Abstract
This paper discusses how the total number of housing starts is affected by the presence of a system of subsidized governmental loans. More than 60 per cent of the housing starts in Norway since the Second World War have been financed through The State Housing Bank. The interest on these loans has been subsidized by the State. A cross-section analysis of loans given in 1993 is used to estimate the short-run effect on housing starts. Many households with loans at HB have total debt-to-income ratios in excess of three and loan-to-value ratios exceeding 80 per cent. I find that more than every second household which got a loan from HB in 1993 would not have been granted loans by private banks. The number of housing starts does not seem to be very sensitive to the size of subsidies; accessibility to credit seems to be more important. The paper concludes that the loans provided from a government agency have a substantial effect on the total number of housing starts.
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