Does History Matter and how?

Path Dependence in Housing

Bo Bengtsson
UPPSALA UNIVERSITY
Institute for Housing and Urban Research
P O Box 785
SE801 29 GVLE, Sweden
phone +46 26 420 65 21
email: bo.bengtsson@ibf.uu.se

Paper presented at the Centre for Housing Policy, University of York, 14 March 2007
[Please do not distribute or quote without the authors permission!]

Does History Matter and how? Path Dependence in Housing

Bo Bengtsson
Abstract
Path dependence in housing is discussed from three different angles. The first part of the
paper is a critical analysis of James Mahoneys strong definition of path dependence as
contingent events at one point setting into motion deterministic institutional change. It is
argued that a weaker and more relative definition of path dependence is more compatible
with a contextualised actor-based analysis, which is often the heart of political and
institutional history. Such a weak concept also makes possible a distinction between
decision-making, agenda-setting and perceptual path dependence and allows for explanations
in 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 for
historical analysis of housing regimes and housing policy. The policy theory of the state
providing correctives to the housing market makes tenures and other market regulations
important institutional elements, which, together with the longevity and physical sluggishness
of housing, may imply rather strong path dependence. This is corroborated by the
paradoxical and persistent differences between the housing regimes of the five Nordic
countries.
The third part of the paper briefly presents the establishing and institutionalisation of the
unique Swedish corporatist rental policy. The historical review is focused on the four phases
(establishing, construction, saturation and retrenchment) of a development curve of
housing provision, which is claimed to be of general relevance. In the analysis of the Swedish
case a number of the elements associated with path dependence are identified.
Introduction
Following the seminal works by Douglass North and Robert Putnam (North 1990; Putnam
1993; Pierson 2003) the concept of path dependence has been given growing attention in
historically oriented social studies. E.g. path dependence is often seen as the basic causal
mechanism in historical versions of institutional theory (Peters 1999: 6263). The general
idea behind the concept is that if the historical development takes one direction at one point in
time, 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: 5089). In a political perspective the idea of path dependence highlights at
least two well known general phenomena: how structural, cultural and institutional constraints
from the past may limit the possibility of change, and how institutional inertia may limit the
willingness to change.
In the paper I take my point of departure from one theoretical perspective on path
dependence, presented by James Mahoney, and suggest how his model should be developed
to better deal with the role of history in decision-making by actors with intentions. Then I go
on to discuss more precisely how such a perspective may be applied to housing policy and
housing regimes, illustrating my discussion with empirical findings from a comparative study
of housing policy in the five Nordic countries Denmark, Sweden, Norway, Iceland and
Finland. Finally I discuss how the historical development of one particular idiosyncratic case,

2
the unique Swedish form of housing corporatism, can be understood in terms of path
dependence.1
Path dependence and social action a critical comment on James Mahoney
In an often quoted article Path dependence in historical sociology, James Mahoney criticises
vague definitions of path dependence that say little more than history matters or the past
influences the future. To define the concept only as forms of path analysis does not
demonstrate why path-dependent patterns and sequences merit special attention, he claims.
Instead Mahoney (1) defines path dependence specifically as historical sequences in which
contingent events set into motion institutional patterns or event chains that have deterministic
properties (my italics). This implies (2) that the identification of path dependence involves
both tracing a given outcome back to a particular set of historical events, and showing how
these events are themselves contingent and cannot be explained on the basis of prior historical
conditions. In consequence, (3) since contingency cannot be established without theory, the
specification of path dependence is always a theory-laden process, meaning that deviant case
studies, which analyse cases where an outcome predicted by theory did not occur, offer one
interesting form of analysis of path dependence (Mahoney 2000: 5078). I will call these
propositions Mahoneys three theses on path dependence.
Even though I agree with Mahoneys second and third theses, about the necessity to trace path
dependence by writing history backwards and the necessity of path-dependence analysis to be
theory-laden (and certainly about the value of deviant case studies), I question the merits of
his strong definition of path dependence. If the concept is reserved for situations where one
contingent 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 deterministic
causation can seldom be claimed. Instead I suggest a weak definition, where one event that is
more or less contingent considerably changes the probability of other subsequent events or
institutional outcomes. This weak concept of path dependence would transform Mahoneys
demarcation between contingency and determinacy into a matter of degrees on a scale going
from contingency to determinacy, where prior events are considerably more contingent than
subsequent. This weak definition would, of course, make path dependence more difficult to
distinguish from other types of correlations, but also more useful in the analysis of real-life
social processes.
Admittedly my weak definition again blurs the distinction between path dependence and path
analysis 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 distinguished
from other forms of path analysis in relation to Mahoneys second and third theses, as a
historical pattern where a certain outcome can be traced back to a particular set of events on
the basis of empirical observation guided by some social theory. Path dependence would then
be a particular form of path analysis that focuses historical events and specifies in theoretical
terms the elements that build up the path. It assumes that history matters but the empirical

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, Hannu
Ruonavaara and Jn Rnar 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 of
housing institutions in Norway, Denmark, Finland or Iceland.

