Does History Matter – and how? Path Dependence in Housing

Does History Matter – and how? Path Dependence in HousingBo BengtssonUPPSALA UNIVERSITYInstitute for Housing and Urban ResearchP O Box 785SE–801 29 GÄVLE, Swedenphone +46 26 420 65 21email: bo.bengtsson@ibf.uu.sePaper presented at the Centre for Housing Policy, University of York, 14 March 2007[Please do not distribute or quote without the author’s permission!]

1Does History Matter – and how? Path Dependence in HousingBo BengtssonAbstractPath dependence in housing is discussed from three different angles. The first part of thepaper is a critical analysis of James Mahoney’s strong definition of path dependence ascontingent events at one point setting into motion deterministic institutional change. It isargued that a weaker and more relative definition of path dependence is more compatiblewith a contextualised actor-based analysis, which is often the heart of political andinstitutional history. Such a weak concept also makes possible a distinction betweendecision-making, agenda-setting and perceptual path dependence and allows for explanationsin terms of combinations of the different mechanisms efficiency, legitimacy and power.The second part is a general discussion of path dependence (weakly defined) as a tool forhistorical analysis of housing regimes and housing policy. The policy theory of the stateproviding correctives to the housing market makes tenures and other market regulationsimportant institutional elements, which, together with the longevity and physical sluggishnessof housing, may imply rather strong path dependence. This is corroborated by theparadoxical and persistent differences between the housing regimes of the five Nordiccountries.The third part of the paper briefly presents the establishing and institutionalisation of theunique Swedish corporatist rental policy. The historical review is focused on the four phases(‘establishing’,’ construction’,’ saturation’ and ‘retrenchment’) of a ‘development curve ofhousing provision’, which is claimed to be of general relevance. In the analysis of the Swedishcase a number of the elements associated with path dependence are identified.IntroductionFollowing the seminal works by Douglass North and Robert Putnam (North 1990; Putnam1993; Pierson 2003) the concept of path dependence has been given growing attention inhistorically oriented social studies. E.g. path dependence is often seen as the basic causalmechanism in historical versions of institutional theory (Peters 1999: 62–63). The generalidea behind the concept is that if the historical development takes one direction at one point intime, certain, otherwise feasible, alternative paths will be closed – or at least difficult to reach– at a later point. This can be analysed either as self-reinforcing or reactive sequences(Mahoney 2000: 508–9). In a political perspective the idea of path dependence highlights atleast two well known general phenomena: how structural, cultural and institutional constraintsfrom the past may limit the possibility of change, and how institutional inertia may limit thewillingness to change.In the paper I take my point of departure from one theoretical perspective on pathdependence, presented by James Mahoney, and suggest how his model should be developedto better deal with the role of history in decision-making by actors with intentions. Then I goon to discuss more precisely how such a perspective may be applied to housing policy andhousing regimes, illustrating my discussion with empirical findings from a comparative studyof housing policy in the five Nordic countries Denmark, Sweden, Norway, Iceland andFinland. Finally I discuss how the historical development of one particular idiosyncratic case,

2the unique Swedish form of housing corporatism, can be understood in terms of pathdependence. 1Path dependence and social action – a critical comment on James MahoneyIn an often quoted article ’Path dependence in historical sociology’, James Mahoney criticisesvague definitions of path dependence that say little more than ’history matters’ or ’the pastinfluences the future’. To define the concept only as forms of ’path analysis’ does notdemonstrate why path-dependent patterns and sequences merit special attention, he claims.Instead Mahoney (1) defines path dependence specifically as ’historical sequences in whichcontingent events set into motion institutional patterns or event chains that have deterministicproperties’ (my italics). This implies (2) that the identification of path dependence involvesboth tracing a given outcome back to a particular set of historical events, and showing howthese events are themselves contingent and cannot be explained on the basis of prior historicalconditions. In consequence, (3) since contingency cannot be established without theory, thespecification of path dependence is always a theory-laden process, meaning that ’deviant casestudies’, which analyse cases where an outcome predicted by theory did not occur, offer oneinteresting form of analysis of path dependence (Mahoney 2000: 507–8). I will call thesepropositions ‘Mahoney’s three theses on path dependence’.Even though I agree with Mahoney’s second and third theses, about the necessity to trace pathdependence by writing history backwards and the necessity of path-dependence analysis to betheory-laden (and certainly about the value of deviant case studies), I question the merits ofhis ‘strong’ definition of path dependence. If the concept is reserved for situations where onecontingent event deterministically leads to other events or to certain institutional outcomes,there would not be many cases left to analyse in the social sciences where deterministiccausation can seldom be claimed. Instead I suggest a weak definition, where one event that ismore or less contingent considerably changes the probability of other subsequent events orinstitutional outcomes. This weak concept of path dependence would transform Mahoney´sdemarcation between contingency and determinacy into a matter of degrees on a scale goingfrom contingency to determinacy, where prior events are considerably more contingent thansubsequent. This weak definition would, of course, make path dependence more difficult todistinguish from other types of correlations, but also more useful in the analysis of real-lifesocial processes.Admittedly my weak definition again blurs the distinction between path dependence and pathanalysis that Mahoney worries about. Does that mean that we are back to ‘history matters’?The answer is yes, but in my opinion path dependence is better defined – and distinguishedfrom other forms of path analysis – in relation to Mahoney’s second and third theses, as ahistorical pattern where a certain outcome can be traced back to a particular set of events onthe basis of empirical observation guided by some social theory. Path dependence would thenbe a particular form of path analysis that focuses historical events and specifies in theoreticalterms the elements that build up the path. It assumes that history matters – but the empirical1 The paper is based on a book on Swedish that presents the results from the Nordic comparative study(Bengtsson et al 2006). I thank my Nordic friends and co-writers Erling Annaniassen, Lotte Jensen, HannuRuonavaara and Jón Rúnar Sveinsson for fruitful co-operation, which has also left its traces in this paper.However, I take full responsibility for all its shortcomings, in particular for any remaining misunderstandings ofhousing institutions in Norway, Denmark, Finland or Iceland.

