Rethinking the Risks of Home Ownership

Abstract

Most debate on home ownership and risk has focused on the management of mortgage debt. But there are other risks for home buyers in settings where housing dominates people's wealth portfolios: where the investment dimensions of property are at a premium; and where housing wealth is, de facto, an asset base for welfare. This article draws from qualitative research with 150 UK mortgage holders to assess the character, extent and possible mitigation of this wider risk regime. The analysis first explores the value home buyers attach to the financial returns on housing. Next we document the extent to which home equity is earmarked and used as a financial buffer. Finally, reflecting on the merits and limitations of this tactic, we conclude by asking whether -in the interests of housing and social policy, as well as with a view to managing the economy -there is any need, scope or appetite for more actively sharing the financial risks and investment gains of housing systems anchored on owner-occupation.

The Revival of Private Landlords in Britain’s Post-Homeownership Society

“…However, both have arguably taken on a different hue in recent decades. Along with the deregulation and financialisation of housing since the 1980s, generations of households have been strongly oriented around housing property as a hedge against future risk (Smith et al 2009), especially against poverty or welfare insecurity in later life. Indeed, survey data suggest that the use of property as a source for financing future welfare expenses is a key motivation for becoming a landlord.…”

“…An influential literature has thus signalled the importance of housing property in contemporary welfare capitalism (see Kemeny 1992, Castles 1998, Schwartz and Seabrooke 2008, Crouch 2009, Doling and Ronald 2010, Ronald and Doling 2012, Ansell 2014, with financial markets and state welfare policies aligned around the promotion of individual property ownership. The concomitant reconstitution of households as financial investor subjects meanwhile (Langley 2006, Finlayson 2009, Smith et al 2009, Watson 2009) has in many ways centred on housing property as a means to cope with, and manage, individual risk.…”

Why housing wealth and welfare?

“…Augmentations in housing wealth in different economies were thus increasingly associated with 'welfare switching' practices -from housing equity into private consumption, welfare services or even income -with advances in owner-occupancy and property values helping to 'legitimize' and 'incentivize' a shift away from collective social insurance to welfare self-provision (Smith et al, 2009). A similar process was conceptualized by Crouch (2009) as a form of 'privatized Keynesianism'.…”

“…Specifically, in many contexts, the housing equity held by owneroccupiers has been eyed by governments and policy makers as not merely an enhancement of, but integral to, welfare self-provision across the life course and a means to compensate for diminishing public provision more generally (Malpass, 2008;Watson, 2010;Lowe et al, 2011). In a context of expansion in owner-occupation and house price inflation, households have also been increasingly orientated around their housing wealth as a means to boost their consumption and take care of their own welfare needs (Smith et al, 2009;Doling and Ronald, 2010;Wood et al, 2013). At the same time, however, growing dependency on property values and house price increases has created enormous vulnerability to economic fluctuations -as demonstrated by the GFC -and stimulated significant indebtedness and potential for inequality (Stephens, 2007;Schwartz and Seabrooke, 2008;Kennett et al, 2013;Rolnik, 2013).…”

Housing finance as harm

“…Financial institutions can provide the essential underpinning for positive social development, but they can also have destructive power [54]. The benefits of homeownership are extremely skewed in terms of location, class, gender, generation and ethnicity [55,56]. The financial crisis and its aftermath have challenged integrative and stabilising dimensions of home ownership more generally speaking [15,57,58].…”