The Impact of Financial Arrangements and Institutional Form on Housing Prices

Dwellings in housing cooperatives constitute 15% of the Norwegian housing property market. The price paid for such dwellings consists of two elements: An equity price and a share of the mutual debt held by the cooperative. The interest rate paid on the housing cooperative’s mutual debt is in Norway lower than the interest rate paid on private loans. This gives rise to an “interest discount effect”. We find convincing empirical support for the interest discount effect, which contributes to a higher equity price for dwellings in housing cooperatives than for self-owned dwellings. On the other hand, we also find empirical support for a co-op discount of 9.3%. The co-op discount work in the direction of making cooperative dwellings more affordable.