Bringing the Household Back in: Comparative Capitalism and the Politics of Housing Markets

Households consume an increasing share of credit in developed economies; however, past and current comparative capitalism research has had very little to say on housing markets. This is an important blind spot, because house prices have crucial economic and distributional implications for nation-states. Moreover, housing markets fail to conform to traditional comparative political economy (CPE) “typologies.” While the liberal economies of the UK and Ireland experienced rapid housing price growth between 1995 and 2008, the egalitarian Nordic countries were close behind. To understand heterogeneity in housing inflation, we argue that it is vital to understand dynamics in two markets that determine homeownership: first, the labor market, which shapes households’ incomes (on which comparative capitalism, and CPE more broadly, has a lot to say), and; second, the market for mortgage credit, which shapes households’ access to financial resources (on which comparative capitalism and CPE have very little to say). We demonstrate that the impact of labor market institutions on housing inflation is conditional on national regulatory frameworks that govern mortgage credit access. Using a panel analysis of 17 OECD economies from 1990 to 2007, we find that in permissive mortgage credit regimes, countries with coordinated labour market institutions that restrain income growth have lower housing inflation than countries with uncoordinated wage-setting. This is what the comparative capitalism literature would predict. However, in restrictive mortgage credit regimes (those which undermine households’ capacity to assume mortgage debt), the structure of labour market institutions have no effect on housing inflation.