Beyond the Asset-Based Welfare State: The Promotion of Homeownership in Small Welfare States

The paper of Karen Anderson and Paulette Kurzer draws attention to the bubbly housing markets of Scandinavia and the Netherlands, countries known for their comprehensive and sturdy pension programs. They focus on fiscal mortgage relief to show that robust and comprehensive welfare states nonetheless rely on equity withdrawal to fuel consumption. The paper asks why politicians encouraged household indebtedness and why they failed to step in until the bubble burst, which has greatly slowed down the economic recovery. Preliminary research suggests that much of the spending on homeownership was facilitated by generous fiscal mortgage relief that ultimately encouraged homeowners to overconsume ‘housing.’ Once the process was underway it was politically impossible to reform the mortgage interest deduction with the result that it was impossible to calm down the bubble expectations. This shows that the promotion of homeownership also takes place in countries with corporatist welfare states or coordinated market economy.