Financialization and housing: Between globalization and Varieties of Capitalism

Abstract

In the literature, one finds various explanations for the rise of financialized capitalism. In the different strands of financialization literature, housing either plays a minor role or is simply seen as one of the bearers of financialization. The relations between housing and financialization are under-researched and under-theorized. This article, first, looks at the rise of housing finance as an integral part of macro-economic policy, and second, at the role of financial globalization in the rise of housing finance. Housing is seen as an absorber of a ‘wall of money’, but the absorption of finance by housing is a very uneven process. Four trajectories of national institutional structures are suggested, and it is discussed how capital flows are absorbed in each of these trajectories. Finally, it is discussed what this tells about the geographies of financialized capitalism, and its relations to debt, housing, mortgage markets and the spatial fix.

Mortgaging Europe's Periphery

“…After all, the liberalization of mortgage finance, an increasing reliance on foreign funding, and regulatory forbearance have been the hallmark of mortgage booms prior to the crisis elsewhere, notably in the USA and UK (Fernandez and Aalbers 2016). First, I show that the nature of demand for housing finance differs.…”

“…To seek an answer, I turn to the work of Manuel Aalbers and his co-authors on the financialization of housing, which complements Schwartz and Seabrooke's work (Aalbers 2008;Aalbers and Christophers 2014;Fernandez and Aalbers 2016;Aalbers 2016 financialization, Aalbers argues that in the last one to two decades, a "global wall of money"-a global pool of liquid capital that looks for investment opportunities-has been built up. The global wall of money results from the rise of accumulated corporate profits which are not being reinvested in the real economy or shared with workers, the recycling of trade surpluses of emerging and export-oriented economies, and the privatization of pension schemes and build-up of funded pensions.…”

Why housing wealth and welfare?

“…Schwartz and Seabrooke (2008) therefore distinguish between varieties of 'residential capitalism' -with, for example, 'liberal market' societies featuring a strong trade-off between owner-occupied housing equity and pension systems (such as Australia and the UK) -and 'corporatist market', low-housing-equity countries that have both large social rental housing sectors and substantial mortgage debt (such as Denmark and the Netherlands). It has been further argued that housing financialization has been particularly effective in stimulating rapid change and realignment in welfare state and institutional relations (Fernandez and Aalbers, 2016), connecting states and households to housing markets and global finance in different ways with important political implications at various levels.…”

Crisis and the Reproduction of Core-Periphery Relations on the Hungarian Housing Market

“…However, markedly different trajectories persist in exactly how these housing systems develop in terms of finances, ownership, regulation, etc . (Fernandez and Aalbers, 2016) . Relating to the more concretely spatial dimension of homogenization and differentiation on the housing market we argue that in boom periods there is a spread-out of investment into previously unexplored areas; spatially homogenizing the housing market in the sense that mortgages (or other forms of financialized housing) become accessible in geographical areas and for social groups which were previously excluded.…”