“On the Political Economy of Housing and the Affordability Crisis”—An Interview with Manuel Aalbers and Steffen Wetzstein

by Václav Walach (University of Ostrava)


With the deepening crisis of housing affordability (Lee et al.2022), there is a strong incentive to explore non-mainstream approaches to the study of housing. Following on the post-Global Financial Crisis expansion of political economy perspectives (Jacobs et al. 2022), this interview focuses on the approach that refuses to see housing merely as a commodity whose production and distribution is primarily driven by individual self-interest and market forces. Political economists recognize economic activity as deeply embedded within wider sets of social and political relations, which are linked to the interests of different social groups and institutions, including the state. While mainstream economists seem favoring the view of the state as an essentially restrictive entity that imposes constraints on market relations, political economists, on the contrary, emphasize its productive character. Very often it is state involvement which creates markets and market actors.

In this interview, the political economy approach is discussed in more detail with two of its leading proponents. Manuel Aalbers is a Professor in the Department of Earth and Environmental Sciences at KU Leuven. Steffen Wetzstein currently works as an Adjunct Research Fellow at the School of Social Sciences at the University of Western Australia. Together, we talked not only about differences between political economy and mainstream economics but also about the role of finance, the finance–state nexus, false promises of the market-based supply housing policy, and possible solutions to the current housing affordability crisis.

The interview took place online on 4 October 2022. Then, a transcript was made, edited, and sent to Manuel and Steffen for completion and confirmation. The process was concluded on 7 November 2022.

The Interview

Václav Walach: You are both human geographers publishing extensively on the political economy of housing. How did you become interested in political-economic approaches? Would it not be enough to leave the issue of housing to the staff of economics departments?

Manuel Aalbers: When I started my PhD studies, my specialization was urban planning and urban sociology. I did not know much about political economy approaches in the study of cities and housing before. I knew of David Harvey, for example, but I really became interested in his work through my research on mortgage redlining, which was the topic of my PhD thesis. Mortgage redlining is a practice that excludes some people from mortgage lending based on the place where they want to buy a house. I realized that not only had Harvey written on this issue, but he had also attempted to theorize this issue. That was something that I missed in the housing studies literature, along with an understanding of how finance works its way into housing. For many non-economists, the finance side of housing seemed simply too complicated. Economists, on the other hand, did not know much about housing policy. Focusing on housing markets, they saw policy primarily as something that should be limited as much as possible, the only exception being a policy that prescribes measures to help the supply side. I was interested in the intersection of those two things—housing policy and housing market—which seemed like separate worlds.

That said, I came to the political economy approach, because I did not see anything else out there that tried to unite these two areas. One of the most fundamental insights of political economy is precisely that it prompts us to think of how the state and the market operate together. The state and the market are not opposites; in fact, they are mutually constitutive. There are, of course, other approaches that realize this. Anthropologists, historians, economic historians, and some non-heterodox economists know that the market and the state produce each other. Mainstream economists see it differently.

Steffen Wetzstein: Growing up in East Germany, I became aware of the implications that political economy has for my life and my opportunities very early. Why is it that my peers in West Germany have certain goods and services that I have not? Why can they travel, and I cannot? This has always raised a strong political interest in me. The more academic encounter with the political economy approach was a bit like Manuel’s. I studied my PhD program in Auckland, New Zealand at a time when the country was undergoing a strong change in their political economy from almost quasi-socialist system in the mid-20th century to one of the most excessive market-driven systems now. When you experience this kind of change which has produced many winners but also many losers, it automatically motivates you to know more about it. I also had good professors around me. David Harvey was not so much promoted at Auckland. It was rather Nigel Thrift and those who went further into perhaps the cultural political economy in the 2000s. Jamie Peck also had a strong influence on me.

Today, I believe you cannot understand our changing world without political economy. Mainstream economists have few answers how to solve the current crisis. David Malpass from the World Bank just talks about caution, caution, caution. Christine Lagarde was totally wrong with her predictions six months ago. Economists struggle to understand this highly complex and highly problematic world we have now. Political economy is important because it allows you to look into the political environment that might offer a different system. You can hardly come up with alternatives if you are just stuck in the current system. So, I think that we should apply the political economy approach because it gives us some insights into how power operates, which also involves specific methodology.