3
challenge is not to prove that general assumption, but to identify in what respect and via
what type of mechanism history matters in a certain context.
The main problem with Mahoneys strong definition, as I see it, is that it does not seem very
fruitful or even applicable in a context of actor-based analysis, which is often the heart of
political and institutional history. The dichotomy between contingency and determinacy is
difficult to apply to actors with intentions, who can be assumed to follow some logic of
meaningful action which may be more or less rational. Without going into the complexities
of different theories of action, I would say that most students would agree that the behaviour
of political actors is to some extent explicable in terms of bounded rational action, though
seldom in the formal terms of deterministic, probabilistic or contingent.2
In an actor-based analysis the typical case of (weak) path dependence is where actors more or
less deliberately design institutions at point (or points) A, institutions which at a later point B
sets the rules of the political game between the same or other actors. In retrospect, the
historical development can be perceived as an ongoing and self-reinforcing chain of games
between actors, institutional change, new games, new institutions, etc. One strength of the
weak definition is, paradoxically, that it makes it possible to identify degrees or modes of path
dependence. In a perspective of contextualised rational action one might, inspired by Steven
Lukes (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 what
happened at point A) or (III) perceptions (where other alternatives are conceivable to actors
due to what happened at point A).
Inspired by Randall Collins, Mahoney presents an interesting typology of path-dependent
explanations of institutional reproduction, where he makes a distinction between utilitarian,
functional, power and legitimation explanations. The mechanism of reproduction in utilitarian
explanation is the rational cost-benefit assessment of the institution by actors, and in
functional explanation the function of the institution for an overall system. In legitimation
explanation the mechanism at work is the belief of actors in the morality or appropriateness of
the 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 at
point A would be that otherwise more efficient, more functional or more legitimate
institutions would not be available or, in the power variation, that an elite group is empowered
that otherwise would not have been so (Mahoney 2000: 51724).
Mahoneys typology mixes rational choice, functionalism, idealism and power analysis. In my
opinion, what he presents as alternative explanations actually implies a choice between
theoretical perspectives, and it is difficult to conceive of an analytical framework that would
be neutral between his four explanations as alternatives in an empirical analysis.3 There are
2

Cf. Somerville and Bengtsson 2002 and Bengtsson and Somerville 2002 for a discussion on social analysis
based on a perspective of contextualised rational action.
3
This problem seems to be a consequence of Mahoneys strong definition of path dependence as complete
contingency at point A and complete determinacy at point B, which makes it difficult to include combinations of
different mechanisms in the model. The weak definition also makes it possible to account for institutional
change without necessarily playing the external shock card. In a perspective of path dependence observed
institutional always demands an explanation, but with a weak definition change may e.g. be caused by internal
contradiction in the institutions themselves (and thus path dependent in itself). But different institutions rest on

4
also other types of explanations that may be relevant besides the four included in Mahoneys
model.4
In an actor-based analysis the point of departure should in principle be subjective and based
on (1) how the actors conceive of the situation at point B, (2) what alternatives enter into
actors calculi (which may be more or less explicit or sophisticated), and (3) how actors
interact with other actors in the decision-making process (which may in fact be a
nondecision-making process). This means that Mahoneys utilitarian mechanism is the core
of the analysis, even though it may be defined in less perfectly rationalistic end economic
terms than Mahoney seems to imply.
In a perspective of contextualised rational action legitimacy and power, like economic
efficiency, are seen in the light of actors preferences. In this perspective it seems more
fruitful to distinguish between mechanisms of efficiency, legitimacy and power. The
efficiency mechanism of path dependence has to do with the coordinating capacity of
established institutions and with the transactions costs of changing them (cf. North 1990; Hall
and Taylor 1996: 945; Pierson 2000). The legitimacy mechanism may enter as an input in
actors calculi either directly, via their own preferences, or indirectly, via their perceptions of
what is seen as legitimate in the society at large. This type of mechanism has to do with the
normative logic behind established institutions, not least among actors who have been
involved in designing them (cf. March and Olsen 1989: 41). Correspondingly the power
mechanism may enter into actors preferences both directly and indirectly. Directly in
deciding 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 arrangements
are never neutral in terms of power, which also affects the conditions of changing them
(Thelen 1999: 39496).5
This discussion also has implications for the role of theory in the analysis of path dependence.
In Mahoneys 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 of
theory is first to make sense of actors and decision-making, and second to help explain more
precisely 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 Mahoneys
strong version of path dependence, where a move from the contingent to the deterministic
calls for an explanation in terms of one inclusive mechanism, the weak and actor-oriented
version allows for combinations of different mechanisms, as long as they can all be included
in the reconstruction of actors preferences and perception of the rules of the game at point B.
Path dependence and housing regimes
The discussion above on Mahoneys concept of path dependence concluded in a modification
of 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 in
different foundations, and so the processes that are likely to disrupt them will also be different, though
predictable (Thelen 1999: 297).
4
One often discussed factor that may actually have deterministic consequences at point B is physical or
technical change at point A (cf. Hughes 1983). This technical explanation may be of particular relevance to
housing policy; e.g. if housing estates at point A are produced as large-scale units, this would certainly put
definite restraints on decisions about housing provision at point B.
5
Maloneys 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).

