Do Real Estate Markets Lead to Unjust Cities?
For two decades, real estate in general and housing in particular have been at the centre of a historic structural shift in global finance. It is believed, for example, that about 60–70% of banking business transactions in industrialized countries today are related to land and real-estate investment. This impact of global financial markets effects cities in different ways. On the one hand, they are regarded as drivers of economic growth by channelling investment to cities. On the other, the assumption that markets are the most rational means of resource distribution for regulating the allocation of urban land and housing has led to public policies that have abandoned people-oriented city planning and the idea of land and housing as a social good. Financialized housing markets respond to the preferences of global investors rather than to the needs of the communities. It is also argued that the dominant impact of wealth and private investment has often created and perpetuated spatial segregation and inequality in cities; housing disconnects from its social function and becomes only a commodity. Today, residents are sometimes confronted with the fact that, as a result of a wide range of financial products, their homes – and even their neighbourhoods – are owned by bondholders, public stockholders, multibillion dollar funds or even nameless shell companies. It is then difficult to know who might be accountable when it comes to the rights of the tenants. Moreover, in many cities an increasing number of investor-owned homes are left empty due to real-estate speculation. In developing countries and emerging economies, these developments have particularly profound consequences for those in need of adequate housing. The urban poor are pushed out into suburbs where their time and money is further taxed by longer commutes, more expensive transportation and/or insecure tenure.
The interconnections between the global financial system and private investors in the development of cities and urban societies are enormously complex. So far, responses have tended to be very sporadic and reactive with little impact on access to housing for all and sustainable urban development.
However, improvements can probably not be tackled by any single ‘big bang’ solution on its own. Rather, for the transformation of cities towards sustainability the role of real-estate markets needs to be discussed and broader systemic issues regarding the financialization and commodification of housing urgently addressed.