Slumlords in the Swedish welfare state: how is it possible?

Purpose - The purpose of this paper is to try to explain how long‐term mismanagement of a housing estate could arise in a country with a strong legal framework aimed at preventing such situations. Design/methodology/approach - Assuming that both tenants and landlords are rational, the paper presents a set of hypotheses that is consistent with the information available. Findings - It is argued that the tenants stayed even though the rent was higher and the quality was lower than in neighboring areas because of a combination of three factors: rents were paid by different forms of welfare payments; lack of alternatives because of queues to other areas; and because some tenants saw an advantage in the “no‐question” asked policy that the slumlord followed. It is further argued that the property owner found this slum‐strategy profitable either because he hoped to find a “bigger fool” to sell to and/or because the decision makers in the company had not invested their own money. Both tenants and investors were, in the end, losers, but not the company managers. Social implications - The Swedish legal framework is, to a large extent, based on the idea that tenants should take action when there are problems. For several reasons the tenants in the area did not do that and it indicates that a more active role for the local authorities is necessary. Originality/value - The paper focuses on an interesting case that most people thought could not occur and tries to explain this within a framework of rational actors.