Entrenchment or Retrenchment: The Political Economy of Mortgage Debt Subsidies in the United States and Germany

Abstract

Why do mortgage subsidies vary across countries? Until the 2000s, the U.S. and Germany provided large-scale subsidies for homeownership. Yet, their paths diverged when they faced deep economic crises at that time. While the U.S. doubled down on government support by quasi-nationalizing its mortgage market, Germany retrenched homeowner subsidies. This article argues that growth regimes shape coalitional logics that explain these contrasting outcomes. In the U.S. demand-led regime, where housing is key to growth, a bipartisan coalition entrenched mortgage subsidies to stimulate household credit and consumption. Germany’s export-led regime, where housing is less central to growth, produced a broad-based coalition that retrenched homeowner subsidies to boost competitiveness. Detailed case studies contrast the quasi-nationalization of U.S. government-sponsored enterprises (GSEs) with the retrenchment of the German “homeowner subsidy” (Eigenheimzulage).

Welfare States, Housing Markets and Millennials

“…The exception to this has been work in the United States (Howard, 1999), and, more recently, Europe (see e.g. Morel et al, 2016;Reisenbichler, 2018), pointing at the importance of 'tax expenditures' as implicit or explicit subsidies for different forms of social protection. Even when these tax expenditures are indirect, they almost always disproportionately subsidize owneroccupied housing.…”

Immobilien und Ungleichheit

“…Ausnahmen von diesem internationalen Trend sind Deutschland, Österreich und die Schweiz. Deutschland schaffte die wichtigste Subvention für den Erwerb von Wohneigentumdie Eigenheimzulageim Rahmen von fiskalischen Konsolidierungsmaßnahmen 2006 ab(Reisenbichler, 2021). Deutschland, Österreich und die Schweiz weisen seit jeher einen sehr hohen Anteil an Mieterhaushalten auf; Mietmarktregulierungen blieben weitestgehend bestehen und die Wohnungspolitik seit den 1980ern fast unverändert.…”