Housing Policy Under The Conditions of Financialization:

Since the financial crisis of 2008/09, the “financialization of housing” has become a buzzword widely used within and outside academia to describe economic and structural changes in the housing market. One of the most visible dimensions of this “financialization” is the growing presence of institutional investors as property owners in manifold cities across Europe.

This trend has come along with a burgeoning housing affordability crisis that affects new households in major cities. While housing is placed again under pressure, new questions arise in relation to the role of institutional investors as active agents of housing supply. There is no clear evidence of how institutional investors affect local housing markets and how they relate to housing affordability pressures in each city.

Additionally, little is known about how housing policies and politics engage with institutional investors as novel housing actors and which are the challenges faced in housing policy development. To shed light on these questions that remain underresearched, we have selected seven cities that vary significantly in terms of rental systems and market dynamics, housing policies, and provision to examine the different, thus the city-specific effects of this general trend across Europe.

The financialization of housing has already become a major issue in urban and housing studies and research has disclosed the growing relevance of institutional investors, financial motives, financialised management, and calculation techniques in the transformation of housing into an asset class (Gabor & Kohl 2022; Wu et al., 2020; Fernandez & Aalbers, 2020; Aalbers et al., 2020). However, after more than 15 years of interdisciplinary research, it has become clear that the term “financialization” is developing as a relatively imprecise umbrella for a broad variety of topics.

We tender that the actual “doing” of financialization is highly context-bound, defined by spatial and temporal local particularities, and, as such, subject to an immense array of variations. For example, while in Germany and Sweden, institutional investors have been buying up entire housing estates and formerly public housing companies, in other cities of central and eastern Europe real estate investment trusts or real estate funds are gaining a foothold in niche markets such as care facilities, student dormitories or micro apartments.

In Spain and Ireland, and more recently, in Greece financialization is often discussed in relation to debt management and the securitization of Non-Performing Loans (NPLs). In our study, we explore these differences and describe the variety of ways in which institutional investors have established themselves in European cities.

The chief aim of our study is to shed light on the role and strategies of institutional investors in local housing markets. First, we trace how institutional investors approach local housing markets in seven different countries. Second, we explore how institutional investors’ activities enmesh with the provision of affordable housing. Third, we reflect on the local specificities and the way institutional investors become embedded in local real estate markets to consider why investment strategies differ significantly amongst cities, and, therefore, we disclose the different gateways in the cities under study.

In doing so, we highlight the role of the local context in the path-dependency of the financialization of housing. A fourth focus is on the interplay between institutional investors, policy actors, and governments. We assume that in a highly regulated field such as urban and housing policy, different forms of exchange and cooperation between institutional investors and local policy actors emerge in each case, reflecting local specificities and dynamics.

To address the above, we have chosen a comparative case study design. Moving away from a conventional comparative approach of identifying similarities and differences, we aim to tease out how the general restructuring of financialised housing is continuously restructured and reshaped by local dynamics. This helps disclose the path-dependency of housing financialization across seven cities. In other words, it is not only the generic trend of housing financialization that shapes local housing markets, but local circumstances that define the process of housing financialization in each case.