Why isn't there enough housing?

Abstract: In 1947 the municipalities in Sweden received the monopoly to decide on and plan their land. Despite this, over 80 percent of the municipalities in Sweden say they experience lack of housing today. This thesis applies The Homevoter Hypothesis introduced by William A. Fischel in 2001 to try to explain why some municipalities are not able to construct enough housing for their inhabitants. The hypothesis says that homeowners become watchers of their local government to protect their largest asset, their home. To keep the value of their home from decreasing due to insufficient regulation they become involved in politics. If the homeowners are a majority, municipalities have no choice but to accommodate the inhabitants’ interests. The study investigates the number of newly started constructions of multi-dwellings and one- or two-dwelling separately in each municipality in Sweden between 2010 and 2017 using a regression analysis. The result shows that the number of constructed one- or two-dwellings is positively affected by a right-wing as well as a cross-functional collaboration local government. An increase in population, average income and possible profitability for firms has a negative impact while an increase in price and a larger existing stock have a positive impact. When looking at multi-dwellings, I find that increases in price, possible profitability from construction and population affect the number of constructions positively, while an increase in average income has a negative impact. I find no evidence that a certain political orientation of the ruling local government has any impact on the number of constructed units. Next, I use a difference-in-difference method to examine if a shift in power in the election in 2014 makes any difference in the number of newly started housing units. The result shows that a shift in power, in general, does not make any difference. However, if I sort the sample after the political orientation of the newcomers I find that voting a right-wing local government into the office reduces the number of constructed multi-dwellings while voting for a left-wing government reduces the number of started one- or two-dwellings. The study shows that the same holds for areas with a low Tobin's Q ratio, in the biggest municipalities according to population and in areas with a relatively low price per square metre. The entrance of a government with a cross-functional collaboration has a positive impact on both the number of one- or two-dwellings and the number of multi-dwellings in areas with a low Tobin's Q ratio.