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:
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).
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).”
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:
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:
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.