Financialization of housing has been an issue since at least the 1980s when technology improved information and efficiency in finance markets. This in turn enabled large scale international flows of funds. But it became much more obviously an issue after the Global Financial Crisis and the introduction of Quantitative Easing in many countries which led to far lower interest rates. This in turn increased the incentive to look for secure returns as well as potentially profitable gaps in the market and regulatory systems.
It was in this context that Curt Liliegreen, Project Director of the Knowledge Centre for Housing Economics in Copenhagen generously funded us to undertake a study of the financialization of housing, first in terms of principles and then to examine how financialization has been playing out in thirteen cities across North America, Europe, Asia and Australasia. The tensions between economic explanations which tend to concentrate on causality as compared to those from sociology, political science and geography which concentrate far more on outcomes provided the framework for the empirical analysis across cities and countries. In each location we aimed to identify and understand the tensions that have arisen as a result of financialization and other factors and the policies that cities, regions and national governments have introduced to address the issues of inadequate housing supply and worsening affordability which are increasingly dominated housing systems across the world.
The 13 cities we examined with the help of local academic experts, cover a wide range of housing systems from those which are fairly unregulated and have open finance markets through to those that have significant social sectors as well as strong financial regulation. In some cities and countries, the issues mainly affect the owner-occupied sector – as in Australia and New Zealand. In others the emphasis is on the increasing unaffordability and sometimes insecurity of rental housing as in a number of European countries. In most of the cities we examined, population and often in-migration pressures were growing. In others it was more international money that was the issue. More generally the traditional relationship between local prices and incomes appears to be breaking down, forcing those on lower incomes out of central areas into suburbs with poor access to jobs. Local policies include constraints on who may purchase housing in particular areas; tax and regulatory changes; limitations on short term lettings and a range of initiatives to increase the provision of affordable homes.
Our research was fundamentally comparative, looking at what is happening to housing in different economic and social environments. We hope that the report will also provide a basis for more detailed analytic studies of financialization by researchers from many different disciplines.
Read the final report HERE