Financialization of the urban: what is it and why does it matter? (original) (raw)
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Financial Geographies of Real Estate and Housing
This article is about new governments for financial recovery after the financial crisis. The focus on tracing the creation of an active class derived from the security of rental income for detached houses has become rent. The study strategically combines conceptual agendas, and is discussed separately. Market formation theories rooted in scientific and technical studies provide information on the analytical method to pay attention to the work of realizing markets, the role of computer devices in market formation and the conditional and conditional aspects of markets. This analysis shows that renting families in an active class is a practical achievement. However, a broader framework rooted in the political economy is needed to address the broader meaning of the working class in terms of power, politics and the dynamics of capital accumulation. The article focuses in particular on the historical and geographical events that make it possible to invent a large-scale SFR market, the work of state and capital market players to reformulate single-family homes restored as rental properties, and the role of accounting practices in this process, and the strategies of issuers and credit rating agencies to develop a new asset class for institutional investors. The working-class points to the fundamental role for housing in the ideology of capital, and talks about new implications of financial role players and domestic life, as financial accumulation adapts to the context after the crisis. In addition to the financial financing of housing after the crisis, the article also shows how economic geographers can carefully integrate the theoretical perspectives to critically examine the conditions of market formation and the social, spatial and political consequences of markets.
Financialization and Housing: Between Globalization and Varieties of Capitalism
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.
Stylized facts from housing and finance: How do they relate across space and time?
This paper brings together stylized facts that cover the process of housing-centred financialization across different types of economies. This particular interpretation of the broader concept of financialization revolves around the impression that residential real estate, as store-of-value, has become a central carrier of practices of financialization.
Financial Geographies of Real Estate and the City: A Literature Review
Financial Geography Working Paper #21, 2019
This is an expanded version of: - Aalbers MB (2018b) Financial geography II: Financial geographies of housing and real estate. Progress in Human Geography DOI:10.1177/0309132518819503. - Aalbers MB (2019a) Financial geography III: The financialization of the city. Progress in Human Geography, in press. Financial geography is often understood as the geographies of money and finance, but this paper takes a different understand in which financial geography is a lens that can be applied to a range of topics (Aalbers, 2018a). This approach follows my historiography of financial geography, which suggests that financial geography is not simply a sub-sub-discipline embedded in economic geography; the field of financial geography is equally rooted in the sub-disciplines of political and urban geography (Aalbers, 2015a) and in this literature review I will look at a frontier of financial geography, that is, the intersection of economic and urban geography. My goal here is not to foreground ‘the city’ or ‘the urban’ as the privileged site of applying a financial geography lens, but rather a pragmatic choice to demonstrate how a financial lens can help to enrich different fields of geographical research. My conceptualization of the city is equally pragmatic: for the purpose of the literature review in this paper, I use it primarily as a container term to include studies of urban governance, housing, real estate and the built environment. This review is not the place to discuss the nature of ‘the urban’. It is also worth pointing out what I have not included here: studies of financial centres, such as the City of London, Wall Street, Raffles Place or Bandra Kurla. Research of financial centres and districts is, in a way, the recognized core of geographies of money and finance, not the frontier I want to prioritise here. In the following sections, I will first discuss financial geographies of housing, with a focus on mortgage debt, securitization and the rise of corporate landlords, but also the financialization of construction firms and social housing non-profits. Subsequent sections zoom in on financial geographies of 1) commercial real estate and large urban projects; and 2) the local state and (semi-)public sector. Finally, I draw some conclusions based on the cumulation of findings, diversity of perspectives, and spatialities and temporalities of financialization. In this literature review I have tried to include literature from non-English speaking countries where possible.