3challenge is not to ‘prove’ that general assumption, but to identify in what respect and viawhat type of mechanism history matters in a certain context.The main problem with Mahoney’s strong definition, as I see it, is that it does not seem veryfruitful – or even applicable – in a context of actor-based analysis, which is often the heart ofpolitical and institutional history. The dichotomy between contingency and determinacy isdifficult to apply to actors with intentions, who can be assumed to follow some logic ofmeaningful action – which may be more or less rational. Without going into the complexitiesof different theories of action, I would say that most students would agree that the behaviourof political actors is to some extent explicable in terms of bounded rational action, thoughseldom in the formal terms of deterministic, probabilistic or contingent. 2In an actor-based analysis the typical case of (weak) path dependence is where actors more orless deliberately design institutions at point (or points) A, institutions which at a later point Bsets the rules of the political game between the same or other actors. In retrospect, thehistorical development can be perceived as an ongoing and self-reinforcing chain of gamesbetween actors, institutional change, new games, new institutions, etc. One strength of theweak definition is, paradoxically, that it makes it possible to identify degrees or modes of pathdependence. In a perspective of contextualised rational action one might, inspired by StevenLukes (1974), differentiate between three different ‘faces’ or forms of path dependence.Earlier more ’contingent’ events at point A may at point B have an effect on (I)decision-making (where actors choose other alternatives due to what happened at point A),(II) agenda-setting (where other alternatives come up on the political agenda due to whathappened at point A) or (III) perceptions (where other alternatives are conceivable to actorsdue to what happened at point A).Inspired by Randall Collins, Mahoney presents an interesting typology of path-dependentexplanations of institutional reproduction, where he makes a distinction between utilitarian,functional, power and legitimation explanations. The mechanism of reproduction in utilitarianexplanation is the rational cost-benefit assessment of the institution by actors, and infunctional explanation the function of the institution for an overall system. In legitimationexplanation the mechanism at work is the belief of actors in the morality or appropriateness ofthe institution, and in power explanation the mechanism is support by an elite group of actors.Depending on the mechanism, the effect at point B of the contingent event that occurred atpoint A would be that otherwise more efficient, more functional or more legitimateinstitutions would not be available or, in the power variation, that an elite group is empoweredthat otherwise would not have been so (Mahoney 2000: 517–24).Mahoney’s typology mixes rational choice, functionalism, idealism and power analysis. In myopinion, what he presents as alternative explanations actually implies a choice betweentheoretical perspectives, and it is difficult to conceive of an analytical framework that wouldbe neutral between his four explanations as alternatives in an empirical analysis. 3 There are2 Cf. Somerville and Bengtsson 2002 and Bengtsson and Somerville 2002 for a discussion on social analysisbased on a perspective of contextualised rational action.3 This problem seems to be a consequence of Mahoney’s strong definition of path dependence as completecontingency at point A and complete determinacy at point B, which makes it difficult to include combinations ofdifferent mechanisms in the model. The weak definition also makes it possible to account for institutionalchange without necessarily playing the ‘external shock’ card. In a perspective of path dependence observedinstitutional always demands an explanation, but with a weak definition change may e.g. be caused by internalcontradiction in the institutions themselves (and thus path dependent in itself). ‘But different institutions rest on

4also other types of explanations that may be relevant besides the four included in Mahoney’smodel. 4In an actor-based analysis the point of departure should in principle be subjective and basedon (1) how the actors conceive of the situation at point B, (2) what alternatives enter intoactors’ ’calculi’ (which may be more or less explicit or sophisticated), and (3) how actorsinteract with other actors in the decision-making process (which may in fact be anondecision-making process). This means that Mahoney’s utilitarian mechanism is the coreof the analysis, even though it may be defined in less perfectly rationalistic end economicterms than Mahoney seems to imply.In a perspective of contextualised rational action legitimacy and power, like economicefficiency, are seen in the light of actors’ preferences. In this perspective it seems morefruitful to distinguish between mechanisms of efficiency, legitimacy and power. Theefficiency mechanism of path dependence has to do with the coordinating capacity ofestablished institutions and with the transactions costs of changing them (cf. North 1990; Halland Taylor 1996: 945; Pierson 2000). The legitimacy mechanism may enter as an input inactors’ calculi either directly, via their own preferences, or indirectly, via their perceptions ofwhat is seen as legitimate in the society at large. This type of mechanism has to do with thenormative logic behind established institutions, not least among actors who have beeninvolved in designing them (cf. March and Olsen 1989: 41). Correspondingly the powermechanism may enter into actors’ preferences both directly and indirectly. Directly indeciding which actors are allowed to take part in the decision-making and with what power.Indirectly via perceptions of power relations in the larger society. Institutional arrangementsare never neutral in terms of power, which also affects the conditions of changing them(Thelen 1999: 394–96). 5This discussion also has implications for the role of theory in the analysis of path dependence.In Mahoney’s model theory is needed to decide what events at point A are contingent or not.In an analysis of path dependence in a perspective of contextualised rational action the role oftheory is first to make sense of actors and decision-making, and second to help explain moreprecisely the mechanisms defining the path, i.e. what aspects of the event A, and its effects,define the rules of the game and actors’ preference orders at point B. Unlike Mahoney’sstrong version of path dependence, where a move from the contingent to the deterministiccalls for an explanation in terms of one inclusive mechanism, the weak and actor-orientedversion allows for combinations of different mechanisms, as long as they can all be includedin the reconstruction of actors’ preferences and perception of the rules of the game at point B.Path dependence and housing regimesThe discussion above on Mahoney’s concept of path dependence concluded in a modificationof his definition and model, better adapted to actor-based historical analysis of institutions.Path dependence was seen as a situation where the decision-making situation at point B indifferent foundations, and so the processes that are likely to disrupt them will also be different, thoughpredictable’ (Thelen 1999: 297).4 One often discussed factor – that may actually have deterministic consequences at point B – is physical ortechnical change at point A (cf. Hughes 1983). This ’technical explanation’ may be of particular relevance tohousing policy; e.g. if housing estates at point A are produced as large-scale units, this would certainly putdefinite restraints on decisions about housing provision at point B.5 Maloney’s functional mechanism seems to be less relevant in an intentional perspective (see Elster 1989: 99–100 for a general criticism of functional explanations in social science).