5
terms of either perceptions and preferences of actors or the conditions of interaction is
affected by previous events at point or points A. The effects may be on the explicit choice
between alternatives, on what alternatives enter the agenda or on what alternatives are
perceived by actors. The mechanism may be changes in efficiency, legitimacy or power or a
combination of these.
How can a perspective of actor-oriented path dependence be applied to the field of housing? 6
Are there any specific characteristics that have to be considered in the historical analysis of
this sector of society?
Housing policy in the Western countries is best perceived as the state providing correctives to
the housing market. This means that market contracts serve as the main mechanism for
distributing housing, while state intervention has the form of correctives, defining the
economic and institutional setting of those market contracts (cf. Bengtsson 2001; Oxley and
Smith 1996: 23, make a similar observation). In principle housing is distributed by means of
voluntary 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 in
accordance with individual consumer preferences.
The normative basis of this mode of provision is that housing is seen not only as an important
element of citizens welfare, but also and perhaps above all as a market good. Hence, and
in contrast to other welfare commodities, politically defined needs of housing are not fulfilled
by 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 is
distributed and housing provision is decided.7
This 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 wobbly
pillar under the welfare state. According to him, in the typical welfare sector fairly clear
standards have been extracted from the vague concept of need, standards that define when
institutions in charge are responsible to take action, and lack of conformity to those standards
is subject to legal action from the prospective recipient. Those elements are seldom discerned
in housing provision, what is striking is rather the contrast in those respects between housing
and other welfare sectors (Torgersen 1987: 11618).
This specific policy theory of housing also has implications for what should be in focus in the
analysis of path dependence in housing. In a policy field based on market distribution the
main institutions are those that define the rules of the game in the market. In housing the
crucial institutions are tenure forms and other types of market regulations, including
non-profit organizations acting in the market.8
A well known characteristic factor of housing provision is related to the longevity and
physical sluggishness of the housing stock per se, often discussed by economists as
6

In Bengtsson et al 2006, this model of weak actor-based path dependence has been applied to the development
of 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: 28586).
8
See Ruonavaara 1992 for a discussion on types and forms of tenure. Housing tenures are institutions, sets of
practices that regulate a particular field of human action and interaction (Ruonavaara 2005: 214). The market as
such 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 an
average lifetime of some 50 years, only a marginal percentage of the stock is replaced by new
production in a certain year. Because of this, political measures aimed at housing production
normally have their full impact only in the very long run. This would be a strong example of
the efficacy mechanism of path dependence.9
As market regulations housing tenures define the rights of exchange and possession that are
fundamental to a capitalist economy, and in Western societies any change in such rules may
be regarded as a threat both to existing property owners and more generally to an economy
based on individual security of property. Even if there are no formal constraints against
changing 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 parliamentary
majority. This would be an example of the legitimacy mechanism of path dependence.10
Together these two factors the sluggishness of the housing stock and the normative
presumption against changes in property rights may mean that the conditions of path
dependence, and historical institutionalisation in general, are of a different character in
housing than in other policy fields. If we combine them with the general mechanisms of
efficiency, legitimacy and power we would indeed expect a higher degree of path dependence
than in many other policy fields.
Why so different? The Nordic housing regimes
The importance of tenure forms was the point of departure of a research project, where the
five housing systems of Denmark, Sweden, Norway, Finland and Iceland were compared in a
historical perspective of path dependence. The differences between the national systems of
housing provision in the Nordic countries are remarkable. It is true that modern housing
policy in all the five countries has been social in the meaning that an important goal has
been to provide decent housing to households of lesser means. However, the institutional
arrangements chosen to achieve this goal differ fundamentally. As a matter of fact the
organizational forms aimed at implementing the national policies are so dissimilar that it
seems well justified to describe the five countries as representing five different housing
regimes.11
In Denmark housing policy has been primarily directed towards rental housing, in particular
in estates owned and managed by public housing associations, organized in small
self-governed units where local tenants have a high degree of self-management or housing
democracy. In Sweden housing policy has also been implemented primarily by means of
rental housing owned and managed by public housing companies, though, in contrast to their
Danish counterparts, these companies are controlled by the local municipalities. Sweden also
has the largest share of co-operative housing in Europe.

