Real estate offers perspectives on understanding some of the factors in
social mobility and economic decision-making, both at the macro and the micro levels. It has had a profound impact on not only government policies, but also meaningful discussions and choices for individuals looking to become homeowners. In recent years, liberalization of the mortgage markets and complex finance operations using mortgage as collateral
(See Mortgage-backed security) have led to the expansion of the world economy.
(See Financialization) Housing and voting patterns Housing and left/right cleavage While popular culture tends to link home ownership with
right-wing voting, studies conducted across Europe tend to show mixed results. In
Sweden, homeowners from
left-wing social classes are likelier to report themselves as right-wing. In
France, middle-class voters were three times more likely to vote for
Nicolas Sarkozy in the
2012 French presidential election, but results showed few variations between homeowners and tenants among lower-class and upper-class voters. In
Germany, homeowners were more likely to vote for conservative parties when house prices were rising. In the
UK, studies on the
Housing Act 1980 and the
1983 United Kingdom general election tend to show that while purchasing council houses was linked to a decreased likelihood of voting for the
Labour Party (UK), it is mostly the Alliance (center-left) that gained those defecting voters. Studies in the UK and Germany have also highlighted links between home ownership and the redirection of voting patterns towards center-left parties. In line with results from the 1983 general election, a more recent study has argued that as part of a broader process of ‘gentrification’ of Labour electoral interests, UK homeowners tend to divert from the
Conservative party (UK) towards a party that reconciles economic interests and left-wing ideals. In Germany, one study has also pointed out a similar ‘embourgeoisement’ effect of the
SPD vote. (See below “The trade-off between Social policies and home ownership)
Housing and populism Recently, several studies conducted in several European countries sought to determine the influence of housing on right-wing populist electoral results. While political spectrums and housing markets differ according to countries, studies highlight some cross-national trends. Studies regarding the relationship between variation in house prices and populist electoral results have found that voters living in areas where house prices increased the least were more prone to vote for right-wing populist parties. One explanation may lie in the fact that as the housing map created winners (those owning in dynamic areas) and losers (those holding in less prosperous areas), those who experienced a relative decline in the value of their homes tended to feel left out of a significant component of household wealth formation, and therefore were inclined to favorite populist political parties which challenged a status quo that did not benefit them. In the UK, some have highlighted a correlation between the relative deflation of housing prices and an increased likelihood of voting in favor of
Brexit. Research in France shows that those who saw their home prices increase tended to vote for candidates other than
Marine Le Pen in the
2017 French presidential election. In Germany, studies show that die
AfD scores are higher in areas where house prices have not risen as much as the average rate. (the formers generally being considered as less prosperous areas), represent to some a sign of upward social mobility towards neither affluent nor disadvantaged class and who do not felt represented by traditional right-wing political parties, which they consider representing a more favorited population, or by left-wing political parties, which they regard representing less deserving class and not supporting their efforts. Such analysis, combined with previous presentations on house price variations, point in the direction that right-wing populist electoral results are, at least partly, driven by geosocial factors, with lower middle-class people living in less populated areas not feeling supported by traditional political parties and afraid of social downgrading.