5terms of either perceptions and preferences of actors or the conditions of interaction isaffected by previous events at point or points A. The effects may be on the explicit choicebetween alternatives, on what alternatives enter the agenda or on what alternatives areperceived by actors. The mechanism may be changes in efficiency, legitimacy or power or acombination of these.How can a perspective of actor-oriented path dependence be applied to the field of housing? 6Are there any specific characteristics that have to be considered in the historical analysis ofthis sector of society?Housing policy in the Western countries is best perceived as the state providing correctives tothe housing market. This means that market contracts serve as the main mechanism fordistributing housing, while state intervention has the form of correctives, defining theeconomic and institutional setting of those market contracts (cf. Bengtsson 2001; Oxley andSmith 1996: 2–3, make a similar observation). In principle housing is distributed by means ofvoluntary contracts between buyer and seller, between landlord and tenant, and so forth.Housing is perceived as an individual good, which, as far as possible, should be distributed inaccordance with individual consumer preferences.The normative basis of this mode of provision is that housing is seen not only as an importantelement of citizens’ welfare, but also – and perhaps above all – as a market good. Hence, andin contrast to other welfare commodities, politically defined needs of housing are not fulfilledby direct state allocation but by state correctives to the market. This particular ‘policy theory’makes the markets for housing and house building the most important arenas where housing isdistributed and housing provision is decided. 7This policy theory of state correctives to the market can be contrasted to other welfare sectors.Ulf Torgersen has pointed out the specificity of housing policy by describing it as ‘the wobblypillar under the welfare state’. According to him, in the typical welfare sector fairly clearstandards have been extracted from the vague concept of need, standards that define wheninstitutions in charge are responsible to take action, and lack of conformity to those standardsis subject to legal action from the prospective recipient. Those elements are seldom discernedin housing provision, what is striking is rather the contrast in those respects between housingand other welfare sectors (Torgersen 1987: 116–18).This specific policy theory of housing also has implications for what should be in focus in theanalysis of path dependence in housing. In a policy field based on market distribution themain institutions are those that define the rules of the game in the market. In housing thecrucial institutions are tenure forms and other types of market regulations, includingnon-profit organizations acting in the market. 8A well known characteristic factor of housing provision is related to the longevity andphysical sluggishness of the housing stock per se, often discussed by economists as6 In Bengtsson et al 2006, this model of weak actor-based path dependence has been applied to the developmentof housing policy in the five Nordic countries.7 A policy theory can be defined as ‘... the total of causal and other assumptions underlying a policy’(Hoogerwerf 1990: 285–86).8 See Ruonavaara 1992 for a discussion on types and forms of tenure. ‘Housing tenures are institutions, sets ofpractices that regulate a particular field of human action and interaction’ (Ruonavaara 2005: 214). The market assuch – and the housing market more specifically – should also be seen as an institution in this meaning.

6‘peculiarities of housing markets’ (Stahl 1985; Arnott 1987). Since housing estates have anaverage lifetime of some 50 years, only a marginal percentage of the stock is replaced by newproduction in a certain year. Because of this, political measures aimed at housing productionnormally have their full impact only in the very long run. This would be a strong example ofthe efficacy mechanism of path dependence. 9As market regulations housing tenures define the rights of exchange and possession that arefundamental to a capitalist economy, and in Western societies any change in such rules maybe regarded as a threat both to existing property owners and more generally to an economybased on individual security of property. Even if there are no formal constraints againstchanging such rules virtually over night, considerable political restraint may be expected, e.g.avoiding to force through major changes with the support of only a narrow parliamentarymajority. This would be an example of the legitimacy mechanism of path dependence. 10Together these two factors – the sluggishness of the housing stock and the normativepresumption against changes in property rights – may mean that the conditions of pathdependence, and historical institutionalisation in general, are of a different character inhousing than in other policy fields. If we combine them with the general mechanisms ofefficiency, legitimacy and power we would indeed expect a higher degree of path dependencethan in many other policy fields.Why so different? The Nordic housing regimesThe importance of tenure forms was the point of departure of a research project, where thefive housing systems of Denmark, Sweden, Norway, Finland and Iceland were compared in ahistorical perspective of path dependence. The differences between the national systems ofhousing provision in the Nordic countries are remarkable. It is true that modern housingpolicy in all the five countries has been ‘social’ in the meaning that an important goal hasbeen to provide decent housing to households of lesser means. However, the institutionalarrangements chosen to achieve this goal differ fundamentally. As a matter of fact theorganizational forms aimed at implementing the national policies are so dissimilar that itseems well justified to describe the five countries as representing five different housingregimes. 11In Denmark housing policy has been primarily directed towards rental housing, in particularin estates owned and managed by public housing associations, organized in smallself-governed units where local tenants have a high degree of self-management or ‘housingdemocracy’. In Sweden housing policy has also been implemented primarily by means ofrental housing owned and managed by public housing companies, though, in contrast to theirDanish counterparts, these companies are controlled by the local municipalities. Sweden alsohas the largest share of co-operative housing in Europe.9 This form sluggishness is of course physical and technical rather than institutional, but it has institutionalimplications as well as can be seen in the next footnote.10 One aspect of this mechanism is that the longevity of housing estates provides unique prerequisites oflong-term financing, which, in turn, gives banks and other financial institutions a strong interest in fixed andpredictable rules.11 Here defined broadly as the set of fundamental principles according to which a national system of housingprovision is organized.