VW: Lack of understanding about how the state and market work and taking the current system almost for granted are two areas where economics is often criticized. Can you tell us more about this, Manuel? Where do you see the main differences between political economy and economics?

MA: I agree with Steffen that power, methodology, and the degree to which we take the system for granted constitute important differences. Mainstream or neoclassical economists take the system we have as a natural system and, within that, they look for rather marginal differences and, therefore, only marginal improvements that fit that system. This is very important to recognize, as it means that their research and policy are very bounded. It cannot be otherwise when their view of how markets and society work is bounded by all kinds of assumptions they make. If you assume that people always act rationally, well, that has a lot of implications. Psychology, sociology, anthropology, or behavioral economics show that people think that they often act rationally, but this is more rationalizing, often after the fact, rather than anything else. Economists themselves are often quite well aware of the fact how limiting these assumptions are, but they are not willing to drop them.

Going back to my PhD studies again, I read a lot of work by economists on housing discrimination. Many papers were just concluding that there is no housing discrimination. For a while, I did not understand what data these models were based on until I read a piece by a critical economist who was basically explaining how his colleagues were wrong (Nesiba 1996). If your basic assumption is that there is no discrimination, it should come as no surprise that you indeed find that housing discrimination does not take place. The problem is with the mathematical models that are based on theoretical assumptions, such as that the market is the best way to solve every problem, people act rationally, and a whole range of other things, which rule out the possibility of discrimination in advance.

So, some of the best critiques of mainstream economists often come from other economists who are not necessarily going to work outside the limited but domineering space of neoclassical economics. In political economy, it is much easier to get inspiration from other approaches. I had a PhD student who merged the post-structuralist approach with the Marxist approach, and he did splendidly (Di Feliciantonio 2016). In economics, such a practice is very difficult, as they are so closed off from the rest of the world. At the same time, when economists actually work with empirical data—a lot of them do—they may perform fascinating analyses with very interesting outcomes. They cannot always explain what they find because their way of explanation is often limited. But what they can do with large datasets is beyond what I could do and what, I think, a lot of other geographers would be able to do.

To give an example, I often cite a study by the Federal Reserve (FED) that revealed how mortgage lending has become the most important thing that banks do in the Global North (Jordà et al. 2014). The authors followed the patterns of bank lending from 1870 to 2011, demonstrating that mortgage lending started to grow faster than all the other forms of lending after the end of the Second World War, and this trend even accelerated since the late 1980s. Now, banks in the Global North are doing more mortgage lending than all the other forms of lending combined. Banks in these countries are primarily in the business of mortgage lending; everything else is secondary. I have not seen any geographer or anyone else doing a study that would establish such patterns; it is very difficult to get those data comparable for 17 countries over a period of 140 years. And I am very thankful that they did that study.

So, there are still possibilities, I think, maybe not directly for an open dialogue, but to learn from each other. I can learn a lot from what they do. Unfortunately, it does not work the other way around so easily. We include the issue of power in our research, we see the state differently, there is a different methodology. This all makes it very difficult for them to actually understand what we are doing and to put our work within their universe.

VW: Before focusing on the role of financial capital in housing in more detail, Steffen, you have also raised serious objections to how economics treats housing issues. In one of your recent papers (Wetzstein 2022), you challenged market-based housing supply policy. Why is it problematic?

SW: Like in every idea, there is some truth in it. If you upzone land like in Auckland, New Zealand, and if you create incentives, especially in times where there is an abundance of money, then you can issue more permits, and people at least intend to build more. However, there are some issues that complicate this causality. One of them is that you can hardly show empirically that an increase in supply will be equal with prices going down everywhere. There are case studies that claim to show the opposite. Some of them are quite stylized though. Just look at Greenaway-McGrevy and Phillips’ paper on Auckland, in which they look at the construction permits given, and not at whether these development projects have actually started or completed (Greenaway-McGrevy and Phillips 2022). I think quite a lot of them have because we live in absolutely bonanza times for development. But still, a permit does not mean that these houses exist.

