Financialization of Housing

The Special Rapporteur on the right to housing of the UN Human Rights Council, Leilani Farha, issued a report on the financialization of housing. It covers the growing separation between housing as a human right and housing as a financial vehicle for investment. The argument that the financialization of housing ‘undermines democratic governance,’ ‘exacerbates inequality,’ ‘dehumanizes housing,’ and causes displacement and homelessness assumes that financialization, and thus finance in general, only has a negative impact.

Finance has led to a positive change in society which most people fail to acknowledge or just take for granted, for example, insurance policies; insuring your house against loss in case of fire or the invention of inflation-indexed debt which protects investors from the devaluation of government-issued debt due to inflation.

With regards to the housing market, the concept of ‘short selling’. Short selling, according to research has proven crucial in bringing back markets to a reasonable price, which in turn help in prevent a bubble. While short selling in the housing market is still difficult, financial products like Exchange-Traded Funds that track the inverse of a portfolio of REITs, may provide some opportunity for investors to do so.

Mortgage-backed securities, though they have a negative image because of the global financial crisis of 2008, they have also had positive effects. They have led to a higher supply of capital to potential lenders, making housing more affordable.

So while the report argues that “financialized housing markets have caused displacement and evictions at an unparalleled scale”, various financial products like the ones mentioned above many others may prove otherwise.

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