7In Norway housing policy has been mainly based on individual and co-operative ownership,and the social rental sector represents only a marginal percentage of the total stock. In Icelandtoo, owner-occupation has been used as a housing policy instrument, though in this caseincluding strong elements of individual self-build. In Finland, finally, housing policy has notbeen directed at any particular forms of tenure or ownership.The institutional arrangements of housing provision in the Nordic countries have a number ofinteresting distinctive features when compared to other countries as well. In Denmark,Norway and Sweden, though not in Finland and Iceland, strong popular movementorganizations have played a leading role in housing provision. Norway and Sweden haveco-operative housing movements without comparison elsewhere, and Sweden also has aworld unique tenant’s movement with an almost corporatist influence on the rental policy (seebelow). In Denmark the national tenant’s movement is much weaker than its Swedishcounterpart, but instead the democratic forms of local self-government in the public rentalsector are unparalleled in Europe.Swedish, Danish and Norwegian housing policies have been described as ‘universal’ anddirected towards all types of households and most segments of the housing market. Finnishand Icelandic housing policies on the other hand have been described as ‘selective’ andoriented more directly towards households of lesser means and based to a large extent onindividual means-testing. 12The large differences between housing regimes in five countries that share a number ofsimilarities in other respects is a puzzle and can in itself be seen as an indication of pathdependence. Without some form of structural restraints or institutional inertia we wouldexpect some signs of convergence, in particular considering the regular collaboration andexchange of ideas that goes on between Nordic politicians, officials and interestorganisations. 13 But the Nordic countries have retained their divergent housing regimes for atleast 60 years by now.Tracing path dependence in housingHow can the concept of path dependence be applied to the development of housing regimes?As already indicated, three central elements of a path-dependence analysis are (1) the event orevents at point or points A, where the historical path is ‘chosen’; (2) the decision-makingprocess at point B, where the effects of the choice at point A become visible; and (3) themechanism or mechanisms that explain the effects of the event at point A on thedecision-making situation at point B.The logical way to identify these elements if we want to analyse the development of housingregimes and tenure policy would be to start at point B, which would typically be an importantpolitical decision on tenure-related issues. Decisions on tenure legislation, organisation andownership, or on subsidies directed towards specific tenures, are obvious candidates. Here wewould expect path dependence to be visible in the contents of the decision, in the politicaldebate and in the general discourse. If we find that some, otherwise plausible, paths are seenas closed by the involved actors, this would be an indication of how to find point A, by going12 After the changes in selective direction that have recently taken place in the three Scandinavian countries, andrather dramatically in Norway, this distinction is less clear-cut than it used to be (see Bengtsson 2001 for adiscussion on the meaning of the dichotomy universal-selective in housing policy.13 Kemeny and Lowe 1999 discuss convergence and divergence in housing.

8backwards in history to a situation where closure took place. Whereas point B would typicallyhave the outward appearance of a central and important political decision, the event at point Amay not have been much debated or even observed at the time, e.g. presented as a provisionalsolution to a specific and acute problem. By scrutinizing the situation both at point A andpoint B it should in most cases also be possible to say something about what type ofmechanism or mechanisms that were at work between the two events.The methodological conclusion is that to find point A one should start at point B, which istypically a more visible political event. If we want more theoretical names than A and B Isuggest we call point A critical juncture and point B political focal point. 14 It should also beunderlined that a political focal point may sometimes also be a critical juncture – in relation tosome future point B. Such a ‘focal critical juncture’ has sometimes been called a formativemoment – in housing policy they may in reality often rather be more drawn-out ‘formativeperiods’ – where actors intentionally induce historical change in institutions (cf. Rothstein1998).There is, however, one interesting complication in this approach. If there is indeed pathdependence, the alternatives that were closed at the critical juncture A may not even be visiblewhen we investigate the political focal point B. In Lukes’ terms, it may not be a case of‘decision-making’ path dependence, but of the ’agenda-setting’ or even ’perceptual’ versions(cf. above), and then we may not find any trace of the deserted path when studying thedecision process. It is true that alternatives seen as unrealistic by actors may sometimes stillbe commented on, but if that is not the case such forms of path dependence must be spottedby some form of counterfactual analysis (cf. below).The development curve of housing provisionWhat decisions about housing policy would be the best candidates for serving as politicalfocal points? First, in consequence with what has already been said, such decisions should beabout tenures, but over time there have typically been many of those in a national housinghistory. In the Nordic project the point of departure was taken in theoretically definedhistorical phases, corresponding to the general challenges that most Western housing systemshave gone through. The idea is that when a system is challenged structurally or discursivelyone would expect some sort of crisis and discussion of change. This should also be the pointwhere institutional constraints gets visible in political debate and decision-making..In general terms we can identify four rather distinctive phases in the housing history of theNordic countries in the 20-th century. First, an establishment phase from early urbanizationup to the second world war, a period when housing provision went from being a field ofrecurrent crisis management on an ad hoc basis to being a permanent item on the politicalagenda. Second, an expansive construction phase (in both physical and institutional terms)triggered by the post-war housing shortage and growing political ambitions in terms ofhousing standards. In the Nordic countries this phase continues up to the seventies, whenhousing demand in quantitative terms was more or less saturated. Third, we can identify amanagement phase (or saturation phase) when production of new housing was successivelyreplaced by renewal and management of the existing stock. Finally, and still going on in theNordic countries, we have a privatisation phase or, in more general terms, retrenchmentphase, starting between 1990 and 2000, when some of the state institutions of housing14 Cf. respectively Collier and Collier 1991 and Schelling 1980, who, however, uses the term ‘focal point’ with asomewhat different meaning.