The biggest concern is that those pro-market supply studies, and the whole market-based housing supply notion, cannot deal with the overall context. Market-based housing supply can work in a system where you have unlimited finance, where economic growth—even speculative—happens, where you have the so-called perfect storm for housing. We had this time after 2008-2009, but has an increased supply of housing translated into a greater affordability? No, of course not. We have seen higher prices and less affordability instead. Why? Because this process has been driven by factors that were not captured by market models.

In my paper, I criticized the market-based housing supply policy based on critical economist literature on housing and urban land markets and actual stakeholders’ experience. They both identified the limits of this policy and the economic model that underlies it very clearly. Mainstream economists generally struggle with the big complexities and analytical frames surrounding not only common good provision but also of the operation of urban land markets. It is very difficult for them to work such a complexity within their models. As a result, the models they run are extremely reductionist.

Finance is another important issue that these models cannot deal with. In his interview with Anne Haila, Manuel talks about how finance actually creates its own demand—self-generating demand, so to speak (Aalbers and Haila 2018). Because of that, in a world of highly financialized housing systems you have strong drivers for those beyond actual—physical—housing dynamics that cannot be captured in those models. And that is why the models are really problematic, because they look at it as if finance does not exist, although that is a key driver of the current dynamics.

So, overall, market-based housing supply policy is a very problematic approach, and that applies especially when it is argued that it will help poor people or even lower middle-class people now. There are some places in the United States, for example, where there are favorable conditions to pro-supply approach. But in many parts of the world that I have studied, there are not. It is the real problem when this approach becomes part of policy. I think it will cause further problems for those people who actually need housing, who need homes to live.

VW: Manuel, what is your take on the issue of market-based housing supply policy and theoretical models behind it?

MA: I basically agree with everything Steffen says. My main concern is “supply of what?” In theory, supply and demand meet. But in reality, supply-driven often does not mean demand-driven. We can see that what is being built in many places is not what the most demand is for—that is, affordable housing. It is not the prices that they need, it is often not the sizes they need, and it is not always in locations that they need. So, that is one very big issue here that market-based and supply-based approaches tend to overlook as if this is a detail.

And then if we look at cases where supply has been very high, higher than household growth, we see in many of those places that housing prices went up. And that has to do with this idea of the self-generating demand that Steffen mentioned. You can also speak of it in terms of hot markets where people just want to buy because otherwise, they fear they would be too late and get completely priced out. But this way they contribute to the frenzy. New Zealand, Canadian cities, Atlanta, these are some good examples of very hot markets, where housing prices go up despite supply going up as well. The same applies to places that were hit hard by the Global Financial Crisis: a lot of them had very high supply. Spain was building more houses in the five years before the crisis than Germany, France, and the United Kingdom combined and with a population that is smaller than each of those countries individually. In the United States, the crisis concentrated in Florida and California. And again, these places were not supply-constrained: a lot of them were building heavily. Florida is known to always build a lot. Still, they had housing prices going up. Belgium, where I live, has seen housing prices going up despite the fact that supply is increasing faster than the number of households. This took place before Covid and even during Covid.

Housing prices tend to go up whether the supply increases or not; it is almost irrelevant you could say. Of course, there are places like London and Paris where there is an absolute shortage of housing, because not everyone can live in those cities, and they are already quite big. Even if you would have more high-rise buildings, that will not change much because there is almost endless demand. On the other hand, there are countries and cities where supply is not the problem at all. And even there, housing prices still go up because finance is such a dominant force in driving prices up. As a result, we have more and more housing that is not built for people to live in, be it a second home or just some place to park money in (Fernandez et al. 2016). I am not saying that we should not build more houses. We should. But we need to build the right kinds of houses in the right locations at the right prices.

VW: Could you both provide tips for studies that would empirically substantiate the claim that supply is almost irrelevant?

SW: I think studies would not go so far because that is quite a strong argument. But there is one great study by Andrés Rodríguez-Pose and Michael Storper from the London School of Economics that criticizes the whole logic of market-based supply not from the political economy perspective, but from more mainstream positions (Rodríguez-Pose and Storper 2020). These researchers are in a way quite mainstream, being advisors for the World Bank, etc. Then, I would like to mention three recent special issues that have provided new momentum to the housing affordability research and were edited by Desiree Fields and Stuart Hodkinson (2018), Katrin Anacker (2019), and George Galster and Kwan Ok Lee (2021), respectively.