Debates around intergenerational conflicts Around Europe, debates around generational inequalities have been the subject of several news outlets. Regarding ownership inequality in Europe, data points to a positive relationship between age and home ownership. In
England, those over 65 owned 35.8% of all houses in 2022, while they only represented 18.6% of the population in 2021. In Germany, 50.4% of 60-69-year-olds owned their homes, while only 18.4% of 20-29-year-olds did. As older people tend to have more time to accumulate wealth, academics highlight that these inequalities are wider than decades ago. Research shows that such inequalities exist due to a significant increase in housing prices to the annual income, also known as the wealth-to-income ratio. (See below Wealth-to-Income Ratio) Data collected from the Bank of England show that, in 1982, a house cost, on average, only 4.16 times an average British person’s annual income, but it has now climbed to 8.68 times the yearly income in 2023. Several European countries enacted in the 1990s different public policies aimed to promote home ownership. In the UK during the 1980s, the
Thatcher premiership passed the ‘right to buy scheme,’ which saw 3 million council houses sold at a price between 30% and 70% below market prices. In France, liberal housing policies gained ground in the 1970s, enabling the rise of residential suburbs. Nonetheless, some have also nuanced the extent to which countries have uniformly incentivized homeownership during that period. Studies on Nordic countries have highlighted the difference in housing models promoted by public policies, arguing that while
Norway has been promoting cooperative and private ownership, it has not so much been the case with
Denmark, which has, for example, institutionalized nonprofit renting. Academics have also pointed out that the strain on capital accumulation that resulted from
WWII and
post-war era interventionist and redistributionist policies have helped workers – i.e., those who earn a large share of their income through work, to earn a larger
share of national income, translating into a greater ability to become homeowners. Such theories would tend to favor the idea that intergenerational homeownership inequalities are more a product of class-based inequalities than intergenerational inequalities as such, as young people struggle to a larger extent not because older people have ‘hoarded’ the housing market but because the capital class, which is not constituted via age but rather by intra-familial transfers and wealth accumulation, have exploited the labor class to a greater extent since the end of the 1970s. In line with this argument, some highlight the importance of considering intragenerational housing wealth inequalities; studies regarding the UK have demonstrated that such household housing wealth inequalities are the most important within the baby-boomer generation, suggesting limits to the intergenerational divide theories. While several news outlets have framed a growing generational conflict around housing ownership, some studies have argued that if, from an objective perspective, millennials recognized that baby boomers were better off, a relational analysis demonstrated that they did not resent the older generation for their situations but rather the government for out-of-touch policies. As for the baby boomers, they tended to resent sympathy for the younger generations, recognizing that they were facing more significant barriers to home ownership. Similarly, research argues that if the probability of housing being a personal issue significantly decreases with age, the tendency to consider it a country-wide problem, i.e., a public policy issue, remains similar across generations, which would tend to affirm the prominence of inter-generational solidarity rather than inter-generational conflict.
Paradigms of Social Welfare Policies Regarding Real Estate Economics Many government policies in social welfare states view houses as assets – a way for families to hedge their risks against eventual retirement and have a safe form of savings alternative to other pensions. Since the 1980s, these governments have often focused on making the housing market more liquid by broadening the access to financing of houses. Bohle and Seabrooke argue that there are three paradigms of housing: • Social Right - All citizens deserve fair housing. It is the obligation of the state to provide society with the ability to own homes by intervening in the market. (ex.
Rent controls, tenure legislation, housing allowances, public/cooperative housing provision,
management of housing by public or non-profit corporations, etc.) An example that the scholars offer is the post-war Scandinavian housing policies.
Sweden believed that all citizens should have fair access to the housing market and that the state must play an active role in shaping the market to this nature. • Asset - Houses are individual properties, and the markets work in the supply/demand fluctuation to provide opportunities. Essential for “asset-based welfare.” Furthermore, it serves as
collateral for debt, which in turn serves as an investment outlet. (
See neoliberal capitalism) Pensions are often complementary to housing-related financial products. Government programs would include the privatization of home ownership, deregulation of mortgage markets, the establishment of
credit scores, fiscal and tax policies geared to home ownership, and assurances from
central banks to stabilize mortgage bond markets. • Patrimony - Family houses are passed on to younger generations: inheritance laws, family-based tax breaks, and subsidies. Family is seen as the stabilizing force of sharing political and economic preferences, and thus, patrimony is often seen under strong conservative connotation. There are clear examples in which these three paradigms served as the basis for structural changes in which states’ housing policies evolved based upon the economic changes. In
Ireland, the 1980s housing market reflected a patrimony-based housing market – but since then,
neoliberal policies have led to cutting social housing programs and increasing private home constructions. Housing finance became even stronger with the EU accession, and banks began asset-based lending. By 2016, the Irish households were the fourth most indebted in the EU, a fifth with residential mortgage debts.: After the
Great Recession, Ireland suffered from the
Troika, resulting in Irish domestic laws undermining the social policies in favor of its financial health. The Land and Conveyancing Law Reform Bill 2013 made it possible for lenders to repossess homes from borrowers - an action aimed at protecting the financial sector rather than having a coherent housing policy. The vacancy rate of housing in Ireland rose to 12.8%, leaving behind ghost towns. Ultimately, wealthier households in Ireland pass their houses to children while lower-income families are excluded from ever owning property – watching the paradigm of Ireland shift from asset to patrimony. In
Denmark, the persistence of tax breaks for mortgage debt led to Danish consumers becoming one of the most indebted people in the world, with an average of 250% of debt per capita relative to personal income. Denmark used a mortgage-based covered bond system as its form of “privatized monetary policy,” in 1986, the housing bubble burst, leading to the coalition government reducing the mortgage interest deductibility from taxes. After the 1989 reform of the mortgage financing system (in line with the EU’s Second Banking Directive) and the 1990 Social Democratic government’s liberalized mortgage product policies, the credit market and available credit for housing boomed. In the 2000s, cracks began to show between the elites and masses - 2007 reforms allowed Danish banks to enter the mortgage market more aggressively while the foreign investment interests in Danish mortgage bond markets increased. (Increased financialization, the continued road to the housing as asset policies). Continued marketization of housing led some apartments in Copenhagen to triple in price within five years. In
Hungary, foreign capital began flowing in during its accession to the EU era, and banks in Hungary were encouraged to increase their access to lending and lower borrowing costs, creating a risky housing market. When the housing bubble burst in 2008, the socialist
Gordon Bajnai administration (2009-2010) focused on reducing public debt and deficit rather than the private side (over-indebted population).
