On the Financialization of Housing (Or “Why Not Celebrate Your House's Birthday?”)
Housing affordability is at a record low. Both rents and mortgage payments have been trending upwards at astounding rates. Income has not kept up.
While there are many issues at play here, one of the systemic underpinnings is the “financialization” of housing, a set of trends and behaviours that stem from the understanding of homes as assets / investment vehicles.
This writeup is not a policy recommendation. It is not an in-depth analysis of the ills plaguing the housing market. It is not my usual (if you can call writing something once every two years “usual”) parade of data.
This is a brief thought experiment to illustrate that (i) financialized housing is by no means the natural or inevitable state of the world and (ii) fully buying into the “house as an asset” metaphor, as we have, is more than a bit ridiculous.
This House is not a Home
To put forward a definition from the top search result on our limitless internet:
Financialization is a term used to describe how housing is treated as a vehicle for wealth and investment – rather than a human right and a social good for people and communities.
…whereby “human right and social good for people and communities” they mean “a place to eat, sleep, and defecate out of the rain and at a temperature suitable for human existence”.
What does financialization look and feel like? It is the difference between:
“It’s a two bed, two bath,” said the realtor.
“It’s fully winterized,” said the builder.
“It’s where we raised our children,” said the parents.
..and…
“It’s an investment,” said the realtor.
“It’s collateral,” said the banker.
“It’s our retirement,” said the parents.
Or to go full economic theorist (as we’re all known to do when the mood is just right), it is the transition from “use-value” to “exchange-value”.
Use-value is relevant in any economic system where folks use money to get the things they need. For example, if your job has you moving from Victoria to Halifax, you might sell your house in Victoria, receive money, then use that money to purchase a house in Halifax.
House 1 → Money → House 2 (Where House 2 is closer to work than House 1)
For both House 1 and House 2, the primary value is from using the home. Yes a financial transaction took place, but in service of a house as something useful (specifically, a job-adjacent place to live).
Exchange-value flips things around. For example, if you are living in Victoria and your goals require you to improve your bank balance, you might decide to buy a house in Halifax, renovate, and resell the renovated Halifax house for a profit.
Money 1 → House → Money 2 (Where Money 2 is greater than Money 1)
While its still true that the Halifax house has walls that stop wind and a roof that stops rain, all of this is incidental to the goal of improving your financial situation. The house is no longer valued for its use, the house is valued for its function in exchanging less money for more money.
Financialization is prioritizing exchange-value over use-value. In our policies, in our behaviours, in our arguments about what is fair and right.
Spelled out academically, it’s a bit innocuous. In reality, the prioritization is saying:
It is very important that one of the ways to get rich is buying and selling houses, even though it comes at the expense of people having a place to live.
It is very important that the price of homes does not drop, even if it means that younger generations cannot afford them.
It is very important that REITs provide an attractive return, even if it means more Canadians will freeze to death each winter.
…and so on.
It feels absolutely normal to refer to a home as an investment. A financial asset. Something that can be loaned against. Something that appreciates. A market that can crash.
But all of that is secondary to the fact that a house is walls, a ceiling, shelter from the rain, the cold, etc. All of that is an abstraction we’ve chose, prioritized, and made real through our actions, policies, and lack thereof. An abstraction that’s increasingly driving perverse societal outcomes.
But how do you see an abstraction for what it is? What other choice do we have? Isn’t this just the way things are? That natural consequence of a human instinct for securing resources? What would the “something else”-ification of housing even look like?
The Personification of Housing
A house is a not an asset, but a person. It is not purchased, but adopted. Your home specifically is not at all an investment, nor is it just a shelter. It is a member of your family.
While you can be sure that a home is not a human being (Please, you’re not delusional!), it is a being of sorts and can be understood to have its own set of needs and emotions. Needs and emotions that must be respected. When it’s hurt, you heal it. You have to keep tabs on weathering, so you time preventative maintenance with your house’s birthday celebrations. Twenty is going to be a big year. New roof!
