PRS Financialization IV: the big picture
The Week in Housing 18/04/25
I’m releasing today’s post early as tomorrow is Good Friday. Previous posts in this series looked at US Single Family Rental, the privatization of public housing and ‘renovictions’. In this final post on PRS financialization, I zoom out to look at what, based on the literature, we can think about as the five key dimensions at stake here: the internationalization of the PRS; the concertation of ownership of housing; the role of the state; affordability; and tenants’ rights.
1) PRS financialization involves the internationalization of the PRS via direct ownership and management of PRS housing by international firms. This can be contrasted with the historical norm in rental sectors across the advanced economies, traditionally owned by domestic operators, be they institutional or household. Financialized PRS housing is being operated directly by firms which are owned or financially backed by international financial institutions, including REITs, private equity firms, hedge funds, pension funds, and insurance firms. This necessarily involves the deep integration of a portion of the PRS into financial markets, and thus a more intense linkage between ‘high finance’ and ‘the everyday life of households’. PRS housing is now subject to a variety of forces, such as currency exchange values, interest rates set by the Federal Reserve and the ECB, the performance of competing assets, such as Government bonds, in a way which has simply not been the case heretofore (see my piece on interest rates here). We know from the experience of financialization during the 2000s that the integration of housing and financial markets can lead to unappreciated risks to housing systems, financial systems and, most importantly, residents. Currently, the types of risks that might be generated by PRS financialization appear to be unknown.
2) The financialization of the PRS is clearly closely related with a wider phenomenon: the concentration of ownership of residential property. Given that for financial institutions scale is crucial, they are associated with a particularly acute form of concentration. A notable related issue has been the tendency towards consolidation, via mergers and acquisitions, over recent years, which is evident both in the US SFR market, but also in markets such as Germany and Sweden. Of the €167 billion of residential assets held by private equity firms in Europe, the top 4 (Blackstone, Patrizia, Lone Star Fund and Amundi) account for an incredible 50% of assets under management (Gabor & Kohl, 2022). Thus, while there is a general concentration of housing ownership among better-off households, the financialization of the PRS in the form of institutional landlords represents a kind of ‘super-concentration’.
3) The state has played a key role in the financialization of the PRS in many, although not all, jurisdictions. State intervention has played a role both in terms of transformations to the housing system (as well as planning) and to the financial system. In terms of housing, there are a number of ways in which Governments have reformed or intervened in housing policy to facilitate the financialization of the PRS. Perhaps the clearest is the case of countries like Germany and Sweden, which experienced direct sales of public and social housing to institutional landlords. In other cases, reforms of tenancy legislation have played a role. Gill and Martinez argue that the deregulation of both security of tenure and rent regulation in Spain, which took place via legislative reform in 2013, was aimed at facilitating financialization. State action at the level of the financial system has been at least as important, if not more so. Examples include legislation to establish REITs, which occurred in the UK, Spain and Ireland between 2007 and 2013 (Fuller, 2021; Nethercote, 2020); and the mass sale of distressed property assets by public ‘bad banks’, especially in Ireland, Spain and the US.
4) While the full impact of PRS financialization is not known, and even the full extent of this phenomenon is not fully understood (Holm et al., 2023), the existing literature indicates that the most significant impact of this shift in the PRS will be a reduction of affordable rental housing (although it should be noted that Build to Rent, as a specific form of PRS financialization, may reduce affordability pressures via delivery of new supply). However, the way institutional landlords contribute to unaffordability, again, differs in different contexts. In cases like Germany and Sweden the mechanism is rather straightforward, i.e. via the privatization of formerly affordable public and social housing. Meanwhile, in many countries the salient phenomenon centres on renovation, upgrading and gentrification. In cases like Ireland and the UK, where Build to Rent rather than acquisition of existing stock dominates, the relevant issue is that institutional landlords are mainly focused on the higher end of the rental market. More generally, there is evidence that institutional landlords set higher rents, likely related to their focus on better quality units, the provision of additional services, the location of their investments, and the scale and geographical concentration of their investment, and hence the market power they may exercise in setting rents (Fields & Vergerio, 2022; McCarthy, 2024).
5) While it seems likely that in some instances institutional landlords can provide a better tenant experience, Institutional landlords may be associated with further undesirable outcomes, including higher levels of evictions (Gomory, 2021), displacement (Gustafsson, 2024), unresponsiveness and poor maintenance (August & Walks, 2018; Fields & Vergerio, 2022; Janoschka et al., 2020; Wijburg et al., 2018), and gentrification (August & Walks, 2018; Raymond et al., 2021; Wijburg et al., 2018). However, the extent to which these outcomes are characteristics of institutional landlords in general, or to which they are more systematically associated with institutional landlords compared to other types of landlords, is not clear from the existing research.