Property Prices and Real Estate Financing in a Turbulent World
observed property prices are assembled from an unobservable 'real' property price linked to macroeconomic conditions and the interest rate environment, and a noisy component given by market sentiment. Between January 1993 and July 2007 all IPD index logarithmic returns were positive. This long series of positive returns created an illusion among investors. It implied that they did not give proper consideration to macroeconomic evidence. That changed fundamentally in 2008. During the subprime crisis investor behavior changed from illusion to disillusion and the market prices occasionally fell well below the level indicated by fundamental economic considerations. IPD property derivatives can, according to the author, be used for risk management purposes. Investors have access to Eurex futures that can be utilized to hedge out property risk and avoid the consequences of price crashes. Giovanni Dell'Ariccia and Deniz Igan, IMF Research have authored chapter 3: "Dealing with real estate booms". Until the global financial crisis, the main policy tenet in dealing with a real estate boom was one of 'benign neglect'. It was considered better to wait for the bust and pick up the pieces than to attempt to prevent the boom. The crisis challenged this view. But preventive policy action is difficult to implement. The authors conclude that policy efforts should focus on booms that are financed through credit and where leveraged institutions are directly involved. Macroprudential tools (such as limits on loan-to-value ratios) are the best candidates to deal with real estate booms as they can be aimed directly at curbing leverage and strengthening the financial sector. Cycles are a common feature of real estate markets. Stylized facts suggest that the longer and higher prices go up, the more they will come down. Housing cycles are closely intertwined with credit and business cycles. Peaks and troughs are not far from each other. There are significant differences across countries. Legal and institutional structures matter. In order to improve policy options, the quality of empirical data should be heightened. Real estate is an important storage of wealth in the economy. Monetary policy is a blunt instrument for the task at hand. It is difficult to use fiscal tools. So, macroprudential regulation in the form of higher capital requirements, dynamic provisioning and limits on loan-to-value and debtto-income ratios are the most promising options.
A Conversation about Land Rent, Financialization and Housing
Manuel B. Aalbers and Anne Haila discuss their respective recent books, The Financialization of Housing: A Political Economy Approach (Aalbers, 2016) and Urban Land Rent: Singapore as a Property State (Haila, 2016). Their debate focuses on issues such as comparative research, a political economy approach to urban studies and topics of interest such as land rent, financialization, housing, property states, path dependency, regulation and the role of the state.
Environment and Planning A, 2014
Rethinking real estate finance in the wake of a boom: a celebration of the twentieth anniversary of the publication of the double issue on property and finance in Environment and Planning A As bubbles go, the property bubble of the 1980s in the US, Great Britain, Scandinavia, Japan, and Australia was extreme, perhaps the largest commercial property bubble ever. Amid the subsequent collapse in housing and commercial real estate prices in the early 1990s, Michael Pryke organized two special issues on finance and real estate for Environment and Planning A. This year marks the twentieth anniversary of their publication. Drawing together authors from England, the United States, and Japan, the special issues were an examination of not simply the workings of real estate, but importantly the increasing role played by the financial sector in both fuelling and shaping how this sector operated. This was a period when national real estate became intertwined with international financial markets to such an extent that by the end of the 1980s "real estate and the financial markets [were] more closely linked than at any other historical period hitherto", as Jerry Coakley noted in his contribution to the second of the two issues (1994, page 711). The aims of the issues were twofold: first, to bring together economists (Ball, Oizumi, Coakley), planners (Healey, Fainstein, Beauregard), and geographers interested in the intersections of real estate and finance; and, second, to encourage a theoretical and empirical exploration of the origins and implications of this particular boom and bust. (2) Reading these essays in the wake of the recent wave of overbuilding and the subsequent financial crisis of 2007/08-and seeing how prescient they remain-leaves us wondering why this line of thought was not more diligently pursued in the years following the publication of the special issues. And so we put together a panel at the 2014 AAG both to honor the work of the writers and to bring the essays once more to the attention of the field. The models and methods the authors used continue to offer a template for work that illuminates both the real estate sector and its relationship with the financial sector-a relationship that has changed but not necessarily dissipated in the light of the most recent crisis. At Pion's suggestion, we have also used this as an opportunity to bring together a number of essays on the topic that have been published over the years in Environment and Planning A. We are delighted that Pion has decided to make a virtual theme issue to be made open access for a year, which it will host on its website.