During the past few years there has been a lot of media coverage about Stockholm as a successful startup community, which is well deserved, since the Swedish capital has produced five unicorn companies – Spotify, Skype, Klarna, Mojang and King.

This is quite impressive on account of the city’s size (1.4 million inhabitants) and Stockholm is ranked after Silicon Valley on the startup scene due to the high number of unicorns per capita. Therefore, the tech community has grown considerably and more and more non-Swedish investors are looking at Sweden.

But there is also a more negative aspect that needs to be addressed: there has been a severe housing crisis in Sweden, and Stockholm in particular. This makes it challenging for younger people to get their first residence and it is almost impossible to find apartments to rent, since they mostly have been converted into housing cooperatives.

Consequently, many people have to apply for huge loans and it is not an ideal start to your career and adult life. In early October, for the first time in modern history, the National Institute of Economic Research voiced concern that the Swedish housing market could crash. The prices increased by over 15 percent this year alone, which further highlights the serious situation in Sweden – and it clearly has an effect on startup companies that want to establish themselves in the country.

At CupoNation, which is a part of the e-commerce incubator Rocket Internet, we are 30 people working for the Nordic markets. We have our headquarters in Munich, Germany, and have had discussions back and forth regarding a move to Stockholm during the past year. From a business perspective it would make sense, since we would be closer to the retailers and external parties we collaborate with on a continual basis.

However, the current situation makes it extremely challenging to move there. The cost of living is also higher and the risk is that we would lose focus on the business in order to find housing if we were to establish a Nordic office there. Besides the high cost of living and high taxes it is also truly expensive and complicated to find apartments – for us it is both cheaper to live and hire competent people in other places.

We can also see that talented people are hesitant to move to Stockholm because of it and this is where the real problem lies. Since most of the attractive jobs are located in the capital, a lot of people have no choice but to buy expensive flats or sublet apartments at exorbitant prices.

This makes you wonder: what will happen to Stockholm as one of the world’s true tech hubs if this continues? We asked that very question to Sebastian Siemiatkowski, co-founder and CEO of Klarna, and he said it is a situation everyone is well aware of, but no one seems to be grabbing the bull by the horns and doing anything about it.

Further, it makes it harder for all companies in Stockholm to recruit international talent, according to Siemiatkowski.

Other Swedish cities are also investing more in their startup communities, for example Gothenburg. The entrepreneurial climate is getting more dynamic with startup hackatons, investments etc. and we have also seen some successful businesses arise there. Despite the fact that the bigger clients are located in Stockholm, some companies have had a hard time moving there as a result of the current situation.

This in turn can help produce more startups in both Gothenburg and Malmö, which can have a positive effect on the Swedish business climate and not concentrate everything to Stockholm.

At CupoNation we have made the decision not to move to Stockholm, since it is not an ideal startup city for us at the moment. Therefore we are sitting in a less ideal city from a business perspective, but in a more a more ideal startup environment as we see it.

Also read:

Startling Stockholm: a tech startup scene that’s rapidly coming of age

London tops the list of most digital entrepreneur-friendly cities in Europe

Tips, tools and tactics: How to build up a community for your startup

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