Should municipalities in Sweden own or rent their public school premises?

University essay from KTH/Fastigheter och byggande; KTH/Fastigheter och byggande

Abstract:

According to the conducted survey the majority of municipalities in Sweden own their municipal

school premises, and only a few municipalities hire that type of premises. The reason why

municipalities own their schools varies. In many cases it will depend on one or more of the

following reasons; because of political reasons, because they have "always done so”, because of

policies to own social infrastructure, or because it is considered more economically feasible. In

theory, the claim that it will be cheaper to own since a private operator requires a premium to

make profit, is correct. Traditionally, municipalities have also been able to borrow money

cheaper than private operators.

Reasons that some municipalities instead choose to rent their school premises is for instance due

to the long-term benefits that the renting option brings. A building will for instance be erected

faster if the municipality, instead of a traditional procurement, chooses the renting-procurement

alternative. A faster erected building can have socio economic advantages. In addition, the

municipality does not lock up a large portion of capital in real estate. Similar to private investors,

municipalities has a limit for lending of capital. The rent option of community buildings in

general, and school buildings in particular, can therefor enable investments in other buildings that

contribute to the municipality's attractiveness. More tax revenue leads to the possibility of

investing more in social and traditional infrastructure. The study showed no significant cost

difference for renting versus owning.

With the increased population and need of new school premises it is important that municipalities

conduct investment analysis and base their decisions on the option that is most economically

advantageous. Allowing a long-term private operator to construct and rent out the new school should therefore be seen as an option for more municipalities in Sweden, municipalities should hence conduct economic comparing calculations for the two options. The economic assessment, and later the action plan for future school constructions, should be based on the municipality's economic conditions. The assessment should also most probably result in a mix between renting and owning schools, to promote, inter alia, competitiveness and quality.

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