MA: I think to show it empirically is harder than to show it through real-world examples, as I tried to do earlier in the conversation. If we are to put our theories into a model, it is extremely complicated, and even if we do that sometimes, we are always criticized for leaving some things out, that we forget about controlling for the right variable. On the other hand, this is precisely what mainstream economists do. They pretend that finance is an externality that you do not need to put into your model, as Steffen pointed out before. You would suppose that, as economists, one of the least things you could think about is examining finance in housing. And yet, they often do not. So, in their studies, they pretend many things simply do not exist. But as we said, the world we live in is much more complicated than as seen through neoclassical economics. Easy theorizing leading to easy models that are also easy to understand—and this is part of the problem.

When I am asked by people in government to explain what is going on, I prefer to work with anecdotes. In addition to those that I gave before, Auckland is a great example. After they freed up the planning system to make new construction in existing neighborhoods easier and increase their density, other cities throughout New Zealand follow them. The result? The prices still went up. Maybe they went up less than before, but even with more supply, the effect on affordability is scant. It would be great if we would have more empirical studies that engage with this issue. But even in the absence of that, I think there are arguments that can help us to convince people that the supply policy is flawed.

VW: In the last decades, financial capital has tremendously changed our world, and this process is closely related to housing. Never has so much money been flowing into the real estate market. How did we get to this point, Manuel?

MA: I will focus on mortgage lending because, as I said, this is a form of lending that banks primarily do, and it involves everyone from the governments to companies, to households. One reason of why so many actors are interested in mortgage lending is simply that it is easy to make money with them. Mortgages are often considered to be low risk, because whatever people do, they will keep on paying their mortgage. Especially in Western Europe, it is very rare for people not to pay off their mortgage because they can still rely on relatively strong welfare states. Thus, even if someone loses their job, they can very often go back to 60 or 70% of their net income. You do not go on a holiday, you do not buy new shoes, you do not buy a new winter coat, but you do keep paying the mortgage. The welfare state is almost like a de-risking strategy for banks: they know that people will keep on paying their mortgage thanks to it. And even if people fail to pay off their loan, the lender can sell the house, receiving a lot of their money back. Of course, the trouble occurs when the prices go down and many people lose their home at the same time. Then, the lenders might lose money, as they did in 2007 and 2008 in the United States and then also in Spain, in Ireland, and in Iceland. But mostly, it is relatively low risk to grant or hold mortgages.

Another thing that makes the growth of mortgage lending much bigger is that mortgages could be resold, that is, the securitization of mortgages. Banks do not have to hold them on their books: they could resell them in financial markets. And again, they were interesting for the same reason: they were considered very low risk. You need to understand that the basic part of mortgage lending and securitization is very much a risk-averse world. We are talking about people who want to make a profit of maybe 5-6%. These are very decent profit rates. And this makes it very attractive for investors who need to be risk averse because this is the nature of their business. Pension funds and insurance companies have been big investors in the buying of mortgages from banks. There are other things that are attractive for these institutions, of course. But the problem is that these other things do not grow as much as mortgages. Take government bonds in Western countries. They are very attractive for risk-averse investors. However, after 2008 most governments—the United States were a bit of an exception—were not printing extra money, and they were implementing austerity policies, so they did not need to borrow additional money. So, precisely in the moment when risk-averse investors wanted to flee the risk, they could not buy additional government bonds. So ironically, even though market securitization and the growth of the housing bubble was one of the reasons for the crisis, the crisis has actually caused more money going into housing, because it is considered risk averse (Fernandez and Aalbers 2016).

In addition, the lack of extra government bonds also results in a situation when every year there is more money looking for new investments than the year before. If investors cannot buy more bonds, they need to go somewhere else, and this makes institutional capital—capital from pension funds, insurance companies, and sovereign wealth funds—to grow much larger than the growth of the economy at large. Thus, the pension funds, especially in countries like the Netherlands and Germany, are growing much faster than the economies of those countries so that money has to go somewhere else and into a different sector, and often that sector is real estate (van Loon and Aalbers 2017). But even elsewhere, the economy is not growing fast enough to keep up with the pace of how much more pension money there is. These funds therefore have no other choice than looking for investment internationally.