This form sluggishness is of course physical and technical rather than institutional, but it has institutional
implications 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 of
long-term financing, which, in turn, gives banks and other financial institutions a strong interest in fixed and
predictable rules.
11
Here defined broadly as the set of fundamental principles according to which a national system of housing
provision is organized.

7
In 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 Iceland
too, owner-occupation has been used as a housing policy instrument, though in this case
including strong elements of individual self-build. In Finland, finally, housing policy has not
been directed at any particular forms of tenure or ownership.
The institutional arrangements of housing provision in the Nordic countries have a number of
interesting distinctive features when compared to other countries as well. In Denmark,
Norway and Sweden, though not in Finland and Iceland, strong popular movement
organizations have played a leading role in housing provision. Norway and Sweden have
co-operative housing movements without comparison elsewhere, and Sweden also has a
world unique tenants movement with an almost corporatist influence on the rental policy (see
below). In Denmark the national tenants movement is much weaker than its Swedish
counterpart, but instead the democratic forms of local self-government in the public rental
sector are unparalleled in Europe.
Swedish, Danish and Norwegian housing policies have been described as universal and
directed towards all types of households and most segments of the housing market. Finnish
and Icelandic housing policies on the other hand have been described as selective and
oriented more directly towards households of lesser means and based to a large extent on
individual means-testing.12
The large differences between housing regimes in five countries that share a number of
similarities in other respects is a puzzle and can in itself be seen as an indication of path
dependence. Without some form of structural restraints or institutional inertia we would
expect some signs of convergence, in particular considering the regular collaboration and
exchange of ideas that goes on between Nordic politicians, officials and interest
organisations.13 But the Nordic countries have retained their divergent housing regimes for at
least 60 years by now.
Tracing path dependence in housing
How 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 or
events at point or points A, where the historical path is chosen; (2) the decision-making
process at point B, where the effects of the choice at point A become visible; and (3) the
mechanism or mechanisms that explain the effects of the event at point A on the
decision-making situation at point B.
The logical way to identify these elements if we want to analyse the development of housing
regimes and tenure policy would be to start at point B, which would typically be an important
political decision on tenure-related issues. Decisions on tenure legislation, organisation and
ownership, or on subsidies directed towards specific tenures, are obvious candidates. Here we
would expect path dependence to be visible in the contents of the decision, in the political
debate and in the general discourse. If we find that some, otherwise plausible, paths are seen
as closed by the involved actors, this would be an indication of how to find point A, by going
12

After the changes in selective direction that have recently taken place in the three Scandinavian countries, and
rather dramatically in Norway, this distinction is less clear-cut than it used to be (see Bengtsson 2001 for a
discussion on the meaning of the dichotomy universal-selective in housing policy.
13
Kemeny and Lowe 1999 discuss convergence and divergence in housing.

8
backwards in history to a situation where closure took place. Whereas point B would typically
have the outward appearance of a central and important political decision, the event at point A
may not have been much debated or even observed at the time, e.g. presented as a provisional
solution to a specific and acute problem. By scrutinizing the situation both at point A and
point B it should in most cases also be possible to say something about what type of
mechanism 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 is
typically a more visible political event. If we want more theoretical names than A and B I
suggest we call point A critical juncture and point B political focal point.14 It should also be
underlined that a political focal point may sometimes also be a critical juncture in relation to
some future point B. Such a focal critical juncture has sometimes been called a formative
moment in housing policy they may in reality often rather be more drawn-out formative
periods where actors intentionally induce historical change in institutions (cf. Rothstein
1998).
There is, however, one interesting complication in this approach. If there is indeed path
dependence, the alternatives that were closed at the critical juncture A may not even be visible
when 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 the
decision process. It is true that alternatives seen as unrealistic by actors may sometimes still
be commented on, but if that is not the case such forms of path dependence must be spotted
by some form of counterfactual analysis (cf. below).
The development curve of housing provision
What decisions about housing policy would be the best candidates for serving as political
focal points? First, in consequence with what has already been said, such decisions should be
about tenures, but over time there have typically been many of those in a national housing
history. In the Nordic project the point of departure was taken in theoretically defined
historical phases, corresponding to the general challenges that most Western housing systems
have gone through. The idea is that when a system is challenged structurally or discursively
one would expect some sort of crisis and discussion of change. This should also be the point
where 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 the
Nordic countries in the 20-th century. First, an establishment phase from early urbanization
up to the second world war, a period when housing provision went from being a field of
recurrent crisis management on an ad hoc basis to being a permanent item on the political
agenda. Second, an expansive construction phase (in both physical and institutional terms)
triggered by the post-war housing shortage and growing political ambitions in terms of
housing standards. In the Nordic countries this phase continues up to the seventies, when
housing demand in quantitative terms was more or less saturated. Third, we can identify a
management phase (or saturation phase) when production of new housing was successively
replaced by renewal and management of the existing stock. Finally, and still going on in the
Nordic countries, we have a privatisation phase or, in more general terms, retrenchment
phase, starting between 1990 and 2000, when some of the state institutions of housing
14

Cf. respectively Collier and Collier 1991 and Schelling 1980, who, however, uses the term focal point with a
somewhat different meaning.

