The Political Economy of Ownership: Housing Markets and the Welfare State

Abstract

T he major economic story of the last decade has been the surge and collapse of house prices worldwide. Yet political economists have had little to say about how this critical phenomenon affects citizens' welfare and their demands from government. This article develops a novel theoretical argument linking housing prices to social policy preferences and policy outcomes. I argue that homeowners experiencing house price appreciation will become less supportive of redistribution and social insurance policies since increased house prices both increase individuals' permanent income and the value of housing as self-supplied insurance against income loss. Political parties of the right will, responding to these preferences, cut social spending substantially during housing booms. I test these propositions using both microdata on social preferences from panel surveys in the USA, the UK, and a cross-country survey of 29 countries, and macrodata of national social spending for 18 countries between 1975 and 2001.

Home ownership and support for government redistribution

“…It thus becomes an empirical question as to whether the financialization of home ownership has prompted people to reconsider their 'life-course' investment strategies away from more collective and institutionalized forms of welfare provision and towards more privatized forms of horizontal insurance. Similar ideas have also been put forward by Ansell (2012Ansell ( , 2013). 1 Using individual-level panel data for the United States (US) and the United Kingdom (UK), Ansell (2013) shows that higher levels of, and stronger increases in housing wealth are associated with less positive attitudes towards government intervention.…”

“…Similar ideas have also been put forward by Ansell (2012Ansell ( , 2013). 1 Using individual-level panel data for the United States (US) and the United Kingdom (UK), Ansell (2013) shows that higher levels of, and stronger increases in housing wealth are associated with less positive attitudes towards government intervention. He also shows that, at the macro-level, house price increases are associated with decreasing social spending.…”

“…Outright ownership can moreover be used in order to supplement pension or care needs. As mortgage-based home ownership in a number of countries became more financialized, housing assets also act as a hedge against labour market risksallowing access to additional credit in order to bridge a period of temporary income loss (Ansell, 2013). The impact of assets on support for redistribution has however remained largely untested.…”

“…As noted above however, several authors also formulate the opposite argument, in the sense that housing equity might underpin the consumption of households faced with labour market and/or life-course risks (for example, Lowe et al, 2011). While the former scenario is more likely in times of house price depreciation (potentially resulting in negative equity), the latter scenario is more likely in times of house price appreciation (also see Ansell, 2013). Unfortunately, we cannot disentangle age, period and cohort effects with our crosssectional data.…”

Why housing wealth and welfare?

“…In view of the growing prominence of housing wealth and its centrality to twenty-first-century socioeconomic transformations -specifically globalization and financialization -a broader 'political economy' perspective on housing has emerged (for example, Schwartz and Seabrooke, 2008;Aalbers, 2008;Aalbers and Christophers, 2014;Ansell, 2014), moving the spotlight from 'owner-occupation' as a source of shelter and stability to 'residential real estate' as an investment product, a store of housing wealth and a driver of economic and political change. Nonetheless, there has long been an awareness of the broader role of housing and housing wealth in the social structure.…”