VW: Where does rental housing come into all this?

MA: Rental housing has become the new global frontier for investors precisely because even the securities they put their money in are not growing that much anymore, and it is, again, considered very low risk. The most common way to invest in rental housing is through real estate companies. Some of them are known as Real Estate Investment Trusts (REITs). These trusts allow investors to put money into real estate quite easily and move their money around easily. They are also focusing on spreading the risk. Rather than buying one building in London and one in Frankfurt, they prefer to own, say, 1% of housing stock anywhere in global cities. This strategy of indirect investment was already well developed in the case of offices. During the last two decades, it has become well developed also for housing. And this is where you can see a lot of the large growth now.

Sometimes, it is even more complicated. The largest landlord in the world, Vonovia, that soon will own almost 600,000 units, has investors from all over the world. But their biggest investors are not pension funds; they are so-called index or exchange-traded funds that often invest on behalf of pension funds. That means that pension funds own real estate not just indirectly by investing in a REIT, but indirectly-indirectly by investing in an index fund that invests in many REITs and other stocks (Aalbers et al. 2023). So, there might be a German pension fund that sends their money to an index fund in the US, and that US index fund puts a little piece of their money in Vonovia, a German fund owning primarily German apartments and a few houses and also a bit in Sweden and Austria. But Dutch and Canadian pension funds and other big funds like Norges, a massive sovereign wealth fund from Norway, are all investing heavily yet indirectly in real estate.

There are other reasons why direct investment in housing has grown. But I think these are some of the structural trends: mortgages and rental housing are attractive for investors because they are considered low risk.

VW: Steffen, how does this connect to your notion of the global urban housing affordability crisis? Can you explain what role financial capital plays in this phenomenon?

SW: There are obviously strong links between the crisis and financial capital. In 2021, New Zealand’s central bank embarked on a strong pandemic-induced quantitative easing program by implementing a NZD 100 billion bond buying program. What happened? Almost all the money went right into real estate, and, just in three months, the property values across New Zealand increased by about AUD 150,000. The link between financialized economy—or political economy in general—and affordability is plain and clear. And there has been hardly any discussion about it. It is just inflation policies that people talk about. So, financialized housing systems in the urban Anglophone areas have seen affordability pressures.

At the same time, we should be careful not to reduce everything to financialization. There are other factors such as migration. The affordability problem in many big cities, university cities, is clearly linked to the influx of people. So, it is a much bigger problem.

For me, affordability in a broader sense is a reflection of what has happened in recent decades. If you free up capital, as many countries with advanced economies did, some are going to gain from this decision: homeowners, high-skilled workers, knowledge workers. A significant part of society has, however, lost a lot—workers who were set up to compete globally by cutting their wages or salaries and lost a lot of social entitlements as a result of austerity policies. Western governments basically created a group of economically vulnerable people, along with an economy that does not provide for those people in terms of basic needs, including housing.

Unaffordability is just one expression of this big mismatch between income and expenses. As we speak, the current situation is really becoming a cost-of-living crisis. It is not just housing that people are unable to pay, not just education. The goods of everyday use become more and more expensive, which is a clear departure from what we have in most of the neoliberal global age years. One can no longer buy cheap products from India or Bangladesh, utilities are also rising. So, affordability is almost a term that now goes across the board and has a lot to do with our political economy setup that has been created in last decades. Therefore, it also asks for political economy solutions.

VW: Speaking of solutions, how about the good old-fashioned deregulation that some, mainly developers, see as a remedy to the housing crisis?

SW: Developers will always argue for lower regulation: “Give us the land, give us the freedom, and we produce affordable housing.” Such arguments resonate well with the people’s stomach and even some folk wisdom. I am thinking of Mark Twain who said: “You should invest in land because they don’t make it anymore.” You can easily take issue with these arguments, but they are powerful. Some people make a lot of money thanks to them. Politicians love them because they can get elected based on presenting themselves as actually doing something about the housing crisis: “What’s the response if there are no houses? You have to build more. And who builds houses? Developers.” Unfortunately, it is not so easy.