9
provision were abolished or reorganized.15 Corresponding structural development curves of
housing provision can probably be drawn up for most other Western countries as well, so the
phase model could be a valuable tool in comparative housing research.
As already indicated, counterfactual analysis is often important part of a perspective of path
dependence. What alternative development would have been possible at point B, if the event
at point A would not have occurred? The individual links in a certain historical chain may
often be analysed counterfactually by making use of records of the political discourse and
interaction. It is more difficult to make a counterfactual analysis of the overall institutional
development, i.e. the result of the whole chain of decision-making and institutionalisation.
Path dependence in the Nordic housing regimes
In the Nordic project the counterfactual analysis of one country was carried out with the
development in the other countries as contrasting relief. When and why were alternative
strategies discarded, that might have lead to a development closer to the housing regimes of
the other countries? Did these alternatives at some point of time enter the political agenda? Or
were the political, institutional and structural conditions never such that those alternatives
were seen as realistic or even perceived of?
The main result of the Nordic study is that the differences between the five housing regimes
have been remarkably persistent all through the various challenges of the four historical
phases. The institutional changes that have taken place in each country have been incremental
in the sense that the new arrangements have consistently retained distinct features of the
preceding 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).16
What is the solution to the puzzle of why so different? Very briefly, in the formative period
of 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 of
urbanisation in each country. When more comprehensive programmes of housing policy were
introduced after the war it was seen as efficient to make use of the already existing, if still
undeveloped, organisations and institutions to implement the new programmes. During the
construction phase, with its massive production of new housing, the five housing regimes
were successively consolidated and institutionalised. From that time we can repeatedly
observe how the mechanisms of efficiency, legitimacy and power counteract institutional
change (Bengtsson et al 2006: chap. 9).
The counterfactual analysis gives further evidence of the strength of path dependence in
Nordic housing policy. Not since 1946, at the time of the post-war housing reforms, have
there 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 both
15

The phase model is inspired by a similar model in Jensen 1995: 22930.

It is true that remarkable institutional change can be observed in the Norwegian housing regime, where the
universal 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 on
co-operative dwellings was successively abolished due to strong market pressure from owner-occupation and
unregulated co-operative dwellings. Since the development was a consequence of inherent contradictions in the
Norwegian housing regime, it may actually be seen as an example of path-dependent change (Bengtsson et al
2006: chap. 4; cf. Thelen 1999: 39496).

16

10
rental housing and owner-occupation, while on Iceland, in contrast, the parties to the left
wanted 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 discussions
within the governing Social Democratic party between advocates of a Norwegian system of
socially oriented co-operative housing and supporters of the system based on rentals owned
by municipal companies that was actually chosen. After that the other Nordic regimes have
still been used as contrasting examples in national housing debates, but the institutions of the
national regimes have grown so strong that no serious import attempts have been made
(Bengtsson et al 2006: 35055).17
Swedish housing corporatism a case of path dependence?
The Swedish rental market is completely dominated by collective negotiations on rents and
other housing conditions between landlords and tenants unions. In this section I will discuss
this absolutely unique form of housing corporatism in a perspective of path dependence. This
can be seen as a deviant case study of the type that Mahoney recommends to students of path
dependence. It is a deviant case not only empirically but also theoretically, since there are
authors who see corporatism as incompatible with consumer organisations and policy takers
(Offe 1985: 23942, Williamson 1989: 16970; cf. Bengtsson 1995: 23538). I will argue
that the development of the deviant Swedish system can be well understood within a
framework of path dependence.18
An important ingredient in the corporatist system is the extremely strong and institutionalised
Swedish tenants movement. Almost half of all Swedish rental households are members of
some 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 The
institutional basis is the corporatist system of collective rent negotiations and the so-called
use-value system of rent-setting linked to the negotiations. Virtually all rents in Sweden are
set within this system, which is rather complicated in its details.20
Another mainstay of the Swedish housing regime are the non-profit municipal housing
companies, which make up the public rental sector in Sweden; there is normally one company
in each municipality.21 The rent negotiations in the public sector are based on the total cost of
the company, and the arguments typically focus both on what costs are reasonable and on how
those 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: 26061).

