A report of the United Nations Human Rights Council on the right to housing was issued on the first of March, 2017 by Leilani Farha, a special rapporteur who explored the financialization of housing and its detrimental impact on human rights, in particular, the right to housing. Today, the global capital markets and financial excess have fully transformed the Housing and real estate markets worldwide which can be referred to as Financialization of housing. It is mainly the phenomenon that occurs when housing is treated as a commodity – an investment, a vehicle for wealth rather than a social good.

The report discussed a paradigm shift that has been occurring in recent years in the enormous field of global housing markets. Particularly, it covered the ever-growing disconnect between seeing housing as a human right, and as a financial vehicle for investment. From the repercussions of the ‘golden visa’ in countries like Spain and Portugal to the n number of foreclosures per day in the United States at the time of the global financial crisis in 2008, the rapporteur painted a bleak picture, that highlighted financialization of housing at its heart. However, certain arguments presented reflected in the report that the financialization of housing “tends to exacerbate inequality”, “seeks to undermine democratic governance”, “dehumanizes housing” and that it causes homelessness and displacement, were seemingly not without merits, the report did miss out on some of the nuances. In particular, it presumes that financialization, and thus the finance in general, solely has a negative impact. 

Now concerning the housing market, several examples of financial innovation having a positive impact are also manifold. First, if we consider the innovation and concept of ‘short selling’, wherein an investor borrows a share, sells it to someone else and hopes to buy it back at a lower price. Ofek and Richardson have proposed and demonstrated a link between the dotcom bubble and restrictions on short selling, arguing that when the ability of investors is restricted to short sell a stock, they aren’t able to “bring the markets back to reasonable price levels”. Whilst short selling in the housing market is still challenging, certain financial products such as Exchange-Traded Funds (ETFs) that is used in tracking the inverse of a portfolio of REITs, may provide a few opportunities for investors to do so. Indisputably, new financial products which allow investors to short-sell the housing market, tend to make the markets more efficient and the advent of a bubble less likely.

Second, while mortgage-backed securities have a negative picture because of their tie to the onset of the global financial crisis of 2008, they have also had positive impacts. Particularly, they have constantly ensured a better supply of capital to potential lenders, making housing cheaper. In addition, securitised mortgage debt makes people’s consumption considerably more resilient to the ongoing ups and downs of the business cycle”. The underlying theory here is that when banks could sell parts of their mortgages, they should might as well “continue to supply credit to consumers even in downturns” 

And lastly third, the home equity protection may provide protection to the homeowners against declining housing prices. Home equity protection comes in varying forms, such as insurance, wherein a homeowner has to pay a regular fee and receives a pay-out when the house prices fall below a certain level. Thus, while the report argues that “financialized housing markets have caused displacement and evictions at an unparalleled scale”, financial products such as home equity insurance may, in fact, counteract displacement and further allow the homeowners to protect themselves against events like the global financial crisis of 2008.

Hence, from inflation-indexed debt to home equity protection, these examples showcase a different side of financialization. I believe that we should not forget that new financial products may bring about positive changes in the global housing markets, possibly making this human right of housing more accessible and affordable to people across the globe.