9provision were abolished or reorganized. 15 Corresponding ‘structural development curves’ ofhousing provision can probably be drawn up for most other Western countries as well, so thephase model could be a valuable tool in comparative housing research.As already indicated, counterfactual analysis is often important part of a perspective of pathdependence. What alternative development would have been possible at point B, if the eventat point A would not have occurred? The individual links in a certain historical chain mayoften be analysed counterfactually by making use of records of the political discourse andinteraction. It is more difficult to make a counterfactual analysis of the overall institutionaldevelopment, i.e. the result of the whole chain of decision-making and institutionalisation.Path dependence in the Nordic housing regimesIn the Nordic project the counterfactual analysis of one country was carried out with thedevelopment in the other countries as contrasting relief. When and why were alternativestrategies ‘discarded’, that might have lead to a development closer to the housing regimes ofthe other countries? Did these alternatives at some point of time enter the political agenda? Orwere the political, institutional and structural conditions never such that those alternativeswere seen as realistic or even perceived of?The main result of the Nordic study is that the differences between the five housing regimeshave been remarkably persistent all through the various challenges of the four historicalphases. The institutional changes that have taken place in each country have been incrementalin the sense that the new arrangements have consistently retained distinct features of thepreceding ones. This is true even in the cases where reforms have actually been launched as‘system shifts’ by political actors (Bengtsson et al 2006: chap. 7). 16What is the solution to the puzzle of “why so different”? Very briefly, in the formative periodof the housing regimes, between the turn of the century 1900 and World War II, different –and more or less ‘contingent’ – solutions were chosen to deal with the housing problems ofurbanisation in each country. When more comprehensive programmes of housing policy wereintroduced after the war it was seen as efficient to make use of the already existing, if stillundeveloped, organisations and institutions to implement the new programmes. During theconstruction phase, with its massive production of new housing, the five housing regimeswere successively consolidated and institutionalised. From that time we can repeatedlyobserve how the mechanisms of efficiency, legitimacy and power counteract institutionalchange (Bengtsson et al 2006: chap. 9).The counterfactual analysis gives further evidence of the strength of path dependence inNordic housing policy. Not since 1946, at the time of the post-war housing reforms, havethere been serious political discussions or a plausible possibility in any of the five countries of‘importing’ a housing regime similar to any of the other four. By that time, more precisely,the non-socialist parties in Denmark advocated a ‘Finnish’ system of selective support to both15 The phase model is inspired by a similar model in Jensen 1995: 229–30.16 It is true that remarkable institutional change can be observed in the Norwegian housing regime, where theuniversal regime since the 1970s has been successively transformed to what in practice is a selective system.This transformation did, however, largely take place ‘behind politicians’ back’, when the price control onco-operative dwellings was successively abolished due to strong market pressure from owner-occupation andunregulated co-operative dwellings. Since the development was a consequence of inherent contradictions in theNorwegian housing regime, it may actually be seen as an example of path-dependent change (Bengtsson et al2006: chap. 4; cf. Thelen 1999: 394–96).

10rental housing and owner-occupation, while on Iceland, in contrast, the parties to the leftwanted to complement the support of owner-occupation by building social rental housing,which would also lead to a Finnish solution. In Sweden at the same time there was discussionswithin the governing Social Democratic party between advocates of a ‘Norwegian’ system ofsocially oriented co-operative housing and supporters of the system based on rentals ownedby municipal companies that was actually chosen. After that the other Nordic regimes havestill been used as contrasting examples in national housing debates, but the institutions of thenational regimes have grown so strong that no serious import attempts have been made(Bengtsson et al 2006: 350–55). 17Swedish housing corporatism – a case of path dependence?The Swedish rental market is completely dominated by collective negotiations on rents andother housing conditions between landlords and tenant’s unions. In this section I will discussthis absolutely unique form of housing corporatism in a perspective of path dependence. Thiscan be seen as a deviant case study of the type that Mahoney recommends to students of pathdependence. It is a deviant case not only empirically but also theoretically, since there areauthors who see corporatism as incompatible with consumer organisations and ‘policy takers’(Offe 1985: 239–42, Williamson 1989: 169–70; cf. Bengtsson 1995: 235–38). I will arguethat the development of the ‘deviant’ Swedish system can be well understood within aframework of path dependence. 18An important ingredient in the corporatist system is the extremely strong and institutionalisedSwedish tenants’ movement. Almost half of all Swedish rental households are members ofsome tenants’ union, which is a far higher percentage than in any other country. The tenants’movement is strongly integrated under the auspices of the National Union of Tenants. 19 Theinstitutional basis is the corporatist system of collective rent negotiations and the so-calleduse-value system of rent-setting linked to the negotiations. Virtually all rents in Sweden areset within this system, which is rather complicated in its details. 20Another mainstay of the Swedish housing regime are the non-profit municipal housingcompanies, which make up the public rental sector in Sweden; there is normally one companyin each municipality. 21 The rent negotiations in the public sector are based on the total cost ofthe company, and the arguments typically focus both on what costs are reasonable and on howthose costs should be distributed between different districts, estates and individual dwellings.In principle this distribution should reflect consumer preferences and not relative costs(Turner 1988: 260–61).17 Cf. Lipset and Rokkan’s well-known thesis that the modern party systems have reflected political cleavages atthe time of transition to democracy in different countries – for decades after those cleavages have lost theirpolitical importance Lipset and Rokkan 1967: 30, 50–55).18 The corporatist system of rent-setting is one of four institutional pillars under the Swedish housing regime, theother three being the universal policy theory, the unitary social rental market and the municipal housingcompanies. Together these four interrelated pillars can be said to define the Swedish housing regime (Bengtssonet al 2006: chap. 3).19 Other tenants’ associations exist, and occasionally they also have a collective rent-setting agreement with alandlord, but the national organisation with its subunits is the completely dominating representative of Swedishtenants.20 See Bengtsson 1994 for a more complete presentation of the system and its logic.21 See Bengtsson 1991 for a presentation of Swedish municipal housing companies; the important thing in thepresent context is that no means-testing or needs-testing is required to get a municipal rental dwelling.

