Why does the party in power lose seats in in off year elections?

In many countries, particularly western ones, the ruling party or coalition tends to lose seats to opposition parties for a few reasons.

The first, and most important reason, tends to be popular dis-satisfaction with the policies of the government. It is uncommon for governments to increase their popularity as time goes on and even if they do so, it is very rarely a sustained trend beyond the second term in office. As a result, people may use mid-term elections to express their dis-satisfaction with the direction the government is taking by voting for an opposition party. Because the composition of the national government is not decided by a mid-term election, people who support the ruling party in a general election may instead vote for a different party in the hope of sending a message to the government that it must do a better job. This can happen even to popular ruling parties; in 2000 for example, in the UK, the then-ruling Labour Party finished a distant second to the opposition Conservative Party, which won 38% of the vote against Labour's 30%. A year later at the general election however Labour won a second term in a landslide with 41% of the vote against 32% for the Conservatives.

Another factor to consider is that people vote for different things in off-year elections to general elections. In local elections for example people are voting for the party they think is best placed to serve their local community, which may not be the same party that they think is best placed to run the country. In regional and local ballots voters are more likely to vote across party lines for candidates or platforms that they find personally appealing rather than ideologically compatible. Similarly, a different set of voters turn out in mid-term elections - turnout is usually substantially lower than a general election and as a result, high turnout groups like the elderly have a disproportionate influence on the outcome of an off-year election. In much of the western world, this tends to benefit centre-right conservative parties, especially when centre-left governments are in office.

It is also important to remember that politicians elected in mid-terms are, themselves, often subject to increasing unpopularity as time wears on, just like national governments. As such, if a party has been in opposition for a long time and made considerable gains in mid-term elections, by the time it comes to power many of the gains it has made will be quickly reversed as people become dis-satisfied with long-serving legislatures or local authorities. This can help explain why very popular governments, coming into power after a long period in opposition, suddenly find themselves making heavy losses halfway into their first term.

Finally, electoral mechanics must be considered. In many parts of the world people are more willing to support minor parties over major ones in mid-term elections, especially local elections, usually because it is easier for these parties to win - and because supporters of these parties do not feel obligated to tactically vote for a major party in order to prevent a party they really don't like from winning government. In the UK for example, evidence suggests that a significant number of people who are prepared to vote for the third-placed Liberal Democrats at local elections will subsequently vote for the major Labour Party at general elections, in order to keep the Conservative Party out of power, even though they might not really like Labour all that much. This means that in local elections, Labour governments tend to find themselves making losses as a portion of their vote flows back to the Liberal Democrats.