This blog is just a note block for further discussion and research into the economic, social, democratic and legal facts and stand points on the topic of 'covenant of habitation' in Norwegian " Boplikt" Literally live-duty or demand to habitate a house.
"Boplikt" is a legal mechanims provided for in national law ( 1975 ) and both brought into force and ammended as local by-laws. It is a mechanism which is then chosen by local governmental politicians as a desirable democratic legislature primarily with three aims which are inter -related:
1) Secure that primary housing stock be lived in all year round
2) Hold house prices within locally sustainable market values and not exposed to the national market _ By limiting the availability to wealthy holiday home buyers or speculative and buy-to-rent investors.
3) To counter depopulation by promoting and securing permanent inhabition.
4) To allow for a clear line to be drawn in the planning process when new building will be either holiday & visitor housing and homes for local people and those wishing to live most of the year in their home.
The Legal Nature and Implementatttion of the Law in Practice
By in large the LGA's (local gov' authority) which have adopted the mechanism and enforce the law, and further more stregnthen the by-law, are nealy all rural and in particular in Norway within scenic valley areas and in coastal villages and towns.
"Boplikt" is also suggested as a mechanism for town planning in larger towns and cities where new build homes for first time buyers and key workers would be covered by an on going covenant requiring the owner to be the one living in the accomodation and this transfering with sale. Hence there would be potential for housing which has control over investment capital inflating prices and rents, and allowing access to affordable housing for these groups, and a housing stock which remains within that part of the market in wages-to-motgage ratio.
The system operates at the LGA level then from the 1975 legal framework on the statutes. It is often applied on a total basis in that area for those houses considered by their fabric or continual habitation. However it has been divided up geographically within one LGA's jurisdiction, or some developments of flats in particular are granted a proportion for sale on the open market.
It is brought into force at the consumer end by in fact estate agents and solicitors acting on the sale of property who are obliged to present the documentation for the deed-of-habitation which is to be signed as part then of something covered by contract law. As such is has been challenged by higher precendential laws such as commerical practice, consumer laws, marketing and even human rights laws as the highest of all in Norwegian courts.
The covenant can also be upheld by renting the property out with no further strings - so for example a house could be rented out right after sale in August with a nine month lease to next summerrr, and the owners using it as a summer home or extacting a higher rental price from holiday makers in the summer. This also of course means that if people desire to move but want to keep a property for pensioning themselves to, then they can attempt cover the costs of that mortgage in rental. This may seem like no barrier what so ever to simple 'buy to rent' investment and exposure to the open market, but In rural areas there is a natural restriction in this due to there being a smaller market and thus a higher risk for inoccupancy, and an associated risk under the covenant of forced sale of the property.
Forced sale of the property is something the LGA will seek where a good case is to be made that the covenant entered with no actual intention of it being fulfilled. Other cases are generally not persued, and infact the law actually ties the owner into only five years of self-habitation, there after the property can lie vacant. However upon resale of the property, the convenant is transfered upon the new owner and applies for the period set in the mehcanism for that LGA (or nationally, this needs a check)
Arguments Against Boplikt
It has to be mentioned that the two groups who argue most against Boplikt are those linked to interests in property development and those who take the grounds of liberty, this being considered as a restricitive covenant by both parties in hindering freedom of movement of capital and labour.
The argument for the 'free market' and open for all capital investment and capital gains, are however mostly absent and instead the political right and libertarian wings choose to use the following main counter arguments
1) Individuals should be free to live where they want and invest as they want
2) It is undesirable for local owners to get this restricted value f they have to move to another area outside such covenants where market values are higher, or upon inheritance
3) It is an unworkable law and has been challenged by the higher laws above this
4) It works against itself in fact decreasing the desire to buy and live in areas with suppressed house prices
Considering each arguement in turn with discursive points:
1) The freedom of the individual to choose where they live has been the one issue which most legally based opposition has been founded upon by individuals and politically motivated entities. This is the view point as against a property is linked to contimous habitation. This languages is nearly always used in preference to mention of personal freedom to invest and a general freedom for capital to invest.
The argument has been taken into account in the law mechanism at some point as follows- if you choose to buy a property but at any point after the legal purchase is made, you find that your employment will be in an area outside pracitical commuting, then you can register an exception to the law. This however will not alter the property's legal status upon further sale.
2) There is a powerful voice from many pensioners who find themselves in properties which either are too costly for them to rennovate or are too far away from family to be desirable. They then cannot expect a sales value with the deed in place which may be the potential value on the open market, and they mean that they may be excluded from the market when they then move.
To counter this argument there are quite few home owninng pensioners who do not have a significant amount of capital in their homes which could be released to lever a small mortgage in any area (pensions are relatively high on average in Norway) , outright purchase of a smaller property or fund a rental period or a nursing home.
In terms of quality of the housing stock in terms of inward investment, it is just as likely that a second home owner would neglect their property in the rural area as a local owner would be restricted in loaning money to improve their homes. In this current financial climate domestic mortgages and consumer loans are undre far higher scrutiny post finance crisis. This is likely to be a continuing phenomenon with retail banks being risk averse and capital dependent.