The idea of selling a house as a simple transaction, with value appreciation and the question of a return? This is tantamount to trafficking. Even without the money talk, it would be abandonment. Jail time in any civilized society.
Of course, you understand that situations change and people have to move. A live-in relationship with your birth home can’t always last a lifetime. This happened when you were younger. While your parents orchestrated the process, you have clear memories of how it played out. Moving is always an emotional time, but there are happy memories alongside the sad ones.
The whole thing was much like a wedding. After a courting period, there was a big ceremony where the new family was accepted as the future caretakers of the house. There were handshakes and hugs and teary eyes. For the dinner, mom and dad put together a veritable feast. Promises were made for a future reunion, to visit the house whenever you found yourselves in town.
Or how about…
The Deification of Housing
A house is not an asset, it is a holy thing. Whether each house is itself a deity, a godly manifestation, or simply a shrine is a subject of debate. No matter which you subscribe to, the practicalities of reverence don’t change much. I’m a shrine man, myself. False idols and such.
Your house, being holy, is the subject of a lot of tribute and ritual. You’ve got a very housing orthodox neighbour who’s adamant one cannot run the dishwasher without making a whole ceremony of it lest you’ll be damned to vagrancy.
You’re a bit more lax and just dedicate Saturdays to the home. Toil and sacrifice to the glorification and preservation of this shrine to the Heavens. Let it protect thee and thy family, for every father mows his Lawn and every mother sweeps her Floors. We are blessed to live and grow in the warmth and Walls of the Highest Spirit. Amen.
Of course, to live in a holy place comes with rules. You have certain acts that must be done in the home. You have certain acts forbidden. Home birth, for example, is insisted upon in all but the most medically complex cases. It is the home that gives life just as it preserves life, after all.
The consumption of alcohol in the home, on the other hand, is strictly forbidden. That is, outside of the fall equinox ceremony where those lucky suburbanites with outdoor pools drain them and drink white wine to represent the home’s lost water. You, like most folks, do all the readings but, lacking a pool, just fill and drain the bathtub.
For most things, there is a degree of flexibility. It’s renovations where things are spelled out down to the last detail. The Building Code and Zoning Laws are in theory supposed to accommodate the diverse belief systems of all housing sects, but it’s an open secret that in Victoria the Civil Clergy are practically an arm of the Flock of the Single Family. Just pick a random passage:
“For each Bedroom in excess of two, the Home must have a Parking Space that measures no less than 5.8 cubits in width and 12.6 cubits in length, with a vertical clearance of 4.5 cubits. The word of the Lord.”
You’re of the belief that they’ve entirely twisted the Holy scripture into something that, pardon my language, can only be described as NIMBY-ism.
So, this is totally ridiculous. Right?
In a way, yes. In a way, no.
Yes, these scenarios are totally ridiculous because of the wild impracticalities they impose.
No, these scenarios are not totally ridiculous because, to some degree, we already behave in ways that are consistent with both the personification and deification of housing.
You don’t make your house a person because we seem to understand that, while a burst pipe under the sink and a burst artery are both emergencies, they are not the same thing. If moving quickly to a new city is tantamount to casting a child into the streets, it’s unreasonably hard to move to Edmonton for that new job. Is your house your daughter? You know that it isn’t. Behaving as if it were would be stupid and difficult.
And yet, in English we use the word “home” to simultaneously mean both “house” and “family”. When we talk about warmth, it’s as likely to be about our HVAC system as it is our loved ones. There’s a valid metaphor for a house as a person - specifically a family member or a close friend - based on the core idea that houses, family, and friends are all (i) fundamental to your support and care infrastructure and (ii) defining aspects of the environment that shapes your identity.
Conceiving of a house as a deity gets very complicated very fast. There’s a different culture around interior decorating when, before hanging a picture, you must cut open the palm of your hand and press it bloody against the place where the finishing nail will be laid. Drink in the pain of your humble servant who begs forgiveness for this desecration of your drywall. The high stakes of interacting with the divine are a poor fit for the practicalities of daily living.
