The Financialization of Housing: What Is It?

How can we understand the financialization of housing? What does it mean? And can this help us make sense of our current housing crisis?

Like all communities across Canada, Edmonton has a housing problem. And despite many best efforts, this crisis only continues to worsen.

How can we best understand and fix this issue of (in)access to adequate housing?

The key to understanding and effectively addressing our housing crisis is to take a human rights approach (UNHRC 2019).

One way we can apply a rights based approach is by identifying major trends and emerging challenges that negatively impact housing rights (UNHRC 2019, p 20).

A growing number of households are unable to access housing that is affordable, in a good state of repair and with enough bedrooms (i.e. tenants).

Unacceptable Housing is housing that is directly unaffordable (over 30% of household income towards housing costs) or indirectly unaffordable (living in homes that are ‘more affordable’ because major repairs are needed and/or have fewer bedrooms than what the household needs).

Which in the City of Edmonton (2021) includes:

Click on the image above to view what households experiencing unacceptable housing across Edmonton looks like (credit: Mountain Math).

One key trend that has been identified as a driver of unacceptable housing, and our prolonged housing crisis, is the financialization of housing.

What Is the Financialization of Housing?

The financialization of housing is the change from understanding housing as a basic need necessary for survival to housing as an item used for investment.

In other words, “when housing is treated as a commodity—a vehicle for wealth and investment—rather than a social good” (OHCHR 2021).

The beginnings of the financialization of housing in Canada can be traced back to the 1980s, alongside the rise of neoliberalism (Walks 2014, Walks & Simone 2016).

However the financialization of housing has really ramped up over the last 20 years (UNHRC 2017, August 2022).

What does this mean?

Seeking other ways to generate wealth outside of the stock markets, protected from downturns (especially after the financial crisis of 2008), investors have made ‘housing’ that alternative.

Consequently, “…massive amounts of global capital have been invested in housing as a commodity, as security for financial instruments that are traded on global markets, and as a means of accumulating wealth (UNHRC 2017, p.1).”

Click on the chart above to enlarge.
Note: Real Estate accounts for the entire right half of the above chart – dark green is commercial real estate ($32.6 tn), dark blue is agricultural land ($35.4 tn), and light blue is residential real estate ($258.5 tn).
Global GDP is dark grey ($84.8 tn).
Source: Savills Research (2020, p.1)

In 2020, the global value of real estate was estimated to be $326.5 trillion – 79% residential real estate ($258.5 trillion).

Real estate was also estimated to be worth 4 times the value of Global GDP.

Globalized markets are not aware of housing as a keystone for individual, household, neighbourhood and community well-being.

As a result of financialization, housing has become detached from:

  • local housing needs, local incomes and local economies
  • “its social function of providing a place to live in security and dignity” (UNHRC 2017, p.3)

Which, in effect, fundamentally “undermines the realization of housing as a human right” (UNHRC 2017, p.3).

So, instead of building homes that meet the adequate housing needs of individuals, households and communities, homes are built for investors, or financialized entities. And housing is financialized through a number of forms, including:

Key Takeaway

The financialization of housing has created a totally different relationship to housing than people have had in the past, where local housing is not owned by local people in a local community.

Instead, housing is owned by a number of people who buy shares in a company, or by investors with access to huge sums of money looking for a surefire way to get a big return on their investment. Including banks, governments, the wealthiest 0.01%, insurance companies, hedge funds, mutual funds, and even pension funds.

Investors have taken housing as we (still) know it, as a jumping off point for the creation of other items that we cannot physically see, and are worth much more than the value of the home itself (i.e. debt, collecting interest).

Learn more about the financialization of housing and what this means for Edmonton:

The National Housing Advocate also has excellent resources.

3 thoughts on “The Financialization of Housing: What Is It?

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