11In the private rental sector, which is about the same size as the public sector, collective rentnegotiations are not based on the landlords’ total costs, but on comparison with the rents ofsimilar dwellings in the public sector. The link between the two sectors is the right touse-value trials based on the use-value paragraph of the Rental Act. According to thisparagraph, a claimed rent – public or private – can be rejected as unreasonable if it is found tobe considerably higher than the rents charged for dwellings with the same use-value in thesame local market. Use-value comparisons are made primarily with the rents of public rentaldwellings as bench-mark, which gives the non-profit municipal housing companies the role asprice-leaders in the local rental markets. If a private landlord demands a considerably higherrent than the rent-level in the public sector, the tenant can take the case to the rent tribunal.This makes the Swedish rental sector an unusually clear-cut case of a ‘unitary social rentalmarket’ (cf. Kemeny 1995: 4).What makes the Swedish rental system corporatist even in formal terms is first that the rightto collective negotiations of tenants’ associations is legally regulated in the Rent NegotiationAct of 1978. Furthermore, the regional rent tribunals that serve as court of first instance inuse-value trials, consists of one representative of the landlords’ organisation (either private orpublic) and one representative of the tenants’ union, together with a neutral chairperson, wellversed in the law. The National Union of Tenants also plays an important part as politicallobbyist and creator of public opinion on housing issues, with strong links to the SocialDemocratic party. The organisation is also a regular participant, together with the landlords’organisations, in government commissions on rental policy.Different explanations to Sweden’s unique corporatist rental policy have been suggested,some of them quite plausible at first sight, but none really convincing. The Social Democraticdominance in Swedish political life, and the high Swedish membership rates in voluntaryorganisations are two explanations that have sometimes been proposed, but in both respectsthe Scandinavian neighbours Denmark and Norway have similar records – but no comparabletenants’ movement. It has also been claimed, in a public choice perspective, that a large rentalsector make tenants an important group to appeal to for vote-maximizing politicians(Meyerson, Ståhl and Wickman 1990: 92–120). The problem with that hypothesis is that othercountries, most prominently Switzerland, the Netherlands and Germany, have larger rentalsectors but weaker tenants’ movement. 22 As we have seen the use-value system is part of auniversal housing policy and an integrated social rental market, but such institutions can befound in other European countries, with weakly organised tenants, so that is not the fullanswer either.Of course, we cannot completely rule out explanations in terms of the size and structure of therental sector, party politics, ideology or traditions of collective action, they may even benecessary conditions. But, since the housing regimes of other countries have similar features,while the Swedish tenants’ organisation and housing corporatism are unique, such general andexternal explanations are obviously not sufficient. So it seems well justified to look for a morecontextual and contingent explanation in terms of path dependence. This is what I will try todo in the following brief history of the Swedish rental policy, which is organised according tothe four phases of the ‘development curve of housing provision’ presented above. 2322 In absolute membership the German tenants’ movement is even somewhat larger than the Swedish, butexpressed as a percentage its coverage is much smaller.23 Space allows only an extremely short version of the story; a somewhat longer short story, with references –and in Swedish – is told in Bengtsson et al 2006: chap. 3.

12The establishment phaseThe period of the First World War witnessed the first permanent organisation of Swedishtenants. Economic crisis had led to a general breakdown of housebuilding, with serioushousing shortage, increasing rents and outright poverty. In a law from 1916 the municipalitieswere granted the right to set up special units for mediation in rental conflicts betweenlandlords and tenants. Those ‘rent tribunals’ had one member well versed in the law, one‘well versed in housing production’ and one ‘with knowledge about the housing conditions ofpeople of small means’. Though tenants’ associations were barely existent at the time, thisoptional institution was the start of corporatist representation. Next year a provisional RentControl Act was passed as a restriction to the landlords’ possibilities to take advantage of theirmarket power in a situation of housing shortage. As long as the crisis prevailed all rentincreases should be approved by the rent tribunals. A few years after the war, in 1923, theprovisional law was abolished and the rental market was again deregulated. This was onetriggering factor behind the foundation of the National Union of Tenants the same year.In the interwar period the rules of the games on the rental market were defined by the oldRental Act of 1907 with its rather week security of tenure. During the economic crisis of thethirties, the situation was sharpened, and a series of rental strikes and boycotts took place, inparticular in Gothenburg. A government commission, including representatives of theorganisations on both sides, was initiated in order to settle the disturbances and normalize therelations. The result was a new Rental Act, still not granting security of tenure, which was asetback by the tenants’ movement. On the other hand the decision-making process was seenas a political recognition of the organisation, and one seat on the new mediation boards forrental conflicts was reserved for a local representative of the tenants.The new Rental Act had not even come into force when war broke out, and though Swedenagain succeeded to stay out, building production went down and rents went up. In 1942 aprovisional rent control was introduced, this time combined with direct security of tenure. Arent tribunal in each municipality was responsible of the implementation, again with a neutralchairperson and one representative of each party on the housing market. A national RentCouncil was also appointed to function as board of appeal and with the further task to decideon the annual adjustments of rent levels. In practice the Rent Council had a strongdiscretionary influence on the development of the rental market during the war – and forconsiderable time thereafter.The Rent Control Act and its implementation meant a definite political acceptance of thetenants’ movement. One precondition was that already in the thirties the National Union ofTenants had said no to wildcat strikes and other militant measures of rental conflict. Now theadministrative co-responsibility of the implementation of the rental policy at all levelsguaranteed the organisation strong influence.The decision of 1942 was politically uncontroversial and regarded as a practical andprovisional response to the crisis. At the time no one foresaw its formative importance. Thetemporary legislation was actually to survive until 1978.The construction phaseIn the years following the war a number of important decisions on housing were taken by theSwedish parliament. The foundation was laid to the universal housing policy that has

