Safe as Houses:

September 11, 2014

Alexander Reisenbichler, a Ph.D. candidate in political science at the George Washington University and AGI/DAAD Research Fellow, presented his research at a seminar on September 11, 2014. The presentation, entitled “Safe as Houses: Comparing Housing Finance Policies in the U.S. and Germany,” analyzed the differences in American and German housing finance policy, including taxation, mortgage-market guarantees, and central-bank programs.

Despite its longstanding reputation as a liberal market economy, the U.S. intervenes in housing markets more intensively than its German counterpart, a social market economy. The U.S. government provides billions of dollars in tax breaks to homeowners, extensive government guarantees in the mortgage market through Fannie Mae and Freddie Mac, and heavy central bank support (i.e., quantitative easing) for the housing sector. Germany provides much less in government support, since it provides no tax breaks for homeowners, less government guarantees in the mortgage market, and much less central bank support for the housing sector. Mr. Reisenbichler discussed some of these puzzling differences and the historical origins of these policies with implications for today’s economies. The German government, for instance, managed to eliminate popular subsidies in recent decades, such as the so-called homeownership subsidy (i.e., Eigenheimzulage) and the mortgage-interest deduction. This might provide some lessons for policymakers in the U.S. and elsewhere. These differences are also reflected in the homeownership rates of both countries, with 66 percent homeownership in the U.S. and less than 50% in Germany.

Comparing the implications of the housing market to the macroeconomic situation, the American housing market has tremendous transmission effects for the larger consumption-based economy. As a result, economic growth depends to a large degree on the development of housing prices and consumption, which is currently holding back the economic recovery in the U.S. The German housing market and house prices have been relatively stable in recent decades and the country has not experienced a housing crash, with less transmission effects into the larger economy. Whereas rising house prices are celebrated in the U.S., Germans view surging prices with skepticism as rising house prices translate into rising rental costs.

A fruitful discussion addressed that the U.S. support of homeownership may function as an alternative to the generous German welfare state, as ordinary people can use their homes as “piggy banks.” Participants also noted that most incentives of the U.S. government are more directed toward financial services than private investors. Participants also discussed the prospects for reforming housing finance policies, which is difficult to implement because of path dependence, electoral politics, institutional factors, and cultural contexts.

Alexander Reisenbichler is a Ph.D. candidate in political science at the George Washington University. During the 2014-15 academic year, he will be a fellow at the Free University Berlin’s Program for Advanced German and European Studies. To support his dissertation research, he has received a research grant from the Horowitz Foundation for Social Policy. He has been a visiting researcher at the Max Planck Institute for the Study of Societies in Cologne and the Hertie School of Governance in Berlin. Mr. Reisenbichler’s recent publications include:

  • Alexander Reisenbichler and Kimberly J. Morgan, “From ‘Sick Man’ to ‘Miracle’: Explaining the Robustness of the German Labor Market During and After the Financial Crisis 2008-09,” Politics & Society Vol. 40, No. 4 (December 2012).
  • Alexander Reisenbichler and Kimberly J. Morgan. “How Germany Won the Euro Crisis: And Why Its Gains Could Be Fleeting.” Foreign Affairs. Web. June 2013.



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United States