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Bubble, Bust and More Boom: The Political Economy of Housing in Norway

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Comparative European Politics Aims and scope

Abstract

Norway has in the last 25 years experienced one housing market bubble, a severe bust in that housing market, and a new boom that may still prove to be a bubble as well. This article analyses the recommodification of the Norwegian housing market and puts forward three arguments: Firstly, that recommodification has contributed to a severe destabilization of Norway's macroeconomy and may do so again. Secondly, that Norway's growth model is increasingly similar to the American one, in that it is increasingly driven by private consumption based on the creation of new wealth out of the housing-monetary policy nexus. Finally, it discusses the thesis that recommodified housing may well drive politics to the right, albeit very slowly. This can happen partly through the tax reluctance mechanism identified in earlier contributions to the political economy of housing, and partly through a reluctance to spend mediated through a macroeconomic governance regime that engenders support for policies that are perceived to contribute to keeping nominal interest rates low.

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Notes

  1. I thank the journal's anonymous referees and the participants at the Oslo workshop on property bubbles, Sjur Kasa, Øyvind Berge, Ingrid Hjertaker, Trygve Lie Jane Zavisca, Gunnar Trumbull and in particular the editors, Herman Schwartz and Leonard Seabrooke for helpful comments. The two graphs presented here were kindly given to me by chief economist Harald Magnus Andreassen of First Securites Norway. Research assistance from Johan Christensen is gratefully acknowledged.

  2. See Schwartz's contribution to this volume and editors' introduction.

  3. Norske Boligbyggelags Landsforbund (The Norwegian Federation of Cooperative Housing Associations, hereafter ‘NBBL’) and Den Norske Stats Husbank (The Norwegian State Housing Bank, hereafter ‘Husbanken’).

  4. By the early 1990s all three (or four if one counts two banks that merged first in an attempt to survive) of the biggest banks in Norway needed substantial assistance in the form of fresh capital from the government. Gross accumulated losses calculated on the basis of the banks' own books have been estimated at 70 bn NOK, or around 10% of GDP in 1991.

  5. The extra 0.5% compared to the ECB represented room to phase in oil income and thus accept a moderate appreciation of the real exchange rate.

  6. Some new Co-ops based on this financing model, have indeed run into serious problems.

  7. Reported in Dagbladet, 2 August 2007.

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Authors and Affiliations

  1. Institute for Labour and Social Research, Department of Political Science, Fafo, Fafo Institute for Labour and Social Research, University of Oslo, Pb. 1097 — Blindern, 0317 Oslo, Norway

    Bent Sofus Tranøy

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  1. Bent Sofus Tranøy
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Tranøy, B. Bubble, Bust and More Boom: The Political Economy of Housing in Norway. Comp Eur Polit 6, 325–345 (2008). https://doi.org/10.1057/cep.2008.14

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