The Financialization of Housing in Europe - My Home is an Asset Class

The report "The Financialization of Housing in Europe - My Home is an Asset Class," authored by Daniela Gabor and Sebastian Kohl, was published by The Greens/EFA in the European Parliament. The document explores the increasing trend of financialization within the housing market in Europe, where residential properties are treated as assets for investment rather than homes for individuals and families.

Over recent decades, institutional landlords, including major real estate companies and pension funds, have significantly impacted the housing market, particularly in cities like Berlin. They have converted approximately EUR 40 billion worth of housing into rental assets. This amount is notably double the combined value of institutionally owned houses in London and Amsterdam. The COVID-19 pandemic has further accelerated this trend, making European residential real estate a highly attractive asset class for global investors, bolstered by governmental policies that inadvertently inflate housing prices while reducing affordability.

The financialization of housing has escalated housing prices and reduced rental yields, intensifying the affordability crisis across European cities. Reports indicate that institutional ownership has adverse social effects, including gentrification and displacement of lower-income tenants. Citizens in cities such as Berlin, Dublin, and Madrid have mobilized against institutional landlords, advocating for measures like rent controls and better regulation to counteract the negative impacts of financialization.

The report highlights the lack of transparency regarding institutional landlords. Institutional investors collectively manage approximately USD 3.6 trillion in European real estate, with around 1,325 investors holding residential assets. However, many do not report the specific value of residential properties they own, leading to a situation where the impacts of their ownership on housing availability and affordability are poorly understood.

The document outlines how current European financial legislation has facilitated the financialization of housing while calling for reforms to de-financialize housing for the public good. The authors propose a range of recommendations, including establishing a Sustainable Institutional Housing framework that mandates disclosure and regulation of institutional landlords. They emphasize that housing should be treated as a special asset class within the European Social Taxonomy, thus improving transparency and minimizing social washing.

The study identifies that the growing demand from institutional investors for stable returns has led to increased scrutiny of their practices. While these investors can potentially enhance the supply of professionally managed rental units, the report warns that their presence often exacerbates issues like housing shortages and affordability crises. It calls for a European Housing Fund to counteract the trend of moving residential housing from public or private ownership into institutional portfolios.

In conclusion, the report serves as a critical examination of the financialization of housing in Europe, calling for urgent action to reclaim public responsibility for affordable housing. It emphasizes the need for a cohesive regulatory framework that aligns institutional investment practices with the human right to adequate housing, ensuring that housing remains accessible and affordable for all.