š Context
The report titled "My home is an asset class" was published in 2022 by Daniela Gabor and Sebastian Kohl, commissioned by The Greens/EFA in the European Parliament. This document critically examines the increasing influence of institutional investors in European housing markets and the resulting impacts on housing affordability and accessibility.
š Key Findings
Scale of Institutional Investment
The report reveals significant data on the scale of institutional investment in housing. Approximately ā¬40 billion of Berlin's housing stock has been converted into rental assets by institutional landlords, which is twice the combined value of properties owned by institutions in London and Amsterdam. In 2021, over 4,000 institutional investors allocated around $3.6 trillion of their total $136 trillion in assets under management to European real estate. Notably, 1,325 of these investors, holding $44 trillion in assets, included residential properties in their portfolios.
š Drivers of Housing Financialization
Several key factors are driving the financialization of housing. Low interest rates have prompted investors to seek higher yields in alternative assets such as housing. Furthermore, government policies that appear to support homeowners have inadvertently inflated house prices. The withdrawal of state support for social housing and regulatory frameworks that facilitate institutional investment have also played significant roles in this trend.
šļø Impact on Housing Markets
The ramifications of this trend are profound. The report documents a decrease in housing affordability in major European cities, leading to the displacement of lower-income tenants and changes in neighborhood character. These changes contribute to deepening urban inequalities and include strategic land banking by institutional investors, which exacerbates housing shortages.
š Key Policy Recommendations
The report outlines several policy recommendations aimed at addressing the issues arising from institutional investment in housing:
1. š¼ Sustainable Institutional Housing Framework
Establish a Social Taxonomy that is resistant to social-washing, ensuring mandatory disclosure and regulation of institutional landlords. This includes special provisions for housing within the Social Taxonomy and a regulatory regime that escalates based on the nature of housing asset classes.
2. š° European Housing Fund
The creation of a European Housing Fund is proposed to act as a countercyclical measure during housing market crises. This fund would also aim to prevent the transfer of housing units from private or public ownership to institutional portfolios and raise financing for public investment in social housing.
3. š© Housing Red Flag Rule
It is recommended to implement oversight mechanisms that would ensure that new European-level regulatory initiatives do not inadvertently de-risk housing asset classes for institutional landlords.
4. š Enhanced Macroprudential Mandate
The report advocates for an expanded mandate for central banks to address house price inflation through tighter and socially responsible regulations on mortgage lending.
š Significance
This report stands out as one of the first comprehensive analyses of how European legislation and financial regulations have facilitated the transformation of housing into an asset class. It underscores the urgent need for policy interventions to ensure that housing remains accessible and affordable for European citizens, rather than primarily functioning as an investment vehicle for institutional investors.