INTERNATIONAL MAX PLANCK RESEARCH SCHOOL on the Social and Political Constitution of the Economy Köln, Germany Sebastian Kohl Homeowner Nations or Nations of Tenants How Historical Institutions in Urban Politics, Housing Finance and Construction Set Germany, France and the US on Different Housing Paths Studies on the Social and Political Constitution of the Economy Sebastian Kohl Homeowner Nations or Nations of Tenants How Historical Institutions in Urban Politics, Housing Finance and Construction Set Germany, France and the US on Different Housing Paths © Sebastian Kohl, 2014 Published by IMPRS-SPCE International Max Planck Research School on the Social and Political Constitution of the Economy, Cologne http://imprs.mpifg.de ISBN: 978-3-946416-08-1 DOI: 10.17617/2.2057032 Studies on the Social and Political Constitution of the Economy are published online on http://imprs.mpifg.de. Go to Dissertation Series. Studies on the Social and Political Constitution of the Economy Abstract The thesis gives an answer to the question of why different countries ended up with different rates of homeowners and tenants in the 20th-century. The literature identifies Germanspeaking countries of low homeownership rates around 40% and En- glish-speaking countries of high homeownership rates of more than 60%, with France falling in between the two groups. Moreover, most of these differences have persisted through the second half of the 20th-century and can be shown to reach back to differ- ent urban homeownership rates around 1900. The homeownership-question is of im- portance beyond the mere question of tenure as studies have associated homeowner- ship questions with stability in financial crises, with embourgeoisement of the working-class in life-style, attitudes and voting behavior or with different unemploy- ment rates. Existing explanations have used post-1980 international, regional or indi- vidual data to explain homeownership differences through socio-demographic, eco- nomic or urbanization differences, through a public-welfare/homeownership trade-off or else through cultural preferences. These explanations fail to account, however, for the persistent country differences that existed already prior to the 1980s and prior to government intervention in housing. The thesis, by contrast, goes back to 19th-centu- ry differences of urban organization, housing finance and the construction sector to claim that countries were historically set on different housing trajectories establishing differences hard to reverse in later periods. The US and Germany are chosen for histor- ic case studies of the often opposed country groups. France is included to use the vari- ables found for explaining why a country of similar welfare type as Germany kept a persistently higher urban homeownership rate. The thesis claims that different comple- mentary institutions in city organization, the housing finance and construction industry locked countries into inert physical and institutional structures of either the compact tenement city-form in Germany or the suburbanized form of a city of homes like in the United States. More concretely, functional complementarities of public welfare cities, housing cooperatives, mortgage banks and a raftsmanship production of solid sin- gle-unit homes led to the German tenant-dominance, whereas private cities, savings and loans (SLAs) and a Fordist mass production of single-family homes created the American production regime in favor of more accessible homeownership. Though the thesis establishes the argument for Germany and the US in historic case studies, it tries to make plausible that it can be extended to other German- and English-speaking countries. The innovation of the thesis concerning the particular explanatory puzzle lies in its reference to relevant historical prior causes, its inclusion of the urban level of analysis and the combination of three institutional factors – urban organization, hous- ing finance, construction – that even singly have not been put forward yet in compara- tive explanations. The thesis contributes to the literature on path dependencies that identifies distant occurrences as longterm causes for hard-to-reverse historical trajecto- ries. On a theoretical level, the study contributes to research in a yet little noticed type of market, i.e. markets for durable goods whose use stretches over time, and which therefore requires history-directed explanations. About the author Sebastian Kohl was a doctoral researcher at the IMPRS-SPCE from 2010 to 2014. Studies on the Social and Political Constitution of the Economy 2 Table of contents Acknowledgments .............................................................................................................................. 5 Figures ................................................................................................................................................. 6 Tables .................................................................................................................................................. 7 Introduction ........................................................................................................................................ 8 Development of homeownership rates ............................................................................................. 14 Explanations in the existing literature ............................................................................................. 19 New explanation and outline ............................................................................................................ 28 Part I. Germany, nation of renters ................................................................................................. 33 1. Critical juncture, the 19th-century: the creation of compact rental cities .............................. 33 1.1 Town planning by liberal municipalities ................................................................................. 38 1.2 Housing finance differences ...................................................................................................... 50 1.3 Traditional Handwerk in the Empire ....................................................................................... 71 2. Paths not taken, legacies and reinforcing mechanisms ............................................................ 77 2.1 Urban development as “layering” ............................................................................................ 84 2.2 Housing finance continuity ........................................................................................................ 89 2.3 Rental construction industry vs. trade-based individual homes ......................................... 101 Conclusion ...................................................................................................................................... 110 Part II. United States, nation of homeowners ............................................................................. 112 1.1 The creation of suburbanized cities ........................................................................................ 112 1.2 Building and Loans .................................................................................................................. 126 1.3 Traditional construction industry .......................................................................................... 146 2. 20th-century legacies ................................................................................................................... 155 3 2.1 Private city continued .............................................................................................................. 161 2.2 SLAs instead of non-profit housing ........................................................................................ 167 2.3 Mass production in the construction industry ...................................................................... 174 Conclusion ...................................................................................................................................... 182 Part III. Hybrid France ................................................................................................................. 183 1. The heritage of the Ancien régime ............................................................................................ 183 1.1 Lagging municipal reforms ..................................................................................................... 187 1.2 Financial-system structure and homeownership .................................................................. 210 1.3. Grands ensembles interlude vs. the creation of individual mass housing ........................... 221 Conclusion ...................................................................................................................................... 228 General conclusion ......................................................................................................................... 230 (1) The argument finalized ............................................................................................................. 230 (2) Generalization over cases: Anglo-Saxon vs. central-continental housing regimes ............... 237 (3) Generalizing the explanation type: towards a sociology of markets for durables .................. 240 Appendix ........................................................................................................................................