Another issue is inheritance where the offspring of the deceased cannot fulfill the habitation demand within the time span allowed for in the law. It is an issue for both those who live in the same LGA and further a field, amd can create an emotional dilema as to whether the original family home be kept and upgraded under that time span. Also when there is dispute between siblings on not just the value but also the future liability which is of course complicated by 'boplikt'. In both scenarios, it can be said that the convenant forces the hand of the new owner to make a decision and placeas more properties on the market as a result. "Aires to the ancestoral pile" can though make legal submisssions for period of grace due to mitigating circumstances.
3) the exceptions created in the first point and some issues relating to the second point are often quoted by politicians and individuals opposed to the mechanism. In the first case where people have either mysterioulsy found employment has arisen elsewhere upon sale completion (eg. The Jagland case in Risor) and where some have engaged lawyers to argue using higher legal precedents, with LGAs settling in back room agreements so as to avoid publicity, The enforceability is therefore questioned along with the concept that the LGA must 'spy' upon its inhabitants to ensure they fufilll habitation demands.
On the second point opponents claim that the law is impractical because the market mechanims work more favourably for all and many poor penssioners are penalised by the suppression of the value on their 'boplikt' bound homes. They claim also that it creates an artificial market which then shelters people from the realities and opportunities of the wider housing market. It has to be noted that the strongest opponents have often either the largest interest directly or politically indirectly by association to investors, or are the greatest proponents of small government from an ideological stand point and indeed often both.
A counter argument to the 'artifical market' is that there are many other desirable, democratically enacted restrictions and alterations to the market through the planning priocess and freeing up of land for new building, while on the other side the desire locally and nationally to preserve areas along the coast and inland rural landscapes for nature and freedom of access. Further to the point of public money distorting the market, pay in the public sector in Norway is unusually high especially in middel to top management where it is more than twice the European average, thus injecting large sums of money into the housing market. Also the state invests via the famous 'oil fund' as a patient investor in firms such as Statoil and Hydro, which are massive employers who are often shielded from the full volatility of markets by having the state as a large so called silent investor who are more interested in long term gains on a mid risk basis than the 'markets' of quarter-capitalism would foster.
4) Working against itself by making areas unattractive and that rural population is falling despite the law. We can then go back to comparing the situation in Norway and Denmark with the Swedish, Cornish, Welsh and Scottish rural reality of house prices which are very often not in line with rural wages, locking workers out of the market, while also there is no incentive to continue to live when a house can lie dormant. Rural depopulation is a factor which continues to be a major phenomenon throughout the developed and developing world, as farming becomes more mechanised and centralised, and the service economy also becomes a more and more urban phenomenon with local businesses failing to compete either on the traditional high street or in the rural area.
"Boplikt" and Rural Depopulation
In effect it can be argued that "boplikt' sets a speed limit on the depopulation by locking the housing stock to local wages more and hence not allowing capital gains to grow so high that people opt to sell up on an open market and move to persue life style choices enabled by this release of capital versus their actual wage based income. Rural depopulation, coupled to rural unemployment, rural lack of affordable housing and the retired gentrification are identified in the UK as the main restriction to growth of rural economies outside the housing market itself. Agriculture and rurally located businesses struggle literally to attract and retain employees in many areas exposed to high demand for holiday properties.
House Prices and The Baby Boom Time Bomb
It can easily be seen that house prices during otherwise high growth periods are suppressed where the deed applies in Norway, and that in particular bidding rounds are linked to local family income and capital gain re-investment on the property ladder. The mechanism is also to be found in Denmark, while in Sweden it is not part of any legislature, and many supporters of the mechanism point to in particular sceneic coastal towns and villages which have become largely owned by visitors.
A further argument is that often these holiday owners choose to become pensioners in their holiday homes, and in Norway as in most western countries it is the LGA whom deliver primary care and support to pensioners. Thus they often relocate at the end of their lives and deliver an extra wieght on finances of the LGA without having been contributing more than the nominal LGA taxes and service costs, which are relatively low in Norway at about 0.5%-1% of house value per year.
Boplikt Under Threat
The two main right wing coalition opponents of the system are represented currently by both the Norwegian Prime Minister and Chancellor of the Excheqour. At a local level their parties , the "Right" conservatives and the more libertarian "progress party" have also had some notable and successful challenges to the LGA by laws, with it being over turned almost completely most recently to time of writing in the attractive coastal LGA area of Tvedestrand. Here there had been quite wide scale avoidance by legal means, or by one partner in a marraige being legally registerred in the national register as based in the property.
Bo lyst, bo her, boplikt !
Local market forces, not oslo beaurocrats, ullevål surgeons, politicians and state employees distorting the market.
Plenty of other resrrictions on a halvøy on the uninhindereed supply prerwquisite for market mwchaims to reqally work, amd a dseire rto not have housung on every inch of water line and hillside.
Speed limit on depopulation. Like sayi g 'everyone drives 50 past the school, so the 30 zone is unworkable anyway' it needs to be enforced.