LSE
2023
Christine Whitehead, Kath Scanlon, Michael Voigtländer, and others
This report delves into the financialization of housing markets across 13 major cities globally, including Copenhagen, London, and Singapore. Authored by a team of experts, it highlights how financialization has transformed housing from a basic necessity into an investment asset, profoundly affecting housing affordability and security. The report, published in April 2023, serves as a critical examination of the interplay between global finance and local housing markets. The findings reveal that financialization is not a uniform process; its effects vary significantly based on national policies and regulatory frameworks. The report categorizes countries into four distinct groups based on their openness to international finance and the degree of regulation within their housing markets. These insights underscore the multifaceted nature of financialization and the necessity for context-specific approaches to address its challenges. At the city level, the report identifies urban centers grappling with rising rents and affordability crises, exacerbated by factors such as foreign investment and regulatory exploitation. Cities like Vancouver have seen significant impacts from international capital, while others are affected by domestic private equity exploiting local regulations. The findings illustrate a pressing need for targeted interventions to protect housing markets from the adverse effects of financialization. In conclusion, the report calls for nuanced policies that balance economic growth with social equity. It emphasizes the importance of adapting strategies to local contexts, ensuring that housing remains accessible and affordable for all residents amidst the growing pressures of financialization.
Context and Authors
The paper is an international comparative report on the financialization of housing markets in 13 cities across different regions, including Copenhagen, Stockholm, London, Dublin, Berlin, Barcelona, Lisbon, Vancouver, Miami, Singapore, Hong Kong, Sydney, and Auckland. It was authored by Christine Whitehead, Kath Scanlon, Michael Voigtländer, Jacob Karlsson, Fanny Blanc, and Martina Rotolo, with contributions from local experts in each city. The report was published in April 2023.
Key Findings
- Financialization and Its Impact: Financialization of housing has become a significant concern globally, particularly in high-demand cities. It involves treating housing more as an investment asset rather than a place to live, leading to increased housing costs and insecurity. The effects of financialization vary widely across countries and cities, influenced by national policies, regulatory environments, and international investment.
- National Contexts: Countries were categorized into four groups based on their openness to international finance and regulatory strength. These groups include:
- Deregulated Markets: The USA, England, Canada, and Hong Kong, which have open financial systems with limited regulation.
- Owner-Occupation Dominant: Australia, New Zealand, and Singapore, where owner-occupation is prevalent and regulations limit international investment.
- Financially Open with Changing Regulation: Portugal and Spain, which have been financially open but are increasing regulation.
- Strongly Regulated: Denmark, Sweden, Germany, and Ireland, known for strong rent regulation and security of tenure.
- City-Level Analysis: The report focuses on cities at the forefront of financialization debates. These cities often have growing populations, rising rents, and worsening affordability. While some cities are heavily influenced by foreign investment (e.g., Vancouver and Miami), others are impacted by private equity firms exploiting regulatory loopholes (e.g., in Scandinavia and Germany).
- Effects on Housing Markets: Financialization contributes to rising housing prices and rents, exacerbated by rapid demand changes and slow supply responses. Short-term letting platforms like Airbnb also reduce available long-term rental housing, further affecting affordability.
- Anti-Financialization Policies: The report discusses various government interventions aimed at mitigating the negative effects of financialization, including rent regulation, restrictions on short-term lets, changes to planning laws, and transparency measures for foreign buyers.
- Investor Perspectives: The views of major investors highlight both the benefits and drawbacks of financialization. While it can bring efficiency and innovation, it also leads to increased housing costs and market volatility.
Conclusion
The report concludes that financialization is a complex phenomenon with varied impacts across different contexts. It emphasizes the need for tailored policies to address the specific challenges faced by each city and country, balancing economic efficiency with social equity and housing affordability.