Orban’s government took a pivot from these policies - it angled its attacks on the foreign banks and lenders as the predators for why Hungary fell under economic downfall; the government levied special taxes on banks, insurance companies, and financial sectors. It tried to alleviate the burdens of households of foreign currency loans by allowing borrowers to pay in
Hungarian forint (currency) at a preferential rate if they could pay their loans in one lump sum. Lenders were compelled to compensate borrowers for discrepancies between the exchange rate they used for loan repayment and the market exchange rate. However, this pushed the lower-income part of the society even further down; the cut down on subsidies to housing for these groups made homelessness even a crime. The ultraconservative policies pushed the cost of the housing onto the banks rather than taxpayers, while Hungary’s housing deprivation problems and issues with dampness, rot, lack of bathroom facilities, and overcrowding are among the worst in Central and Eastern Europe.
Governments’ neoliberal policies and rising mortgage debt levels The popular academic discourse surrounding the financialization of real estate is that liquidity and furthering of credit stimulate economic growth. Deregulation and liberalization are ways financial regulators intended for the markets to grow – through the increasing utilization of real estate as collateral for other financial products. Such decisions have led to the creation of complex financial transactions that eventually led to the government’s continued neoliberal policies of opening the housing markets to financialization. The academic debate around the causes for rising levels of mortgage debts concerns their focus on the supply or the demand side of the housing market. Recent scholars focusing on the demand side explain that consumers purchasing and owning houses seek mortgage lending to complete their purchases, ultimately increasing house prices. Schwartz states that the 1980s
deregulation of
mortgage markets increased potential credit, resulting in higher demand for real estate and rising prices. This side of the academic debate presents an argument that seeks to use increased demand for housing over the years as the primary reason for rising levels of mortgage debt worldwide. On the other hand, Anderson and Kurzer argued that drivers of housing supply led to a rising level of mortgages and household indebtedness – while also interacting with the demand levels for housing. They studied the
Netherlands,
Denmark, and
Sweden – three countries with the highest levels of outstanding mortgage
debts compared to their
disposable income and the highest levels of mortgage debts as part of their
GDP. In summary, the study presented that the three countries rode the waves of political policies that were formed around the right/center-right governments’ desire in the 1990s to stimulate home ownership and reduce social housing expenses and build a society of self-sufficient home-owners. However, when the more left-leaning governments came to power, they did not reverse these policies. Instead, they introduced further deregulation of mortgage markets to allow more working-class consumers to become homeowners. As a result, the continued neoliberal policies around the mortgage markets in these three countries led to the growth of banking power. Danish banks saw their annual growth rates in lending exceeding 50% between 2003 and 2007, while in the Netherlands, the Dutch market for securitized assets (in this case, mortgage-backed securities) became the second largest in Europe after the UK in 2008. In Sweden, the Swedish-covered bonds (securities, usually backed by mortgages) were at 55% of GDP in 2014 and more than double the Swedish government bonds. In summary, the scholars argue that the Netherlands, Denmark, and Sweden mortgage markets were liberalized to encourage financial innovation and promote homeownership. Still, residential construction remained stagnant, leading to an inelastic housing supply. Government officials and regulators liberalized the mortgage market using credit and financial products such as special mortgage packages and consumer tax incentives to bypass this issue. Because all three countries have very high tax rates, the fiscal relief offered by tax incentives from having mortgages seemed even more lucrative, increasing the demand. At the same time, the supply of housing continued to stay inelastic. Anderson and Kurzer conclude that this led to the collapse of housing markets under the crumbling legs of complex mortgage-backed financial products. Ultimately, the debate around the rising mortgage debt levels worldwide centers around financialization and the political agenda of homeownership. There are strong connections to government programs that reflect the political ideologies of homeownership and the economic tools to achieve those means. In the case of the Netherlands, Sweden, and Denmark, Anderson and Kurzer showed that the center-right governments began increasing homeownership to cut social housing costs and reduce social policy dependence. The center-left government that subsequently followed also used similar tools of neo-liberal housing policies to enable homeownership for working-class citizens.
