Internal rents and the ownership of state properties: experiences from Sweden

Abstract

Purpose

The purpose of this paper is to show that general‐ and special‐purpose properties have to be dealt with differently by the public sector.

Design/methodology/approach

Application of standard economic theory concerning pricing of properties and infrastructure. The issues are analyzed based on experiences from Swedish state‐owned properties.

Findings

The distinction results in quite different public property management strategies. Special‐purpose properties have no short‐run alternative use and have limited rental and capital values, unlike general‐purpose properties. Thus, to apply a required rate of return based on assumed capital values universally will lead to inefficient use. For special‐purpose properties, short‐run marginal costs (SRMCs) should be charged – no more.

Practical implications

General properties owned by the state represent a suitable case for privatization. For special‐purpose properties, only SRMCs should be charged.

Originality/value

The paper makes a distinction between two kinds of state‐owned properties; general‐ and special‐purpose properties, and analyzes the important consequences in property management.

Citation

Andersson, R. and Söderberg, B. (2011), "Internal rents and the ownership of state properties: experiences from Sweden", Journal of Corporate Real Estate, Vol. 13 No. 1, pp. 64-76. https://doi.org/10.1108/14630011111120350