Sweden Overwhelmed by Worsening Housing Crisis, Skanska Says

  • Country at `crossroads' on refugees, CEO Says in interview
  • Karlstroem says government needs help on infrastructure

As a wintry chill settles over Sweden and the government struggles to find shelter for tens of thousands of refugees who have streamed across the border, the Nordic country’s biggest construction company Skanska AB says the private sector should be brought in to help build infrastructure.

As many as 190,000 asylum seekers are expected to arrive in Sweden this year, a development that has overwhelmed authorities who have already run out of places for them to live. Some families are sleeping in heated army tents and in the streets of the southern city of Malmoe. The influx mainly from Syria, Afghanistan and Iraq into the country of 10 million people could reach more than 350,000 in total this year and next, according to the Migration Agency.

The number this year will be the equivalent of adding “a big city," Skanska Chief Executive Officer Johan Karlstroem said in an interview in Stockholm last week. Housing is urgently needed “but who is going to pay for it? This is an enormous risk and opportunity for a country like Sweden.”

The executive, who said he has met with authorities to discuss the housing shortage, is using the refugee crisis to renew calls for the use of public-private partnerships, known as PPPs, to raise funds for projects like public transport that will allow new accommodation to be built more quickly. The government should let companies help finance and maintain infrastructure projects, he said.

Politicians are Hesitant

In Stockholm, Skanska is building a new hospital, one of only two major so-called PPP projects in Sweden. Critics of the undertaking include the Swedish National Debt Office’s Director-General Hans Lindblad who has said private financing risks increasing costs because businesses generally borrow at less favorable terms than the government.

While Swedish politicians have so far been reluctant to embrace private-public partnerships, they will soon realize there is no other choice, Karlstroem said.

“The question is on the politicians’ table,” he said. “They are very hesitant here. But I think they are going to face the reality -- they have to.”

Even before the current wave of refugees, Sweden was suffering from a housing shortage as new construction lagged population growth. Record low interest rates have helped lead housing prices and household indebtedness to records, prompting warnings from policy makers of risks to the economy. Now, the refugees are straining public finances.

System Starting to Crack

The government will have to revise economic forecasts because budget deficits will be wider than previously estimated, Swedish Finance Minister Magdalena Andersson said Monday in a speech in Linkoeping, Sweden. The country doesn’t have the capacity to deal with current numbers of refugees, she said.

In a sign that the system is starting to crack, Sweden introduced temporary border controls this month and Migration Minister Morgan Johansson said refugees may be told they will have to arrange housing for themselves or go back to Germany or Denmark. The Migration Agency on Tuesday said it may house refugees on passenger ships and floating platforms in addition to other accommodation such as hostels, tents and caravans.

“In a city like Stockholm you have to find new places a little bit further out, new residential areas, but you can’t build them there if you don’t have the infrastructure” like public transport, Karlstroem said. "We understand that there is no money to fund these infrastructure projects in the traditional way -- so why not PPPs?”

In the U.S., a group led by Skanska was selected earlier this year to help finance, build and manage a $3.6 billion replacement for the main terminal at New York’s LaGuardia Airport. The Swedish builder has also pushed for similar public-private partnerships in other countries like the U.K. in addition to its domestic market.

“Sweden is standing in front of a watershed, at a crossroads -- the big question is how we’ll be able to deal with and integrate all the people that are coming right now” said Karlstroem. “If we do it right and are good at integration, then it can be something that is really going to boost the economy and the country.”

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