House Prices Research Papers - Academia.edu (original) (raw)

A global wall of money is looking for High-Quality Collateral (HQC) investments, and housing is one of the few asset classes considered HQC. This explains why housing is increasingly becoming financialized, but it does not explain the timing, politics and geography. The need for HQC, supported by a neoliberal ideology, discursive tenure practices that favour homeownership, and government policies pushing the financial sector as a key engine of economic growth, have internationally—but far from globally—inflated mortgage finance bubbles.

The state is far from absent in the process of creating variegated patterns of housing financialization: it is directly implicated in each step that the wall of money takes towards securing HQC in local and national housing market sectors. The state actively—but not always consciously—creates the conditions for the financialization of housing and other assets, sectors and markets, often through a process I called “regulated deregulation” (Aalbers, 2016). The term indicates that the state is not withdrawing but rather being restructured (increasingly also through finance) in a way that favours the interest of some, often financialized corporations, and at the expense of others. Regulation is not being repealed to make the market mechanism function more smoothly; it is introduced to create new markets that end up looking nothing like the level playing field utopias espoused by neoliberal economists, think tanks, lobbyists and politicians. Of course the state could do other things, and luckily some arms of the state continue to, or start to, do other things—a theme we will revisit in the second half of this chapter.

Colin Crouch describes the situation that governments have created as “privatized Keynesianism”, which occurred initially by chance, but gradually became a crucial matter for public policy. Instead of governments taking on debt to stimulate the economy, individuals and families did so, including some rather poor ones. (...) Once privatized Keynesianism had become a model of general economic importance, it became a kind of bizarre collective good, however nested in private actions it was. (...) that very irresponsibility became a collective good. (Crouch, 2011: 114)
In this book I analysed how privatized Keynesianism was introduced in the years following the Great Moderation, a period that economists think of as one of stable growth and convergence, but which, in fact, was the beginning of the Great Excess, in which income and wealth inequality in many countries increased rapidly (Piketty, 2014). The lack of real income growth was matched with a rapid rise in household debt, and in particular, mortgage debt for the middle and to some extent lower classes.

Privatized Keynesianism, the Great Moderation, neoliberalization and financialization have transformed the nature of homeownership and rental housing, and in turn also the social relations of housing. We arrive here a fundamental point of contention between Marxist and Weberian housing scholars. As covered in Chapter 2, Marxists maintained that one’s position in the housing market is a result of one’s position in the labour market, i.e. social class determines housing position; while Weberians argued that one’s position in the housing market determines social class. Kemeny (1992), for example, argued that housing forms the basis for a new explanation of social inequality.