The Political Economy of Housing Financialization by Gregory W. Fuller

Author:Gregory W. Fuller [Fuller, Gregory W.]
Language: eng
Format: epub
ISBN: 9781788211000
Google: Qs1NxQEACAAJ
Amazon: 1788211006
Publisher: Agenda Publishing
Published: 2019-04-14T18:30:00+00:00

The upshot

Due to the dearth of data, it is difficult to make strong claims regarding the link between financialization and inequality. Nevertheless, the theoretical case for a connection seems strong – and the evidence, while limited, does appear to support its existence. One of the problems in definitively establishing this link is that, with multiple drivers of varying forms of inequality, it is possible to be a “winner” in one context and a “loser” in the other. A young, highly indebted urban homeowner might have lost out compared to their parents’ generation – and the sustainability of their financial situation might be fraught – but they could still be doing far better than older homeowners, carrying no debt in dying rural areas and market towns.

It seems reasonable to argue that the older homeowners who were able to buy properties in economically dynamic urban areas during the latter half of the twentieth century have made out the best. They earned incomes that were relatively high compared to housing prices, did not have to borrow extensively to make their purchases, then benefitted from long periods of incumbency in which credit-fuelled demand drove up the price of their assets. In many countries, their homes were sold at heavy discounts (as in many former Eastern Bloc countries) or through the privatization of social housing (such as the “right to buy” schemes in the UK and elsewhere) – only for financialization and commodification to take over later, shooting prices skywards.

Compared to these “winners,” other groups have not done as well. Some homeowners have not benefitted as much from incumbency because they do not live in desirable areas. Younger people who need to borrow heavily in order to access housing can win or lose; they must take greater risks than their parents if they are to get on the housing ladder. As such, many of them live in a state of precarious homeownership. At the same time, many of these young homeowners would not have been able to buy at all if not for the presence of financial markets, which allow them to borrow enough to afford the escalating prices.

Despite these differences within home-owning groups, there is little doubt who the ultimate losers are: tenants. Across the entire developed world, homeownership is one of the primary determinants of wealth. Renters, especially in areas where tenancy is protected and the standard of rented accommodation is high, may experience very little inequality in housing outcomes. But where wealth is concerned, not owning one’s own home is a recipe for relative impoverishment. As noted previously, tenants are not merely storing their incomes in other ways – they have less, full stop.

The lingering challenge, then, is to determine how these national spectra of winners-versus-losers are affected by housing financialization and commodification. I suggest that this happens in three chief ways. First, by encouraging the intergenerational perpetuation of class differences; second, by randomizing housing outcomes; third, by introducing risks disproportionately borne by the most precarious of homeowners.

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