And yet, house-to-deity parallels are prevalent in our behaviour. Take tithing. What is the first expense applied to income in modern financial planning? The rent or the mortgage. There’s even a little percentage rule for both - 10% for tithing, 30% for housing (though in both cases the practice of adhering to these rules has gone out the window).
Why do fathers disproportionately receive power tools as gifts? Is it because they’re going to build a local community centre? Do they work in construction? Do they really need to own all this? Almost never. It’s a social elevation of personally caring for and tending to one’s house like a shrine. For making clothes, raising livestock, and most other core underpinnings of survival, it’s fine to outsource it. Those are just pieces of the economy. Home maintenance is ritualized as something one does personally, on a recurring basis, as a core part of identity, with its practitioners often spending disproportionately on the ostentatious accessories to do so. Sunday is when I go to church. Saturday is when I mow the yard. A ride-on lawnmower is a gilded incense swinger for the suburban dad.
The list goes on. Holy days that have community gatherings at the church, mosque, or synagog almost always have a corresponding gathering of family and friends in one’s own home. For the right house in the right neighbourhood, we may opt to be more distant from and lose touch with certain friends or family members. Many do the same for the right god.
At the high level, we live by the metaphor that both houses and holy places are (i) fundamental to our most important gatherings, (ii) places to take deep pride in, and (iii) core to the cadence of our defining rituals.
The Takeaway
Each metaphor has useful elements. When taken to the extreme, things start to fall apart. The idealogical framework stops enabling the outcomes we want and starts to get in the way.
That’s what we’ve done with financialization. We’ve taken a useful metaphor:
A house is an asset in that… it can be owned
A house in an asset in that… it has a value which is not depleted by use
And taken it to the extreme:
A house is an asset in that… its core purpose is to be optimized for financial return
This extreme view takes us from use-value to exchange-value. From out of the rain for people, to making it rain for realtors. From “place to be” to AirBNB.
Financialized housing is not the natural state of the world. Houses have as much in common with gods and family members as they do with financial assets. Using any of these frameworks where helpful is equally valid. Taking any of these frameworks to the extreme is equally stupid.
So what do we do?
Build to Suit
There is no perfect framework we can copy and paste onto housing, because houses exist to achieve specific outcomes. Outcomes that are extremely basic, but so drowned out by the investment conversation, that it can be helpful to spell them out:
Protection against cold, damp, heat, rain, and wind
Access to water for drinking and sanitation
Access to energy for cooking, lighting, heat, and food preservation
Proximity to community, work, stores, and schools
Space to safely sleep, eat, store belongings, and generally exist
We need to shape a system that makes sense for these basic outcomes, not borrow one that is unable to distinguish between a 15-story apartment and a 50-meter stack of bills.
There’s lots of thinking on how to achieve this. As a simple example:
Limit the number of rental units that can be owned by a single individual or entity. Those who already own a rental unit aren’t eligible to buy more. No matter how rich you are, you get one, then you’re out of the race. Wealth disparity cannot continually drive up housing prices. Rentals are still available, they’re just owned by a less concentrated set of people.
For more, the Canadian Human Rights Commission has a pretty exhaustive list (linked here, pg. 38-43) as do dozens of other reports from the past decade.
We know what system needs to be built. Giving ourselves permission to build it requires recognizing what we’ve recognized today. That (i) financialized housing is by no means the natural or inevitable state of the world and (ii) fully buying into the “house as an asset” metaphor, as we have, is more than a bit ridiculous.
For now, when you hear objections to sensible policy by someone who is prioritizing the exchange-value over the use-value of housing, don’t be embarrassed to call it out.
In a not-so-alternate universe, the finance bro insisting that unfettered free markets are the only solution is just another a religious zealot, sacrificing goats to a new gazebo.
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