Housing commodification and financialization as discrimination
By: Juan Carlos Benito Sanchez
Tags: Housing, Poverty, Human Rights, Discrimination, Finance

Photo by Chronis Yan on Unsplash

Anti-discrimination law is crucial to addressing housing inequalities. On the one hand, it complements and enriches a right to adequate housing approach, clarifying some of the least explored elements of this right. On the other hand, it gives us practical tools to fight against the hostility, prejudice and stigma suffered by disadvantaged groups; the lack of recognition of diverse identities and practices; the lack of transformation of existing housing structures; and the unfair distribution of housing in society.

In this series of posts, I present the main findings of my PhD research project “Securing Housing for All in Diverse European Societies: Applying International and European Antidiscrimination Law to the Housing Context”. This is the second post of the series. You can find the first post on housing segregation here.

Housing commodification and financialization are pervasive phenomena compromising the affordability of housing for individuals and families around the world. Disadvantaged groups, both from a status-based and from a socioeconomic perspective, tend to suffer the negative consequences of these processes in a disproportionate manner.

Housing commodification arises when housing is no longer viewed as a human right, but rather as an object to be traded in the market. Through commodification, housing becomes detached from its rights-based and needs-based function, and it becomes a mere commodity to be produced and then sold for profit. One of the main drivers of housing commodification is the fact that housing can be easily used to store value, as it persists across decades. This means that apartments and houses are seen as “safety deposit boxes in the sky” instead of places to live in.

Housing financialization, for its part, represents one further step in this process. Through financialization, housing becomes an asset by reference to which financial flows of capital are invested and divested. Profit is generated here through financial (instead of productive) channels. Housing financialization is especially visible in mortgage markets, and one of its main drivers is mortgage securitization, by which mortgage loans are split, recombined and repackaged to be sold as a new investment product.

Housing commodification and financialization are exacerbated by deregulated and globalized markets, where prices are no longer aligned with the local social need for housing but have more to do with location, the scarcity of land and the interests of powerful market actors. The market functions here as a plutocracy, reflecting the demand of those with the highest purchasing power. Through these processes, housing becomes a mechanism for rent extraction, financial gain and wealth accumulation, instead of a social good that is also provided to those with less resources.

Both states and private actors play a decisive role in housing commodification and financialization, and I argue that both can be held liable to some extent under anti-discrimination law.

Firstly, housing commodification and financialization have been largely facilitated and sponsored by states. Many countries deliberately adapted their legal and financial frameworks to fit the needs of large corporations and investors. In doing so, states reinforced and legitimized the criterion of purchasing power over need, fostering a model where those who cannot access private housing markets to satisfy their housing needs are left helpless. This can occur either because certain individuals and families do not have sufficient means to afford the prices dictated by the market or because they experience status-based discrimination (for instance, because of their ethnic origin, their disability or their gender) in the private housing market.

Anti-discrimination law offers some solutions in this regard. A strong anti-discrimination legal framework can be used to tackle widespread housing discrimination against status-based disadvantaged groups, for example by addressing direct discrimination and discriminatory harassment in private housing transactions. Moreover, restrictions can be placed by states on the level of income that landlords may require potential tenants to prove and on the documents that landlords may request from potential tenants, thus reducing socioeconomic discrimination.

Furthermore, many public policies and practices that result in housing commodification and financialization have a disproportionate negative impact on disadvantaged groups. If these policies and practices cannot be sufficiently justified, they may be found as indirectly discriminatory and therefore prohibited under anti-discrimination law. This means that states ultimately ought to promote decommodification policies that are diversity-conscious and all-inclusive and which promote need over purchasing power.

Secondly, besides states, private actors are also potentially liable under anti-discrimination law for carrying out certain discriminatory practices that exacerbate commodification and financialization. Perhaps the clearest example is that of predatory lending, whereby banks and lending institutions target lower income households, offering them financial products with unreasonably high risks and with abusive and unfair clauses. These practices indirectly discriminate against status-based disadvantaged groups, notably ethnic minorities, migrants and single-parent households.

Another example is the bulk purchase of housing units below market prices, often as distressed assets coming from bank restructuring or from public authorities, in order to substantially raise rents and force out the existing tenants. In most cases, evicted households are made up of older tenants, tenants with disabilities, young children, etc. Such structural actions by large private actors destabilizing housing markets can be found as constitutive of prohibited indirect discrimination if they have a disproportionate impact on socioeconomically or status-based disadvantaged groups and if they do not have an appropriate and objective justification.

In sum, housing commodification and financialization hinder the realization of the right to housing for many, and especially for socioeconomically and status-based disadvantaged groups. Anti-discrimination law can be leveraged to some extent against states and against private actors who foster and exacerbate these processes, complementing a right to adequate housing approach and offering specific legal avenues to improve the affordability of housing for all.