17

Cf. Lipset and Rokkans well-known thesis that the modern party systems have reflected political cleavages at
the time of transition to democracy in different countries for decades after those cleavages have lost their
political importance Lipset and Rokkan 1967: 30, 5055).
18
The corporatist system of rent-setting is one of four institutional pillars under the Swedish housing regime, the
other three being the universal policy theory, the unitary social rental market and the municipal housing
companies. Together these four interrelated pillars can be said to define the Swedish housing regime (Bengtsson
et al 2006: chap. 3).
19
Other tenants associations exist, and occasionally they also have a collective rent-setting agreement with a
landlord, but the national organisation with its subunits is the completely dominating representative of Swedish
tenants.
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 the
present context is that no means-testing or needs-testing is required to get a municipal rental dwelling.

11
In the private rental sector, which is about the same size as the public sector, collective rent
negotiations are not based on the landlords total costs, but on comparison with the rents of
similar dwellings in the public sector. The link between the two sectors is the right to
use-value trials based on the use-value paragraph of the Rental Act. According to this
paragraph, a claimed rent public or private can be rejected as unreasonable if it is found to
be considerably higher than the rents charged for dwellings with the same use-value in the
same local market. Use-value comparisons are made primarily with the rents of public rental
dwellings as bench-mark, which gives the non-profit municipal housing companies the role as
price-leaders in the local rental markets. If a private landlord demands a considerably higher
rent 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 rental
market (cf. Kemeny 1995: 4).
What makes the Swedish rental system corporatist even in formal terms is first that the right
to collective negotiations of tenants associations is legally regulated in the Rent Negotiation
Act of 1978. Furthermore, the regional rent tribunals that serve as court of first instance in
use-value trials, consists of one representative of the landlords organisation (either private or
public) and one representative of the tenants union, together with a neutral chairperson, well
versed in the law. The National Union of Tenants also plays an important part as political
lobbyist and creator of public opinion on housing issues, with strong links to the Social
Democratic party. The organisation is also a regular participant, together with the landlords
organisations, in government commissions on rental policy.
Different explanations to Swedens unique corporatist rental policy have been suggested,
some of them quite plausible at first sight, but none really convincing. The Social Democratic
dominance in Swedish political life, and the high Swedish membership rates in voluntary
organisations are two explanations that have sometimes been proposed, but in both respects
the Scandinavian neighbours Denmark and Norway have similar records but no comparable
tenants movement. It has also been claimed, in a public choice perspective, that a large rental
sector make tenants an important group to appeal to for vote-maximizing politicians
(Meyerson, Sthl and Wickman 1990: 92120). The problem with that hypothesis is that other
countries, most prominently Switzerland, the Netherlands and Germany, have larger rental
sectors but weaker tenants movement.22 As we have seen the use-value system is part of a
universal housing policy and an integrated social rental market, but such institutions can be
found in other European countries, with weakly organised tenants, so that is not the full
answer either.
Of course, we cannot completely rule out explanations in terms of the size and structure of the
rental sector, party politics, ideology or traditions of collective action, they may even be
necessary conditions. But, since the housing regimes of other countries have similar features,
while the Swedish tenants organisation and housing corporatism are unique, such general and
external explanations are obviously not sufficient. So it seems well justified to look for a more
contextual and contingent explanation in terms of path dependence. This is what I will try to
do in the following brief history of the Swedish rental policy, which is organised according to
the four phases of the development curve of housing provision presented above.23

22

In absolute membership the German tenants movement is even somewhat larger than the Swedish, but
expressed 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.

12
The establishment phase
The period of the First World War witnessed the first permanent organisation of Swedish
tenants. Economic crisis had led to a general breakdown of housebuilding, with serious
housing shortage, increasing rents and outright poverty. In a law from 1916 the municipalities
were granted the right to set up special units for mediation in rental conflicts between
landlords 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 of
people of small means. Though tenants associations were barely existent at the time, this
optional institution was the start of corporatist representation. Next year a provisional Rent
Control Act was passed as a restriction to the landlords possibilities to take advantage of their
market power in a situation of housing shortage. As long as the crisis prevailed all rent
increases should be approved by the rent tribunals. A few years after the war, in 1923, the
provisional law was abolished and the rental market was again deregulated. This was one
triggering 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 old
Rental Act of 1907 with its rather week security of tenure. During the economic crisis of the
thirties, the situation was sharpened, and a series of rental strikes and boycotts took place, in
particular in Gothenburg. A government commission, including representatives of the
organisations on both sides, was initiated in order to settle the disturbances and normalize the
relations. The result was a new Rental Act, still not granting security of tenure, which was a
setback by the tenants movement. On the other hand the decision-making process was seen
as a political recognition of the organisation, and one seat on the new mediation boards for
rental 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 Sweden
again succeeded to stay out, building production went down and rents went up. In 1942 a
provisional rent control was introduced, this time combined with direct security of tenure. A
rent tribunal in each municipality was responsible of the implementation, again with a neutral
chairperson and one representative of each party on the housing market. A national Rent
Council was also appointed to function as board of appeal and with the further task to decide
on the annual adjustments of rent levels. In practice the Rent Council had a strong
discretionary influence on the development of the rental market during the war and for
considerable time thereafter.
The Rent Control Act and its implementation meant a definite political acceptance of the
tenants movement. One precondition was that already in the thirties the National Union of
Tenants had said no to wildcat strikes and other militant measures of rental conflict. Now the
administrative co-responsibility of the implementation of the rental policy at all levels
guaranteed the organisation strong influence.
The decision of 1942 was politically uncontroversial and regarded as a practical and
provisional response to the crisis. At the time no one foresaw its formative importance. The
temporary legislation was actually to survive until 1978.
The construction phase
In the years following the war a number of important decisions on housing were taken by the
Swedish parliament. The foundation was laid to the universal housing policy that has