13prevailed since. The municipal housing companies were seen as the main cornerstone of thispolicy, and they were now given the ‘universal’ task to provide housing to all types ofhouseholds regardless of income. 24The housing shortage did not go down after the war, and there was considerable politicalconsensus that the Rent Control Act could not be abolished immediately. Instead it wasprolonged year after year, always with the explicit reservation that it was only provisional andshould be discontinued once the market had reached balance. In the fast-growing public rentalsector, rents were set in cost-based collective negotiations from 1958, but in the private sectorone problem remained to be solved: Tenants’ right to security of tenure had by now developedinto a generally accepted social norm, which was seen as impossible to uphold effectively onan unregulated market.A solution to this deadlock was not worked out until 1968 when a new permanent Rental Actwas finally passed. The compromise was that tenants were assured security of tenure, whilethe rent control was replaced by the use-value system of rent-setting described above. Thechairman of the National Union of Tenants was in fact the inventor of this rather originalsystem – first introduced in a provisional law from 1956 – and when the idea was accepted byhis opposite party, the National Federation of Private Property Owners, the political partieshad no other option than to follow suit. 25The new and more liberal use-value system of rent-setting was accepted by the parliament in1968. However, since the housing shortage was worse than ever in some places, time was notconsidered ripe to implement it in the whole rental market. It was first introduced in new-builtestates and last in the privately owned housing stock in the large cities. Needless to say theorganised interests in the rental market had a major role in the rather complex transitionprocess between the two systems. When the rent control was finally abolished in 1978,Swedish housing provision had already entered the third phase of the development curve ofhousing provision.The management phaseIn the sixties the housing shortage in the large cities had become a great strain on the SocialDemocrat government, and in 1966 the so-called Million Programme was launched with theaim of constructing one million new dwellings in the next ten years. Ten years later the goalwas accomplished, and from the mid-seventies signs of saturation in the form of vacantdwellings started to show up in the market. In this new situation the old ‘provisional’ rentcontrol could finally be abandoned in the whole rental sector. The final resolution was part ofa large housing decision of 1974 – and was taken almost without political debate. The role ofthe public rents in the use-value trials was now given stronger emphasis in the Rental Act thanearlier, which again made it more difficult for private landlords to raise rents in situations ofhousing shortage.24 As mentioned the municipal housing companies is another institutional pillar under the Swedish housingregime. Their historical path starts in the middle of the 1930s, when it was decided that housing companies undermunicipal control should be responsible for building and managing housing estates reserved for household withlow income and more than two children.25 There was considerable turmoil in the decision-making process, but this had more to do with the politicalparties trying to position themselves favourably in the eyes of the tenants (Bengtsson et al 2006: 124–126).

14Swedish rental corporatism reached it peak in 1978 with the Rent Negotiation Act. Until thenthe system of collective negotiations – in contrast to the use-value paragraph – had beenvoluntary, but now the right of tenants’ associations to collective bargaining was laid down inlaw. Even though the movement did not get a formal monopoly, it is clear from text of thegovernment bill that units within the National Union of Tenants was expected to represent thetenants in all normal situations. The legislation was actually proposed by a non-socialistgovernment, and the new law was accepted almost unanimously by the parliament.Even before the new legislation nearly all public rents and about half of all private rents hadbeen decided in collective negotiations. Supported by the new Rent Negotiation Act, thecollective system was soon implemented in almost the whole private sector as well. Thecorporatist control of the rental market was now complete.The retrenchment phaseFrom the eighties a stronger polarisation than before was discernible in the political debate,both on housing policy in general and on the system of rent-setting. The political oppositionbecame more and more outspoken about the drawbacks of the use-value system. The newnon-socialist government that came into office in 1991 launched an overall attack on theSocial Democratic housing policy – which had largely been decided in agreement. In the nextfew years a ‘system shift’ was carried out, and a number of economic policy instruments wereeither abolished or thoroughly changed. Most prominently the universal system of statefinance that had been introduced in the 1940s was now abandoned together with most of thestate subsidies, which had been growing almost out of control since the mid-seventies.A reform of the rental policy and the use-value system was also on the agenda, but in this casethe suggested changes were considerably less far-reaching, and certainly within the generalboundaries of the corporatist system. Nevertheless, when the National Union of Tenantslaunched an attack on ‘market rents’ and supported it with opinion polls that indicated that themajority of Swedish tenants were against the proposed changes, the government soon backedeven from this position. Eventually only minor adjustments were decided, formallyweakening the monopoly position of the tenants’ union, but in reality without much effect.With the Social Democrats back in office from 1992, the system of state finance and thegeneral subsidies were not reintroduced. The criticism of the use-value system has continuedin recent years, and the focus is now on the difficulty to produce new rental housing in theinner city of Stockholm within the rent limitations set up by the use-value system. When thegovernment appointed a commission to investigate the problem, this was, however, the resultof a three-party agreement between the two organisations of landlords (private and public)and the National Union of Tenants. The organisations in the rental market were alsorepresented in the commission and thus guaranteed influence on the results. It is obvious thatthe corporatist regime in housing is still accepted by most political actors, even thoughSwedish corporatism has been strongly weakened in other sectors of society.The path dependence of Swedish housing corporatism – conclusionsWhat can we learn about path dependence from this condensed historical review? Thedevelopment certainly has some of the features that is characteristic of path dependence. First,the described process has a conspicuous historical logic, from the first institution of mediationin rent conflicts of 1916 up to the full-blown rental corporatism of today that embraces the

