4 - The case of housing

Summary

Introduction

An investor-subject critique is at the heart of criticisms of financial inclusion. This critique is driven by the idea that people are shifted from the security of the welfare state to the insecurity of financial markets. This chapter studies the case of housing. It does this because housing is arguably one of the most important investments made by investor-subjects and this case highlights the connections that exist between the financial system and other parts of the economy. Hofman and Aalbers (2019: 91; see also Jordà et al, 2014) comment that the:

alleged dominance of finance is in many ways interdependent with real estate. For example: real estate has become the single largest form of collateral that banks provide credit on. Between 1870 and 2010, the share of mortgage loans in banks’ total lending portfolios doubled from 30 to 60 per cent in a group of 17 OECD countries including the US, Canada, Australia, Japan, the UK and 12 other European states. … Finance may dominate the economy, but real estate finance dominates banking.

Smith (2008) underlines the connection between housing and the financial system. Drawing on two qualitative studies done in the UK, she explores the conceptual links between housing, home and finance. Smith (2008) argues that ‘home’ has a variety of meanings. In the English-speaking world, she claims that the notion of home has become closely bound up with the idea of an investment. This means that the homeowner is seen to be an investor rather than a propertyowning citizen. Smith (2008) argues that these home investors need access to mortgage markets to be able to make investments and so housing is bound up with financial markets. She writes that in places such as the US and UK:

homeowning (or homebuying, at least) is the dominant housing style, and it takes a particular form: it is funded, insured, and to an extent marketed and managed, by a stream of financial services which link households’ cash economy (their behaviours around savings, spending and debt) into the world of international finance. (Smith, 2008: 520)