calculated and whether they have a potential to become more popular has been investigated. Comparisons with foreign renting markets with a more widespread secondary market have furthermore been carried out. The thesis is limited towards Attefall-houses classified as residential. Few Attefall-houses have been built and are available for rent. Since the number of transactions pertaining to single family housing units with Attefall-houses was insufficient, market values have been estimated by studying the attitude of market actors, by an income based approach and by a cost approach. In order to get a more perspicuous view of the profitability, repayment times on those let out have been calculated. The value an Attefall-house entails on a single family housing unit has been estimated to between 200 000 SEK and 300 000 SEK. The repayment times when the Attefall-houses are let out and then are sold at this value vary between 5 and 12 years with the current  egislation, depending on financing and municipality. If all rental income had been tax-free, the repayment times would vary between 4 and 7 years instead. If the Attefall-house, on the other hand, is reformed into a tenant ownership unit, the sales prices vary between 1 500 000 and 2 100 000 SEK. According to this, Attefall-houses have the potential to be a profitable investment. A couple of problems and misleading incentives when building and renting them have, however, been found. A property with an Attefall-house will get two property tax assessment fees after 15 years. In addition, the rental income is taxable, which creates trouble for the property owner but also for the taxation authorities. It is also more economically profitable to re-form the Attefall-houses into tenant-ownership units rather than to keep them as complementary buildings. If the house is re-formed into a tenant ownership unit it is less of a clear alternative for newly established on the market hence not as good complement to the exiting property market as if the owners rent out the dwelling. The process when the houses are built is, furthermore, not as easy as it sounds since the municipality requires detailed documents and the buildings have to meet tough building standards to be allowed to be let out. The processing time before starting decision can be given also varies a lot between different municipalities. There are also a lot of ambiguities and grey areas that have been found. It is not clear when letting of Attefall-houses should be classified as a business rather than a private activity and it is also not clear on which market value maximum rent and property tax assessment should be based. Possibilities for a good investment and economic benefits exist but to make the Attefall-houses more popular, misleading incentives should be removed and incentives for renting should instead be created. The legislation should also be clarified to lower the risk for property owners. At the end, time is needed for Attefall-houses to become an established alternative on the residential market.