Affordable housing in the Nordics: Norway

Over the past two years, rising interest rates and higher inflation have increased already high entry barriers to the housing market, despite softening house prices. In particular first-time buyers and low-income households struggle to gain footing in the housing market, but the recent developments have intensified the house hunt for an increasing share of the population. At the same time, the volume of new housing construction has declined dramatically, hindered by increased funding and production costs. Thus, we see an increasing mismatch between production costs for new housing and what households can afford.

In this series of focus reports we take a closer look at the various systems for affordable housing in the Nordic countries. In the publication Affordable housing in the Nordics we presented an overview and comparison between the different systems for affordable housing in the Nordic countries.

In this country focus report, we take a closer look at the system for affordable housing in Norway. The affordable housing market in Norway dates back to the 1850s. For many years, the primary tool for the authorities to provide affordable housing was via cooperative housing companies that performed development activity in close cooperation with the Norwegian municipalities.

The cooperative housing companies remain a major part of the Norwegian housing market. Over time, however, the direct support to the construction of new housing has decreased. With the decline of social housing construction, overall house building has declined in Norway. Over the years, the supply of new housing has lagged population growth. Consequently, house prices have risen, increasing the difference between the ‘insiders’ and ‘outsiders’ in the housing market.

Today there is hardly any direct social housing construction. Instead, the housing policy has become more consumer oriented, i.e. with an ambition to support the households that have failed to find adequate housing in the market. The modern Norwegian housing policy is centred around home ownership. The three main parts of the current support system are the housing allowance system, municipal housing and assisted purchase schemes.

With the increased focus on social issues the sustainable bond market has developed into new forms. This includes both social bonds and sustainability-linked bonds (SLBs). For real estate companies we see these instruments as interesting complements supporting the focus on social challenges and solutions.

The Norwegian real estate companies with relevant exposure to the residential market under our coverage include OBOS BBL, Carucel Property, Bane NOR Eiendom, Olav Thon Eiendom and Thon Holding. Norwegian Property is exposed through its JV Nordr.

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