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

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.