Financialisation
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Financialisation refers to the increasing dominance of financial actors, markets, practices and narratives, resulting in the structural transformation of economies, firms, states and households. In the context of housing, financialisation denotes the mechanisms and processes through which housing and finance become increasingly intertwined and housing is treated as an asset class, transforming national and local housing and property regimes. Patterns of financialisation are largely embedded in processes of neoliberal globalisation and the concurrent rise in the significance and power of multi- or transnational financial actors and landlords. Nevertheless, financialisation trajectories are also embedded in local property and institutional regimes and manifest differently across countries and cities. The financialisation processes contribute to the commodification of housing, enabling the creation, extraction and increase of financial value from homes used as financial assets. Thus, housing financialisation conflicts with the lived experience of housing as a basic need and a social right, which has serious implications for cities, communities and households.
Financial landlords present new challenges to residents and create new terrains of conflict. In San Francisco, several aspects of financial landlords pose dilemmas for residents and municipal legal structures. First, large financialised landlords buy properties in bulk – they create portfolios and finance dozens of buildings at once. The buildings must then be sold as a single portfolio because they are all tied to one mortgage. This means that the only possible buyer is another financial institution, as large as or larger than the first. This also makes it impossible for city initiatives like the San Francisco Community Land Trust to buy one or a selection of buildings to protect tenants. In San Francisco, the largest financialised landlord also operates through limited liability companies (LLCs) or limited partnerships (LPs), meaning that, on paper, the legal owner for each building is different. The paperwork lists only an LLC (or an LP), and the residents often do not know the name of their actual landlord. Instead, they pay their rent to a property management company with a different name. However, it is owned by the same financial institution whose CEO signs all the paperwork for the LLCs or LPs that technically own the properties. Putting the pieces together to understand who your landlord is and how to interact with them becomes a research project. On the other hand, when the dots are finally connected, a vast pool of tenants can come together and organise collectively to support each other in fighting for their rights.
The Dutch housing market is significantly financialised. Dutch homeowners exhibit some of the highest levels of leverage globally, underscoring the considerable reliance of Dutch lenders on mortgage securitisation. Over the past decade, the proportion of home purchases by investors has surged from 16% in 2009 to 28% in 2019 in the four major cities of the Netherlands, namely Amsterdam, Rotterdam, Den Haag and Utrecht. Amsterdam, in particular, stands out as the epicentre of this financialisation. In 2021, for instance, Blackstone owned rental properties valued at 585 million euros. These local and international investments contribute to soaring property prices, raising concerns about housing affordability for local residents. Additionally, the social housing sector in the Netherlands is grappling with extensive financialisation pressures. For example, Vestia, the largest social housing association in the Netherlands, required a 2 billion euro bailout after a speculative venture with derivatives in 2011.
The integration of Spain into the European market and its opening to foreign capital investment in the 1990s gave rise to the financialisation of housing and land. The expansion of a deregulated mortgage market resulted in mass access to homeownership, with finance penetrating the homes of the poorest households. Simultaneously, tailored legal reforms created an abundance of urban land to be developed, giving rise to a financial bubble and a housing building boom whereby urban land (and, prominently, housing) was transformed into a liquid asset. After the mortgage and construction bubble burst in 2008, the restructuring of the financial-real estate nexus took place through a ‘crisis resolution regime’ characterised by the bailout of banks that had accumulated large swathes of land and housing-backed non-performing loan (NPL) and their subsequent transfer into the hands of investment funds. The foundations for the financialisation of an emergent private rental market were then set, in particular through the creation of the Spanish figure of the real estate investment trust (Sociedades Anónimas Cotizadas de Inversión Inmobiliaria) and the promotion of a service industry, which enabled the financialisation of rental streams.
In Greece, the financialisation of housing originated in the 1990s. Prior to this, the antiparochi system of land-for-flats swap provided cheap and wide access to homeownership. However, this was replaced by widespread financial lending and mortgaged homeownership. In the 1990s and 2000s, lending surged, and mortgages more than quadrupled. Following the economic crisis and austerity in the 2010s, Greece faced an acute NPL crisis, with the NPL ratio reaching almost 50% by 2017. Starting in that period, a new financial architecture was designed in order to resolve the NPL crisis in favour of Greek and international financial institutions, by fostering the entrance of transnational capital in the Greek real estate market, thus enabling and accelerating the financialisation of housing. This was achieved by establishing a secondary market for distressed assets (loan and property portfolios) and an asset-backed securitisation system based on state guarantees, known as the Hercules asset protection scheme. These policy shifts culminated in 2020 in a new bankruptcy framework for over-indebted homeowners, which fully liberalises the foreclosures of homes (previously protected by law). It also institutionalised the marketisation of vulnerability by introducing a new financial landlord that will acquire and lease back the homes of the most vulnerable debtors, turning them into tenants in their own homes.
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