Book Project

Growth, Welfare, and Housing Capitalism in the United States and Germany

In times of  increasingly unaffordable housing markets and growing inequality in many advanced economies, the book makes a timely contribution to our understanding of the historical and political foundations of sizable mortgage and homeownership policies.

Housing finance markets are important engines for economic growth and assist households in obtaining homeownership. But why do some countries subsidize mortgage debt while others do not? My book project examines the politics of large-scale mortgage subsidies in the United States and Germany from a comparative, historical perspective.

It is hard to overlook the vast presence of the American state in the mortgage market. From the Great Depression, U.S. governments have developed an elaborate state-based architecture supporting the country’s housing finance market, consisting of large tax breaks for homeowners and guarantees that underwrite large parts of the multi-trillion-dollar mortgage market. In contrast, Germany’s relationship with housing markets is more ambivalent. German policymakers initially subsidized mortgage debt to rebuild the country’s housing market in the early postwar decades, offering homeowners large-scale tax breaks and subsidies as part of social housing programs. However, they have scaled down these longstanding programs by the mid-2000s. Today, the housing finance market in the United States, the land of the free markets, is much more socialized than that of Germany, a social market economy.

Drawing from extensive fieldwork, the book offers an argument about how different economic structures shaped distinct policy coalitions that explain these contrasting policy trajectories. In the demand- and credit-led U.S. economy, where housing is key to growth, a longstanding bipartisan coalition of politicians, supported by housing interest groups, established, defended, and extended mortgage subsidies. Over time, these dynamics have resulted in the expansion and entrenchment of subsidies in the name of promoting consumption, credit, and growth in the United States. In Germany’s export-oriented economy, housing has been less central to growth, particularly once the country’s postwar housing crisis subsided. Over time, this facilitated the development of a broad-based political coalition that successively retrenched homeowner subsidies in the name of fiscal consolidation and structural reform to boost competitiveness.

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