15whole market. It is true that history always appears to be more logical when writtenbackwards, but still the self-reinforcing sequence of small events is rather striking. Second,several of the events that in hindsight stand out as critical junctures on the road to thecorporatist regime are decisions on provisional solutions to acute problems, where possiblelong-term effects are not discussed by the actors involved. Third, decisions at the politicalfocal points have often been taken in relative consensus, and when different alternatives havebeen discussed those have been rather similar to one another. Fourth, when there has been anambition to change the system – most prominently with the non-socialist government in theearly nineties – these ambitions have met with institutional obstacles that have proved to bedifficult to get by.These observations speak in favour of interpreting the institutionalisation of Swedish housingcorporatism as a clear case of path dependence. It remains to say something about the mainelements of this process. What can be said about the critical junctures A, the political focalpoints B and the mechanisms linking the events at point A to the situation at point B?In accordance with my methodological recommendation above I start with the focal points.. Ifwe disregard the introductory phase, the first focal point along the corporatist path are theformative housing decisions after World War II, when the municipal housing companies weregiven their present role in the Swedish housing regime. Rental policy per se was, however, anissue of non-decision by the time, so the rent control of the war produced a case of‘agenda-setting path dependence’, where the provisional corporatist mediation could go overunquestioned into the construction phase. The second focal point is the decision about theRent Negotiation Act of 1978, when the state set up the corporatist system as the rules of thegame in the whole rental market. This decision was virtually unanimous, and no alternativeswere discussed, so again the label ‘agenda-setting path dependence’ would seem appropriate.The third focal point is the attempt by the non-socialist government in 1992 to weakensomewhat the corporatist influence on the rental market. Though the reforms originallyproposed were clearly consistent with the prevailing system, they were still discounted in thedecision-making process. So at this point we have a combination of decision-making andagenda-setting path dependence. 26Thus we have identified three political focal points all at points of time that in other respectsare among the most formative of Swedish housing policy. Still in none of the decision-makingprocesses was the corporatist system of rental policy politically controversial. In 1946 it is anon-issue, in 1978 the reform is decided in consensus, and in 1992 only minor change isdecided.The main conclusion about the critical junctures of the process is that it is difficult to identifyone single point A as being crucial. E.g. the roots of the Rent Negotiation Act of 1978 can betraced back to the general housing policy decision of 1974, when the rent control was finallyreplaced by the use-value system. This decision in turn can be traced back to the Rental Act of1968, the provisional law of 1956, the new role of municipal housing companies (and thenon-decision on rental policy) of 1946, and the decision on rent control of 1942, where thecorporatist administrative forms were introduced. The latter decision, again, may be tracedback to prior forms of interest-based mediation starting as early as 1916, before there evenexisted a national tenants’ movement.26 Had it not been for the professional economists who consistently advocated a completely unregulated rentalmarket it would even have looked like a case of the ‘perceptual’ version.

16This chain indicates that with a weak concept of path dependence it is seldom possible toidentify one single critical juncture, though in this case the ‘provisional’ decision of 1942certainly stands out more than the others. The large number of critical junctures may alsoreflect that path dependence is particularly prominent in housing due to the physical andideological restraints discussed above, which would make it more difficult to go back thaninstigators of provisional policies may realise. The long chain also shows that a focal point B(e.g. the reforms of 1946) may at the same time be a point A in relations to subsequent pointsB.What are the mechanisms that have restricted actors at the political focal points? In aperspective of contextual rational action these mechanisms should affect either (1) the set ofactors and their relative power, (2) the alternatives perceived by those actors or (3) the actors’preference orders between those alternatives. If we look closer at the latest focal point of1992, the puzzle is why non-socialist politicians, who were strongly committed to a ‘systemshift’ in housing policy, and with no strings to the tenants’ movement, did not take theopportunity to come to grips with the corporatism in the rental sector.To give a definite answer we would need to go even closer to real actors than has beenpossible in this study. From a little distance, however, it seems that a combination of power,legitimacy and efficiency has been at work. The corporatist system has given power to boththe tenants’ and the landlords’ organisations, and their participation is crucial to theimplementation of the policy in the market arena. And while the use-value system is more orless a necessary prerequisite of the strong position of the tenants’ unions, the landlords’organisations also appear to find the system generally both efficient and effective.Furthermore opinion polls from the time showed consistently that the system was legitimateamong tenants in general – and probably among voters (cf. Bengtsson and Rothstein 1997:282–83). Together with the apparent acceptance of the system by landlords, this legitimacymay have made the political cost of changing the system to something less corporatist andmore market-based seem too high. Finally a general conversion from one set of institutions toanother would have resulted in transaction costs at all levels.One final remark. Housing organisations can be seen as acting in three different butinterrelated arenas: internal, market and political (cf. Bengtsson 1995). The main focus herehas been on the political arena, but as we have seen the path of the corporatist housing policyruns in parallel – and sometimes intersects with – other processes in the other arenas. Themost critical juncture in the organisational arena was probably the decision of the NationalUnion of Tenants in the thirties to follow the collaborative path of peaceful negotiations, andin the market arena the huge production of multi-family public rental housing in the years ofthe Million Programme. If we want to compare, in counterfactual perspective, the pathdependence of Swedish corporatist rental policy with corresponding paths of non-corporatistrental policies of other countries all three arenas must be considered.ReferencesArnott, R, 1987, ‘Economic Theory and Housing’, pp 959–88 in Mills, E S (ed.) Handbook of Regional andUrban Economics, Vol. II. Urban Economics, Amsterdam: North-Holland.Bengtsson, B, 1991, ‘The Crisis of Public Housing in Sweden – Economic Reality or Organizational Myth?’Scandinavian Housing & Planning Research, Vol. 8: 113–27.Bengtsson, B, 1994, ‘Swedish Rental Policy – A Complex Superstructure with Cracking Foundations’Scandinavian Housing & Planning Research, Vol. 11: 182–89.Bengtsson, B, 1995, ‘Housing in Game-Theoretical Perspective’, Housing Studies, Vol. 10: 229–43.

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