Brief overview of topic:
Particularly I do not agree with the UN report describing negative side but also, I am not fully against the report.
As we all know, everything has two sides one positive and another negative side. The financialization of housing too has two sides, one positive implication and another negative implication. But we have to see which side dominates and which is suppressed by the other one. Converting housing as a basic utility into a commodity has various implications.
Today financialization of housing is common in almost every place. Today people see housing as an investment opportunity rather than a basic necessity for dwelling purposes. Nowadays housing is not seen as a basic utility to be consumed by every person in the country but it is seen as an opportunity to invest our excess capital and gain profit.
People nowadays with their excess capital make investments in real estate and with these housing prices hikes. It becomes impossible for middle-class and lower-class families to buy a new house for dwelling purposes. After keeping some portion of income aside labelled as savings, people keep some per cent income for investment purposes.
First, they see the stock market as the best opportunity for investment, but if the market is highly volatile, they opt for many other options and investing in real estate is one of them. Rich investors make huge bidding on houses for investment. With these housing prices hikes and making it for middle and low-class people impossible to own any house for basic utility. Discussion and research were also conducted by the United Nations Human Right council about the financialization of housing and its implication for the well-being of many people in different countries. Specifically, two countries were selected for the research, these were India and Portugal.
Negative side of the financialization of housing:
The negative side would be that low-class and middle-class families are not able to fulfil their housing rights because the rich families are seeing housing as an investment opportunity for wealth creation rather than as a basic utility that is to be acquired by every citizen of the country. It is their fundamental right or you may say housing right given to them by the constitution.
The real estate business is expected to grow at a constant compounded annual growth rate of 3.2%. Urban gentrification is a term that defined the augmentation of housing prices, rental prices hike in property values, resulting in the exclusion of the low-income class from their neighbourhood and push in living in slums, squatter settlements and homelessness.
As it is stated by Professor Robert Shiller, the total value of land in China is incredibly high relative to its GDP. Hence the rent is very high. How can the average middle class have to cope with these prices and at the same time fulfilling its dwelling purpose? So, with these, we can conclude that there are many reasons with the help of which we can say that due to the financialization of housing, the housing problems have increased rather than decreased.
Benefits:
However, financialization has also merits which we ought to discuss because of this many financial products have increased in the financial market. Now more investors have participated in this process and more finance is coming into the financial markets. The financialization of housing has attracted more private equity, HNI, FPI and many corporate investors, which helps to keep the fiscal deficit under the control and bring new investments into the market. Because of these financial markets increased, which is considered a positive side for the particular nation.
Another benefit is the accessibility of financial products to the large number of investors, who might be unable to purchase land physically, so in these, they can easily get in and get out of the trade. With the financialization of housing, manipulation of housing prices is near impossible. As the efficient market theory professes that with a much number of speculators, manipulation of housing prices becomes impossible.
With the advent of the financialization of housing, many new things have come that are considered innovations. Different types of insurance have come to insure houses against risks like a flood, fire and any other natural calamities. People buy the insurance to ensure that their houses are being insured against any risk.
Financialization of housing becomes a curse when big private firms and players enter into the picture and try to manipulate housing prices in their favor and this results in the exclusion of low and middle-class families.
Solution for the financialization of housing:
To overcome this Government has to enter and tend to take control of the real estate market into their hands. They have to create rules and regulations and efficiently regulate the real estate market. Government has a huge responsibility for regulating the real estate market and ensuring adequate housing for all of its citizens. I feel there should be some sort of regulation by the Government to provide subsidized or affordable housing to everyone.
To conclude I will say that the financialization of housing is not bad but due to some major players it becomes worst for the lower class of groups and it violates human rights.
Example:
As we all know India is a vast nation with about 1.3 billion population. As a result, there would be a problem with housing. Many such people are not getting houses to live in and are unable to afford them because of huge housing prices. And housing prices have increased more than 50% in 5 years.
There are many ways to eradicate this problem by increasing more houses with an affordable range. Because of this those people are not able to purchase houses due to income constraints and it becomes impossible to buy them. In India, the government has implemented the housing scheme under the name, “Housing for all” in which government aims to establish 20 million houses in urban areas. With the aim of housing 100 million people by 2022.
