The Financialization of A Social Housing Provider

Abstract

Why does a social housing provider bet on interest rate fluctuations? This article presents a case study of the financialization of both housing and the state. Social housing in the Netherlands is provided by non-profit housing associations that have since 1989 been set apart from the state. Many associations started developing housing for profit, borrowing on global capital markets or buying derivatives. Whereas other semi-public institutions moved into the world of finance due to financial constraints, housing associations did so to capitalize on the possibilities offered by their asset-rich portfolios. Vestia, the largest of them all, is an extreme--but not exceptional--case of what can happen when public goals are left to be realized by inadequately supervised and poorly managed private organizations. As a result of gambling on derivatives, Vestia had to be bailed out to the tune of over 2 billion euros. To recoup the losses, housing was sold off and rents were raised. Almost half of Dutch housing associations used derivatives, although most refrained from using them purely speculatively. The changes in the housing sector that led to its financialization cannot be separated from the wider financialization of the state.

The Financialization of Housing Production in Brussels

“…The number of institutional investors in the Belgian economy has increased (Goethals et al , ). Moreover, there is clear evidence of housing property financialization in neighbouring countries––France (see Aveline‐Dubach, and Nappi‐Choulet, ) and the Netherlands (see Aalbers, ; Aalbers et al ., , this issue)––nations from which some of the major Brussels housing developers hail (Romainville, ).…”

State-led Gentrification and the Changing Geography of Market-oriented Housing Policies

“…Yet from the 1990s onwards, the promotion of homeownership has gained greater currency at the national level, at the cost of social renting. A key event in this regard was the cutting of financial ties between housing associations and governments in 1995, officially eradicating state support for social housing 3 (Boelhouwer and Priemus 2014;Aalbers, van Loon, and Fernandez 2017). Housing associations did, however, remain important players in urban development, as is evidenced by their important role in cooperating in various urban renewal policies initiated since then (Uitermark 2014).…”

“…In the years before and after the onset of the 2008 global financial crisis, the public legitimacy of housing associations suffered several blows due to a range controversies. Examples include high salaries for managers, high profile cases of fraud, failed flagship developments, and perhaps most significantly the heavy losses suffered by the housing association Vestia due to speculation with derivatives (Aalbers, van Loon, and Fernandez 2017). Not only did these cases directly impact the financial position of housing associations -Vestia ultimately had to be bailed out for €2 billion, partly paid for by other housing associations (Aalbers, van Loon, and Fernandez 2017) -but they also fostered public support to reduce the role of housing associations in general.…”

Off the Beaten Track? Selectivity, Discretion and Path-Shaping in Swedish Public Housing

“…The MHCs interpret the legislation through a certain discourse, which bears the mark of financialization -the increased dependency of financial motives, financial institutions and financial capital in political economy of housing (See e.g. Aalbers, Loon, and Fernandez 2017). In such a discourse, "risks" and "yield requirements" become truths, enabled via the MHCs documents.…”