Financialization of Housing

My essay position is that I agree with the illuminating report presented by Special Rapporteur Leilani Farha, who empathetically argues the case that housing has become financialized, and it has lost its currency as a “universal basic right.” She addresses this idea that corporations, financial institutions, hedge funds, and smart money have taken aim at the housing market, and caused high prices, homelessness, and displacement. The influx of capital has meant that people cannot afford to live in their community. This displacement could be avoided, but it is the inability of the state to regulate predatory lending in the financial market. In addition, Leilani makes the case that housing is being compromised by three factors.

“Do you have a design in mind for your blog? Whether you prefer a trendy postcard look or you’re going for a more editorial style blog - there’s a stunning layout for everyone.”

You’ll be posting loads of engaging content, so be sure to keep your blog organized with Categories that also allow visitors to explore more of what interests them.

Homelessness vs Private Equity

The first factor is financialization undermines democratic governance and community accountability. This means that governments are more likely to answer to credit agencies than to what human rights require. Monetary importance can heavily influence the housing market from remote boardrooms. The problem with human rights is that it is not easily enforceable when violations occur. Presently, companies use their capital to lobby government officials, and influence policies such as housing and taxes for the purpose of making money. As Farha effectively highlights, these private and public practices perversely worsen the problem of affordable housing, displacement and homelessness; making it necessary for the government to consider the collateral damages along with the interests of private equity.

The second factor is financialization of housing exacerbates inequality and social exclusion. This means that financial institutions have created wealth by acquiring residential and commercial properties. According to Leilani, housing has become a huge profit for nameless corporate entities, and this has displaced the low and middle-class residents. This displacement has been caused by high rent and mortgage costs. Community gentrification can increase housing inequality.

The third factor is financialization detaches housing from its connection to communities. Families who have lived in communities for more than 20 years are being displaced by the acquisition growth of private equity. The lack of affordable housing and foreclosures have led to a more complex web of poverty. It is estimated that 150 million people are homeless worldwide.

According to https://www.hudexchange.info/homelessness-assistance/ahar/#2019-reports, there were 552,830 people who were homeless in the US. In Leilani’s UN statement, she discusses how some states and local governments have begun to develop policies regarding housing. However, these discussions have not brought about systemic housing regulation changes.

Current regulations have led to more real estate purchases by wall street firms such as Blackstone and Blackrock. Governments should incentivize companies through tax benefits to invest in the inner city. Local governments should require that purchased property agreements mandate a certain number of housing units and employment opportunities for local residents. In the words of Leilani, “The State must regulate, direct and engage with private market and financial actors.” This will ensure that the financial institution’s actions are consistent with the right to adequate housing.

According to www.therealdeal.com, Blackstone paid $18.7 billion in 2019 for the purchase of warehouse assets in one of the largest industrial real estate deals in history. Blackstone’s global real estate portfolio was worth $324 billion according to its website in March 2020. Regulation reform must be implemented so both sides can benefit. How can states regulate if they do not have a solution?

Perhaps, Finland’s solution could serve as a model for the US. The idea is to give the homeless individual a house first, without moving through the different stages of temporary accommodation. This could be financed through the state, non-profits, and investment firms. The Finland model incorporates new apartments recreated from hostels, shelters, and public housing. The model maintains a strict housing mix: 25% social housing, 30% subsidized, and 45% private sector. According to https://www.ara.fi/en-US/Materials/Homelessness_reports, in 1987, Finland had 18,000 homeless people, and in 2018, it decreased to 5482.

In 2008, the real estate market bottomed out, and many private equity firms acquired residential and commercial properties. This shift was the reason behind unaffordable housing and homelessness. Another area that needs the government’s attention is evicting tenants with 60-day notices. For example, in Los Angeles, there is a “No cause eviction” where a tenant can be ousted from their lease even if they do not violate the lease. During the 60 days, the investment firm is able to renovate the property, and increase their profit with higher rents.

Tenant displacement could also be addressed by the 1980s New York model. The New York solution was implemented to provide permanent housing with support services for individuals who have mental illnesses or HIV. As it stands now, there are severe consequences with deregulation, but these consequences could be avoided by implementing immediate housing policies and solutions.

In conclusion, Leilani Farha makes a strong case for the government officials and private investors to urgently address the current housing crisis. Leilani’s purposeful mission and commitment is focused on eradicating housing unaffordability, family displacement and homelessness. After reading her statement, I am left with the question “Where do we go from here to implement sustainable solutions?” My critique with her recommendations for India and Portugal is that they only touch the surface of the problem, and do not lend itself to sustainability and accountability. The Finnish housing solution appears to be a viable consideration to begin systemic change.