13
prevailed since. The municipal housing companies were seen as the main cornerstone of this
policy, and they were now given the universal task to provide housing to all types of
households regardless of income.24
The housing shortage did not go down after the war, and there was considerable political
consensus that the Rent Control Act could not be abolished immediately. Instead it was
prolonged year after year, always with the explicit reservation that it was only provisional and
should be discontinued once the market had reached balance. In the fast-growing public rental
sector, rents were set in cost-based collective negotiations from 1958, but in the private sector
one problem remained to be solved: Tenants right to security of tenure had by now developed
into a generally accepted social norm, which was seen as impossible to uphold effectively on
an unregulated market.
A solution to this deadlock was not worked out until 1968 when a new permanent Rental Act
was finally passed. The compromise was that tenants were assured security of tenure, while
the rent control was replaced by the use-value system of rent-setting described above. The
chairman of the National Union of Tenants was in fact the inventor of this rather original
system first introduced in a provisional law from 1956 and when the idea was accepted by
his opposite party, the National Federation of Private Property Owners, the political parties
had no other option than to follow suit.25
The new and more liberal use-value system of rent-setting was accepted by the parliament in
1968. However, since the housing shortage was worse than ever in some places, time was not
considered ripe to implement it in the whole rental market. It was first introduced in new-built
estates and last in the privately owned housing stock in the large cities. Needless to say the
organised interests in the rental market had a major role in the rather complex transition
process 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 of
housing provision.
The management phase
In the sixties the housing shortage in the large cities had become a great strain on the Social
Democrat government, and in 1966 the so-called Million Programme was launched with the
aim of constructing one million new dwellings in the next ten years. Ten years later the goal
was accomplished, and from the mid-seventies signs of saturation in the form of vacant
dwellings started to show up in the market. In this new situation the old provisional rent
control could finally be abandoned in the whole rental sector. The final resolution was part of
a large housing decision of 1974 and was taken almost without political debate. The role of
the public rents in the use-value trials was now given stronger emphasis in the Rental Act than
earlier, which again made it more difficult for private landlords to raise rents in situations of
housing shortage.

24

As mentioned the municipal housing companies is another institutional pillar under the Swedish housing
regime. Their historical path starts in the middle of the 1930s, when it was decided that housing companies under
municipal control should be responsible for building and managing housing estates reserved for household with
low income and more than two children.
25
There was considerable turmoil in the decision-making process, but this had more to do with the political
parties trying to position themselves favourably in the eyes of the tenants (Bengtsson et al 2006: 124126).

14
Swedish rental corporatism reached it peak in 1978 with the Rent Negotiation Act. Until then
the system of collective negotiations in contrast to the use-value paragraph had been
voluntary, but now the right of tenants associations to collective bargaining was laid down in
law. Even though the movement did not get a formal monopoly, it is clear from text of the
government bill that units within the National Union of Tenants was expected to represent the
tenants in all normal situations. The legislation was actually proposed by a non-socialist
government, 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 had
been decided in collective negotiations. Supported by the new Rent Negotiation Act, the
collective system was soon implemented in almost the whole private sector as well. The
corporatist control of the rental market was now complete.
The retrenchment phase
From 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 opposition
became more and more outspoken about the drawbacks of the use-value system. The new
non-socialist government that came into office in 1991 launched an overall attack on the
Social Democratic housing policy which had largely been decided in agreement. In the next
few years a system shift was carried out, and a number of economic policy instruments were
either abolished or thoroughly changed. Most prominently the universal system of state
finance that had been introduced in the 1940s was now abandoned together with most of the
state 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 case
the suggested changes were considerably less far-reaching, and certainly within the general
boundaries of the corporatist system. Nevertheless, when the National Union of Tenants
launched an attack on market rents and supported it with opinion polls that indicated that the
majority of Swedish tenants were against the proposed changes, the government soon backed
even from this position. Eventually only minor adjustments were decided, formally
weakening 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 the
general subsidies were not reintroduced. The criticism of the use-value system has continued
in recent years, and the focus is now on the difficulty to produce new rental housing in the
inner city of Stockholm within the rent limitations set up by the use-value system. When the
government appointed a commission to investigate the problem, this was, however, the result
of 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 also
represented in the commission and thus guaranteed influence on the results. It is obvious that
the corporatist regime in housing is still accepted by most political actors, even though
Swedish corporatism has been strongly weakened in other sectors of society.
The path dependence of Swedish housing corporatism conclusions
What can we learn about path dependence from this condensed historical review? The
development 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 mediation
in rent conflicts of 1916 up to the full-blown rental corporatism of today that embraces the

