Housing financialization as a self-sustaining process. Political obstacles to the de-financialization of the Dutch housing market

Abstract

The 2007–2009 financial crisis exposed the risks of housing financialization. Yet the political dynamics shaping post-crisis efforts to de-financialize housing have received surprisingly little analysis. The financialization literature posits that de-financialization policies have been hampered by a policy consensus on the desirability of the pre-crisis status quo. I examine this claim through a detailed analysis of Dutch macroprudential policy reforms, which aimed to mitigate housing-related systemic risks. It finds a fragmented rather than coherent policy community, with the central bank and financial conduct authority pushing for ambitious policies. While they influenced reforms during the housing bust (2008–2013), the government ensured that these financial supervisors would remain peripheral to the future determination of these policies. As the subsequent housing market recovery reduced the urgency to reform, supervisors were unable to impose further de-financialization policies. Housing financialization thus appears self-sustaining, by making mortgage-related policies politically too important for the government to consider a significant empowerment of the actors that might challenge it.