Historical studies on the institutionalization of the mentally ill have primarily relied on data on institutionalized patients rather than the population at risk. Consequently, the underlying factors of institutionalization are unclear. Using Swedish longitudinal microdata from 1900–1959 reporting mental disorders, we examine whether supply-side factors such as distance to institutions and number of asylum beds influenced the risk of institutionalization, in addition to demand-side factors such as access to family. Institutionalization risks were associated with the supply of beds and proximity to an asylum, but also dependent on families’ unmet demand for care of relatives. As the supply of mental care met this family-driven demand in the 1930s, the relative risk of institutionalization increased among those lacking family networks.