The trade-off between Social policies and home ownership Academic debates surround the nature of the trade-off between
social welfare and house ownership. In the 1980s, Jim Kemeney presented that
homeownership and social welfare policies have an inverse relationship. First, Kemeney argued that citizens living in a country with meager retirement pensions and/or lacking government support of public welfare policies would tend to make private contributions in their earlier phases of life towards
retirement – often in the form of housing. Homeowners would feel that their home is a valuable asset that would safeguard them from the risks of eventual retirement and aging. Thus, they would feel less inclined to rely on or support the government’s public welfare policies. The government’s social welfare policies would further undermine the value of the houses because the public support of the social housing upkeep will ultimately drive the value of the homes downward. Kemeney showed these findings from his analysis of eight
OECD Countries, including Sweden, the Netherlands, the UK, the USA, Canada, Australia, and others. About twenty years later, Frank Castles, a professor of political science at the Australian National University, conducted more in-depth research on Kemeney’s thesis and strongly confirmed his case. Castles would adjust Kemeny’s thesis to show that the “really big trade-off” was between homeownership and
pensions instead of the welfare state. Kemeney’s main argument is presented in his work: “My overall argument was that high rates of home ownership impacted on society through various forms of privatisation, influencing urban form, public transport, life-styles, gender roles, systems of welfare and social security as well as other dimensions of social structure. I argued that an overwhelming emphasis on home ownership created a lifestyle based on detached housing, privatised urban transport and its resulting ‘‘one-household’’ (and increasingly ‘‘one-person’’) car ownership, a traditional gendered division of labour based on female housewifery and the fulltime working male, and strong resistance to public expenditure that necessitated the high taxes needed to fund quality universal welfare provision.” In 2020, Gunten and Kohl returned to Kemeny’s thesis. They presented a different side of the academic research, presenting in an updated study that this inverse relationship between social welfare and house ownership converges upwards to what they labeled the “dual ratchet effect.” Huber and Stephens argued that the political costs of stopping social policies could be damaging, and thus, social policies are more resistant to their opposition. Gunten and Kohl reciprocate this argument for homeownership – homeownership is also used to garner political support due to its popularity amongst citizens – and thus, the damaging political costs from withdrawing the benefits of having public policies favoring homeownership (ex. In the form of
tax breaks,
subsidies, etc.) lead to a resiliency against its opposition. This inelasticity of both social policies and homeownership resulted in the fact that high costs associated with decreasing either of the policies resulted in them being more responsive to upward drivers rather than downward effects. Governments bypassed the issue of unloading the problems of social policies on homeowners by using the credit markets – resorting to inflation in the 70s, public debt in the 80s, and private debt in the 2000s. This was labeled as the buying time hypothesis by Gunten and Kohl and will be further supported by their capital supply hypothesis – where the amount of capital available will increase due to the deregulation of the international financial market since the 1970s and the growth of private pension fund assets leading to an abundance of available capital. In conclusion, Gunten and Kohl present a case where the inverse relationship between homeownership and social policies existed in the 80s but has changed towards the dual ratchet effect of simultaneous, upward convergence. Furthermore, they state that if the trade-off in the long run still holds, the correction costs of homeownership and pensions will eventually correct themselves in the long run when the amount of capital begins to dwindle and the credit market runs dry. ==See also==