The Danish Housing Market

While Denmark has fairly flexible labour and product markets in most respects, the housing marketstands out with large direct and indirect subsidies for all types of housing and a highly regulated rentalmarket hindering mobility, probably resulting in a mismatch between housing needs and use. In the currenthousing policy framework there is quite a contrast between the well-functioning market for transactions ofowner-occupied housing (supported by the highly liberalised mortgage market) and the highly regulatedrental housing market. This paper assess the recent development in Danish house prices, followed by adiscussion of ways of replacing the costly government intervention in the Danish housing market withmore market-based mechanisms, thereby achieving policy objectives in a more efficient and targeted way.The paper reviews the main areas for reform, including overall subsidisation of housing, rent regulation,social housing, and how housing supply could be made more responsive.