Events & news
The next instalment of our Making Rental Housing Affordable series will take place on May 21st and focuses on Danish Cost Rental - register here. I hope to make the recording of the first in the series available within the next week. The next Simon Talks webinar will focus on mental health and homelessness and takes place on April 29th.
What I’m reading
The latest in the Housing Agency’s Insights Series looks at tackling dereliction in Limerick. For those of a philosophical bent, this new article looks at the political philosophy critique of multiple-property ownership. I’ve just ordered a copy of this new book on tenant activism, Renters Unite.
References
Aalbers, M. B. (2017). The Variegated Financialization of Housing. International Journal of Urban and Regional Research. https://doi.org/10.1111/1468-2427.12522
August, M., & Walks, A. (2018). Gentrification, suburban decline, and the financialization of multi-family rental housing: The case of Toronto. Geoforum, 89, 124–136.
Beswick, J., Alexandri, G., Byrne, M., Vives-Miró, S., Fields, D., Hodkinson, S., & Janoschka, M. (2016). Speculating on London’s housing future: The rise of global corporate landlords in ‘post-crisis’ urban landscapes. City. https://doi.org/10.1080/13604813.2016.1145946
Byrne, M. (2016a). “Asset price urbanism” and financialization after the crisis: Ireland’s National Asset Management Agency. International Journal of Urban and Regional Research, 40(1), 31–45.
Byrne, M. (2016b). Bad banks and the urban political economy of financialization. City, 20(5), 685–699.
Card, K. (2024). From the streets to the statehouse: How tenant movements affect housing policy in Los Angeles and Berlin. Housing Studies, 39(6), 1395–1421.
Christophers, B. (2022). Mind the rent gap: Blackstone, housing investment and the reordering of urban rent surfaces. Urban Studies, 59(4), 698–716.
Fields, D. (2018). Constructing a new asset class: Property-led financial accumulation after the crisis. Economic Geography, 94(2), 118–140.
Fields, D., & Vergerio, M. (2022). Corporate landlords and market power: What does the single-family rental boom mean for our housing future?
Fuller, G. W. (2021). The financialization of rented homes: Continuity and change in housing financialization. Review of Evolutionary Political Economy, 2, 551–570.
Gabor, D., & Kohl, S. (2022). My home is an asset class. The Greens/EFA.
Gil García, J., & Martínez López, M. A. (2023). State-led actions reigniting the financialization of housing in Spain. Housing, Theory and Society, 40(1), 1–21.
Gomory, H. (2021). The Social and Institutional Contexts Underlying Landlords’ Eviction Practices. Social Forces.
Guironnet, A., Bono, P.-H., & Kireche, N. (2023). The French touch to the financialisation of housing. Institutional investment into the Paris city-region (2008–2021). Housing Studies, 1–22.
Gustafsson, J. (2024). Renovations as an investment strategy: Circumscribing the right to housing in Sweden. Housing Studies, 39(6), 1555–1576.
Holm, A., Alexandri, G., Bernt, M., Belotti, E., Bortolotti, A., Watt, P., Hodkinson, S., & Aaudycka, B. (2023). Housing policy under the conditions of financialisation. Sciences Po.
Horton, A. (2021). Liquid home? Financialisation of the built environment in the UK’s “hotel‐style” care homes. Transactions of the Institute of British Geographers, 46(1), 179–192.
Janoschka, M., Alexandri, G., Ramos, H. O., & Vives-Miró, S. (2020). Tracing the socio-spatial logics of transnational landlords’ real estate investment: Blackstone in Madrid. European Urban and Regional Studies, 27(2), 125–141.
McCarthy, B. (2024). Institutional Investment and Residential Rental Market Dynamics. Central Bank of Ireland.
Nethercote, M. (2020). Build-to-Rent and the financialization of rental housing: Future research directions. Housing Studies, 35(5), 839–874.
Raymond, E. L., Miller, B., McKinney, M., & Braun, J. (2021). Gentrifying Atlanta: Investor purchases of rental housing, evictions, and the displacement of black residents. Housing Policy Debate, 31(3–5), 818–834.
Santos, A. C. (2024). Peripheral housing rentierisation in Southern Europe: Reflections from the Portuguese case. Housing Studies, 1–26.
Waldron, R. (2018). Capitalizing on the state: The political economy of real estate investment trusts and the “resolution” of the crisis. Geoforum, 90, 206–218.
Wijburg, G., Aalbers, M. B., & Heeg, S. (2018). The financialisation of rental housing 2.0: Releasing housing into the privatised mainstream of capital accumulation. Antipode, 50(4), 1098–1119.