Daniela Gabor & Sebastian Kohl
The Greens / EFA
2022
## 📄 Context This report, authored by Daniela Gabor and Sebastian Kohl, was commissioned by The Greens/EFA group in the European Parliament and published in 2022. It investigates the increasing influence of institutional investors in European housing markets and the subsequent effects on housing affordability and accessibility. ## 📈 Scale of Institutional Investment The report reveals that institutional landlords have transformed approximately €40 billion worth of Berlin's housing stock into rental assets, a figure that is twice the total value of institutional properties in both London and Amsterdam. In 2021 alone, over 4,000 institutional investors allocated around $3.6 trillion of their total $136 trillion assets under management to European real estate. Notably, 1,325 of these investors, controlling $44 trillion in assets, included residential properties in their investment portfolios. ## 🔍 Drivers of Housing Financialization Several factors are driving the financialization of housing. Low interest rates have prompted investors to seek higher yields in alternatives like housing. Government policies, which are often intended to benefit homeowners, have inadvertently inflated housing prices. Additionally, there has been a noticeable withdrawal of the state from providing social housing, coupled with regulatory frameworks that encourage institutional investment in housing. ## 🚨 Impact on Housing Markets The effects of these trends have been significant, leading to reduced housing affordability in major European cities and the displacement of lower-income tenants. This transformation has altered neighborhood dynamics and exacerbated urban inequalities. Furthermore, strategic land banking by institutional investors has contributed to ongoing housing shortages. ## 🏛️ Key Policy Recommendations The report outlines several key policy recommendations aimed at addressing these issues: 1. Sustainable Institutional Housing Framework: Establish a Social Taxonomy with mandatory disclosure requirements for institutional landlords. 2. European Housing Fund: Create a fund to act as a countercyclical measure during housing market crises and to support public investment in social housing. 3. Housing Red Flag Rule: Implement oversight mechanisms to ensure that new regulations do not inadvertently reduce risks for institutional landlords. 4. Enhanced Macroprudential Mandate: Expand central banks' authority to regulate mortgage lending in response to house price inflation, ensuring socially just outcomes. ## 🌍 Significance This report provides one of the first comprehensive assessments of how European legislation and financial regulations have facilitated the transformation of housing into an asset class. It emphasizes the urgent need for policy interventions to ensure that housing remains accessible and affordable for all European citizens rather than serving primarily as an investment vehicle for institutional investors.
Daniela Gabor & Sebastian Kohl, The Greens / EFA
Context
This 2022 report by Daniela Gabor and Sebastian Kohl, commissioned by The Greens/EFA in the European Parliament, examines the growing role of institutional investors in European housing markets and its implications for housing affordability and accessibility.
Key Findings
Scale of Institutional Investment
- Institutional landlords have converted approximately €40 billion of Berlin's housing stock into rental assets, double the combined value of London's and Amsterdam's institutionally owned properties
- Over 4,000 institutional investors directed around $3.6 trillion of their $136 trillion assets under management to European real estate in 2021
- Of these, 1,325 investors with $44 trillion in assets held residential properties in their portfolios
Drivers of Housing Financialization
- Low interest rates pushing investors to seek higher yields in alternative assets like housing
- Government policies ostensibly aimed at homeowners that end up inflating house prices
- Withdrawal of state from social housing provision
- Regulatory frameworks that facilitate institutional investment in housing
Impact on Housing Markets
- Reduced housing affordability in major European cities
- Displacement of lower-income tenants
- Changes in neighborhood character and deepening urban inequalities
- Strategic land banking by institutional investors contributing to housing shortages
Key Policy Recommendations
1. Sustainable Institutional Housing Framework
Development of a social-washing-proof Social Taxonomy with mandatory disclosure and regulation of institutional landlords, including:
- Special provisions for housing in the Social Taxonomy
- Mandatory disclosure regime for institutional investors
- Escalation-based regulatory regime for housing asset classes
2. European Housing Fund
Creation of a fund that would:
- Act as a countercyclical force during housing market crises
- Prevent transfer of housing units from private/public ownership to institutional portfolios
- Raise financing for public investment in social housing
3. Housing Red Flag Rule
Implementation of oversight mechanisms to ensure new European-level regulatory initiatives do not inadvertently de-risk housing asset classes for institutional landlords
4. Enhanced Macroprudential Mandate
Expanding central banks' authority to react to house price inflation through tighter, socially just regulation of mortgage lending
Significance
This report represents one of the first comprehensive analyses of how European legislation and financial regulation have enabled the transformation of housing into an asset class. It highlights the urgent need for policy intervention to ensure housing remains accessible and affordable for European citizens, rather than primarily serving as an investment vehicle for institutional investors.