Growth, Welfare, and the Entrenchment of Housing Capitalism in the United States and Germany
Housing finance markets for mortgage debt are not only important engines for economic growth, but they also increasingly act as forms of private social insurance for ordinary people in times of welfare state retrenchment. Why do some countries support these markets while others do not? My book project examines the politics of public policies that have shaped housing capitalism in the United States and Germany from a historical perspective.
It is hard to overlook the vast presence of the American state in the market for mortgage debt. Since the Great Depression, U.S. governments have developed an elaborate state-based architecture supporting the country’s housing finance market, consisting of sizable tax breaks for homeowners and guarantees that underwrite large parts of the mortgage debt market. In contrast, Germany’s relationship with housing finance is more ambivalent. While German governments also supported home finance markets in the early postwar decades, offering homeowners large-scale tax breaks and subsidies as part of social housing programs, they have scaled down most of 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 broader macroeconomic structures have empowered certain policy coalitions over others in shaping these divergent trajectories in housing capitalism. In the consumption-led U.S. economy, where housing finance is key to growth, a strong political coalition of politicians and interest groups has established, defended, and extended home finance policies. Over time, these dynamics have resulted in the entrenchment of state-based housing capitalism in the United States. In export-oriented Germany, where home finance is less important to growth, competing coalitions – one promoting homeownership and another privileging affordable rental housing — have clashed in their efforts to shape housing markets in the country. These dynamics resulted in more flexible and unstable policy arrangements over time.
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 housing finance markets and their attendant public policies, and how they shape housing and wealth inequality.