Tools to tame the financialisation of housing

Abstract

The extensive research on financialisation of housing and lively public and political debate on its negative implications for housing affordability have translated into surprisingly modest and fragmented policy responses. This reflects the power imbalance between the winners and losers from financialisation, but also the challenges inherent in taming financialisation due to its variegated, complex, and evolving nature and shortage of research on de-financialisation tools. To address this critical evidence gap, this article draws on the concept of financial circuits and comparative research on policy responses in the 56 United Nations Economic Commission for Europe member states. Comparing these policy responses with a four-part typology of the features of financial circuits which impact most on housing affordability reveals a pattern of uneven and inadequate action. Most governments have focused on controlling the scale of housing finance circuits, whereas limited action to control the number and cost of these circuits and practically no action to influence their focus has been taken. Some policy measures have reduced credit flows and thereby diminished house price growth, but their effectiveness has been undermined by countervailing policies and poor policy design, leading to inadequate targeting and implementation weaknesses.