LSE
2023
Christine Whitehead, Kath Scanlon, Michael Voigtländer, and others
This report explores the phenomenon of financialization in housing markets across 13 diverse cities globally, including major urban centers such as London, Berlin, and Singapore. Authored by a team of experts, it provides a comparative analysis of how financialization affects housing affordability and security, revealing a pressing issue that resonates with many urban dwellers today. The key findings illustrate that financialization transforms housing into an investment asset rather than a home, creating significant challenges for residents. The report categorizes countries based on their regulatory landscapes, from deregulated markets like the USA and England to strongly regulated ones such as Denmark and Germany. These varying contexts influence how financialization manifests and affects local housing markets. City-level analyses highlight that cities experiencing rapid population growth and rising rents are particularly vulnerable to the detrimental effects of financialization. While some cities suffer from foreign investment inflating prices, others grapple with private equity firms exploiting regulatory gaps. The report also identifies anti-financialization policies that governments are implementing, such as rent regulations and restrictions on short-term rentals, as essential strategies to combat these challenges. In conclusion, the report emphasizes that financialization is a multifaceted issue requiring tailored solutions. It calls for policies that not only enhance economic efficiency but also prioritize social equity and housing affordability, ensuring that cities remain livable for all residents amidst growing financial pressures.
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.