15
whole market. It is true that history always appears to be more logical when written
backwards, 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 the
corporatist regime are decisions on provisional solutions to acute problems, where possible
long-term effects are not discussed by the actors involved. Third, decisions at the political
focal points have often been taken in relative consensus, and when different alternatives have
been discussed those have been rather similar to one another. Fourth, when there has been an
ambition to change the system most prominently with the non-socialist government in the
early nineties these ambitions have met with institutional obstacles that have proved to be
difficult to get by.
These observations speak in favour of interpreting the institutionalisation of Swedish housing
corporatism as a clear case of path dependence. It remains to say something about the main
elements of this process. What can be said about the critical junctures A, the political focal
points 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.. If
we disregard the introductory phase, the first focal point along the corporatist path are the
formative housing decisions after World War II, when the municipal housing companies were
given their present role in the Swedish housing regime. Rental policy per se was, however, an
issue 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 over
unquestioned into the construction phase. The second focal point is the decision about the
Rent Negotiation Act of 1978, when the state set up the corporatist system as the rules of the
game in the whole rental market. This decision was virtually unanimous, and no alternatives
were 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 weaken
somewhat the corporatist influence on the rental market. Though the reforms originally
proposed were clearly consistent with the prevailing system, they were still discounted in the
decision-making process. So at this point we have a combination of decision-making and
agenda-setting path dependence.26
Thus we have identified three political focal points all at points of time that in other respects
are among the most formative of Swedish housing policy. Still in none of the decision-making
processes was the corporatist system of rental policy politically controversial. In 1946 it is a
non-issue, in 1978 the reform is decided in consensus, and in 1992 only minor change is
decided.
The main conclusion about the critical junctures of the process is that it is difficult to identify
one single point A as being crucial. E.g. the roots of the Rent Negotiation Act of 1978 can be
traced back to the general housing policy decision of 1974, when the rent control was finally
replaced by the use-value system. This decision in turn can be traced back to the Rental Act of
1968, the provisional law of 1956, the new role of municipal housing companies (and the
non-decision on rental policy) of 1946, and the decision on rent control of 1942, where the
corporatist administrative forms were introduced. The latter decision, again, may be traced
back to prior forms of interest-based mediation starting as early as 1916, before there even
existed a national tenants movement.
26

Had it not been for the professional economists who consistently advocated a completely unregulated rental
market it would even have looked like a case of the perceptual version.

16
This chain indicates that with a weak concept of path dependence it is seldom possible to
identify one single critical juncture, though in this case the provisional decision of 1942
certainly stands out more than the others. The large number of critical junctures may also
reflect that path dependence is particularly prominent in housing due to the physical and
ideological restraints discussed above, which would make it more difficult to go back than
instigators 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 points
B.
What are the mechanisms that have restricted actors at the political focal points? In a
perspective of contextual rational action these mechanisms should affect either (1) the set of
actors 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 of
1992, the puzzle is why non-socialist politicians, who were strongly committed to a system
shift in housing policy, and with no strings to the tenants movement, did not take the
opportunity 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 been
possible 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 both
the tenants and the landlords organisations, and their participation is crucial to the
implementation of the policy in the market arena. And while the use-value system is more or
less 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 legitimate
among tenants in general and probably among voters (cf. Bengtsson and Rothstein 1997:
28283). Together with the apparent acceptance of the system by landlords, this legitimacy
may have made the political cost of changing the system to something less corporatist and
more market-based seem too high. Finally a general conversion from one set of institutions to
another would have resulted in transaction costs at all levels.
One final remark. Housing organisations can be seen as acting in three different but
interrelated arenas: internal, market and political (cf. Bengtsson 1995). The main focus here
has been on the political arena, but as we have seen the path of the corporatist housing policy
runs in parallel and sometimes intersects with other processes in the other arenas. The
most critical juncture in the organisational arena was probably the decision of the National
Union of Tenants in the thirties to follow the collaborative path of peaceful negotiations, and
in the market arena the huge production of multi-family public rental housing in the years of
the Million Programme. If we want to compare, in counterfactual perspective, the path
dependence of Swedish corporatist rental policy with corresponding paths of non-corporatist
rental policies of other countries all three arenas must be considered.
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