The Financialization of Housing and Affordability in the Private Rental Sector

This paper integrates different strands of research which are in some way or another concerned with (increased) inequality in housing outcomes, and provides for an empirical illustration of the relevance of such an endeavor. Our main focus concerns the association between housing market financialization and the increase of housing affordability problems for lower-income private renters, and how such an association has come about across 12 Western-European countries. We incorporate a spatial dimension by distinguishing between ‘urban’ and ‘rural’ regions. We argue that housing market financialization adversely affects households with less economic and political power through housing market dynamics arising from the strategic behavior of higher-income households and other housing market actors, e.g. landlords. Our findings support such arguments: In particular in countries with strong financialization (Ireland, Netherlands, Spain and Portugal) decreasing affordability arises from the fact that during the period 1995-2007 private rent increases were not compensated for sufficiently by the growth of household incomes, controlling for changes in the age and socio-economic composition of our group of interest. Changes after the Great Financial Crisis (up to 2013) were more limited and diverse. Other than expected, our findings do not indicate large differences between urban and rural settings.