How Europe's Startup Capital Can Survive the Housing Crunch

How Europe's Startup Capital Can Survive the Housing Crunch

Why you should care

Because we want the next Skype and Spotify to succeed.

Brandon Landis was excited to move from Britain five months ago to take a job with a startup in Stockholm. But he was less impressed to find himself homeless in the city’s Central Station. Luckily, he found a kind stranger’s sofa to sleep on during his months-long search for a place to rent.

Yet some are refusing to pack their bags at all, as the city’s entrenched housing shortage reaches new and frustrating heights, putting its reputation as the world’s second-most-prolific tech hub, according to Atomico, at risk. Munich-based CupoNation, for one, had been planning to move to Stockholm, but recently decided to stay in Deutschland to avoid the hassle of finding staff housing or office space in the Swedish capital.

Those already established in Stockholm, meanwhile, recognize that the inability to draw from an international talent pool — if there’s nowhere to live, it’s hard to woo foreigners — could one day threaten the ability of startup wonders like Spotify, Mojang and Tictail to compete. You have to have good people on board, says Måns Ulvestam, founder and CEO of podcasting platform Acast. “Good people demand decent salaries, a decent lifestyle and, if you can’t provide housing — a basic necessity — it’s going to be impossible to build companies,” he says. Local leaders are also aware of the challenges posed to local businesses by the housing crunch, which is prompting both startups and the city of Stockholm to step up efforts to spur change.

[Politicians] have to realize that startups need solutions now.

Jessica Stark, CEO of SUP46

Some entrepreneurs and workers who are looking for lodging make up the 500,000 who subscribe to the city-run apartment-search website Bostadsförmedlingen. That process, though, can take months, sometimes years. Hakim Belarbi, press secretary to Swedish Minister for Housing, Urban Development and Information Technology Mehmet Kaplan, says a housing deficit started to accrue years ago and that the current administration is playing catch-up. It needs to raise annual housing builds from 50,000 to 80,000 while also addressing a war-era rent-control system (which has limited rents and discouraged housing projects) and an increasingly onerous secondhand contract market (which has made some rents soar).

In spite of all this, it’s easy to see why startups would want to be in Stockholm. Local residents are tech-savvy and enjoy great connectivity — 4G wireless coverage is available even in the subway. This pervasive connectivity, combined with a social safety net that prevents financial ruin, lends itself well to daring innovation. But what sets Stockholm apart from other tech hubs, according to many business leaders, is the city’s collaborative nature. “People bounce ideas off each other; it’s not a competition in the same way” as places like Silicon Valley, says Ulvestam.

Some, in turn, are taking on the housing burden themselves, collaborating with one another and offering relocation services to their out-of-town hires. Tictail, for example, has helped several recruits by networking on their behalf and even signing leases as guarantor, says its general manager, Wilhelm Lundborg. But these firms are also pushing for reform. Faced with the same housing crisis and similar goals of keeping the city at the forefront of innovation, 80 startups, alongside incubator SUP46, recently created the Swedish Startup Manifesto to boost awareness of the challenges they face and launch a dialogue with politicians.

For its part, the city of Stockholm says it’s doing its utmost to boost housing projects in the capital and nearby municipalities, as well as extend the high-speed rail network. “We work very hard to get land for new houses,” says Olle Zetterberg, CEO of Stockholm Business Region Development, a city-owned firm. This includes city-initiated housing, as well as selling land privately for housing projects. It’s a big process, Zetterberg says, and one often stymied by “not in my backyard” legal complaints and a difficult permit process, not to mention building height restrictions. But the SBRD has helped double the number of annual new builds in the city from 4,000 units a few years ago to 8,000 to 10,000 today. And Stockholm’s council has announced a new goal of 140,000 homes being built by 2030.

But both startups and the city say real reform — to permit, legal, tax and rent-control systems — must come from the national government. To that end, the first meeting in many years between the prime minister and opposition leader about how to address the housing shortage was held earlier this year, and business leaders are hopeful this dialogue will lead to real progress. Belarbi says the government, in the next four years, will invest about 24 billion SEK ($2.86 billion) to boost housing projects over the next two decades.

For now, most firms OZY spoke with say they’re staying put in Stockholm, and others are continuing to look for ways in. CupoNation’s PR coordinator, Lukas Ohlsson, says that while his firm will stay in Munich for the time being, he’s hopeful that the manifesto and murmurings for change within the government will one day enable his company to become part of Europe’s biggest startup scene. To get there, says SUP46 CEO Jessica Stark, politicians “have to realize that startups need solutions now, and not a couple of years down the line.”

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