Housing policy under the conditions of financialisation - The impact of institutional investors on affordable housing in European Cities

The report titled "Housing policy under the conditions of financialisation - The impact of institutional investors on affordable housing in European Cities" is published by the Sciences Po Urban School. The authors of this research include Andrej Holm, Georgia Alexandri, Matthias Bernt, and several others, focusing on the effects of financialisation on housing affordability across various European cities.

Since the 2008 financial crisis, the phenomenon of housing financialisation has gained attention, particularly regarding the growing role of institutional investors in housing markets. This trend has exacerbated the housing affordability crisis in major European cities, as institutional investors increasingly dominate property ownership. The study examines seven cities—London, Brussels, Milan, Berlin, Malmö, Athens, and Warsaw—to analyze the specific impacts and strategies of these investors in local housing contexts.

The report highlights that institutional investors control a significant share of rental housing, yet their influence varies greatly by city. For instance, in Germany and Sweden, investors have acquired entire housing estates, while in Central and Eastern Europe, they target niche markets like student housing and care facilities. Overall, institutional investors manage over 1 million rental apartments across Europe, with a notable concentration in Germany, which hosts over 770,000 units.

Athens exemplifies a city grappling with severe housing challenges, characterized by a homeownership rate of around 68%, most of which are small owners. The city has faced a significant increase in rental prices, particularly since 2017, driven by rising demand from international investors and local financial actors. The average rent for a 75 sqm apartment has surged from €6.9 per sqm in 2015 to €10 in 2019, representing an almost 40% increase.

Despite the existence of social housing schemes, they remain underfunded and insufficient to meet demand. The report notes that only about 5.6% of tenants benefit from reduced rents, while the broader population faces rising costs due to inflation and energy price hikes. The financialisation of housing has led to a scenario where many households are increasingly burdened by housing costs, with 32.4% spending over 40% of their disposable income on housing.

Institutional investors have redefined the housing landscape, often prioritizing short-term returns over long-term affordability. For example, new construction projects are typically aimed at high-end markets, pushing lower-income households further from affordable options. The study indicates that investor strategies often involve buying distressed properties or portfolios of non-performing loans, further complicating access to affordable housing for vulnerable populations.

The report emphasizes the need for robust housing policies that can effectively regulate institutional investments. It calls for a reassessment of existing frameworks to enhance tenant protections and ensure that housing remains accessible. Strengthening collaboration between local governments and institutional investors can also help address the pressing need for affordable housing solutions in urban settings.

The findings underscore that while institutional investors play a substantial role in the housing market, their impact on affordability remains contentious. The report advocates for policy frameworks that not only address the dynamics of financialisation but also prioritize sustainable housing solutions to safeguard the interests of local populations across European cities.