We have discussed before how simplistic this policy logic is and how this is connected to reductionist theoretical models. Another thing that is often omitted in mainstream economic models is the urban land question. Josh Ryan-Collins and his team have done an amazing job in showing how economic thought has silenced this issue for 150 or 200 years and how the urban land market does not function the way that developers want us to believe it functions (Ryan-Collins et al.2017). I believe that if we really want to do something about housing crises, we should start to see land lease as an important part of this effort. Municipalities have to own land and then create leasehold systems, where actors can work with the environment for a long period, for 49 years or 99 years, but land has to be owned publicly. I see no other way now how to break the land–finance nexus that Manuel talked about. It will probably be a rather slow process, which has perhaps already started in Barcelona or Berlin. But the urban land market is key to rebalancing local housing markets for a greater affordability.

MA: I think we need to separate what the discourse is, and what the realities are. Very often, these are two different things. On the one hand, we have developers who ask for less regulation because it makes their work easier. For the same reason, we can see more and more developers actually asking for regulation: “Oh, we need a tax break on this, we need a tax break on that.” This is perhaps not what is conventionally understood as regulation, but undoubtedly, not having to pay taxes that other people do pay is a form of government intervention.

I am now in New York, which people in Europe see as the capital of capitalism, where the free market reigns. But in fact, most of the developments here are done with huge tax breaks, and this is a form of regulation. If you do not pay the taxes that other people do, that is very much a form of the government intervening. Years ago, I spoke to the chair of the Real Estate Board of New York, and I asked him about subsidy programs that existed in New York City. And he was very happy about one of them because it allowed developers to build affordable housing in locations with cheaper land. They could build more affordable housing and keep the company going. But the real reason why the developer was so happy was something else. If they built these housing units, they were allowed to build many housing units in areas where the land prices were high—Manhattan, Brooklyn—without having to pay taxes. No wonder he liked it.

VW: Manuel, this brings us to your concept of “the real estate/financial complex” (Aalbers 2012). Can you explain what do you mean by this, and why did you decide to coin this term in the first place?

MA: I use the real estate/financial complex as a metaphor comparable to the military/industrial complex, which was coined by Dwight Eisenhower in his final speech as American president. He said that he realized how interdependent the military, the industrial sector, and the state in the US are. And that he saw that entanglement as a danger for the future of society and economy.

I use the term to show how nowadays in many countries, the interdependencies between the state, the financial markets, and housing, are somewhat similar. They are very much dependent on each other. And the example I mentioned before about how important mortgages have become for banks in itself shows how important housing is for finance. It is much more intuitive to say how important finance is for housing, of course, because the more expensive housing gets, the more you need to rely on finance. But entanglements with the state are equally important.

Developers asking for state intervention is a good example of how much the state is involved in this. But in many countries, states are deeply involved in real estate development themselves. Many European states or cities come up with the plans for big real estate development projects, whether it is redevelopment projects or new ones at the edge of the city. In other cases, the state participates through a public–private partnership. And if we go to places like Brazil, Turkey, China, and many other Asian countries or Middle Eastern countries, the state’s active involvement in development is obvious. Very often, the state is the main developer itself.

A big element of the real estate/financial complex is a practice that Gavin Shatkin (2017) conceptualized as land monetization. It is the state using the land value to make money. This can be a good thing if it serves the purpose of building affordable housing. Unfortunately, the state often acts as if it is just another market actor, meaning it is oriented solely on profit-making. There are great studies on Chinese municipalities that are doing this (e.g. Theurillat 2017; Wu 2022). In part, it is motivated by the fact that these actors have limited local tax power. So, to keep up with expenditures, they see this practice as a solution.

The state thus becomes very entangled in housing, and not just in terms of regulation, but in terms of active participation in these markets. In fact, markets for REITs, mortgage securitization, and all those markets that I have mentioned before only exist because of the governments decided to regulate them. And it was not because they wanted to do something better for the people and housing affordability. These markets have been created through an active lobbying by the financial sector and by parts of the real estate sector. In some cases, I would be inclined to talk about “regulatory capture” or “cognitive closure” (Aalbers et al. 2011), but the reality is naturally much complex. My colleague Cody Hochstenbach described how various political parties support the financial sector because of their ideological views; they do not need to be persuaded, they themselves help to establish these connections between the state, finance, and real estate sector (Hochstenbach 2022).

So, for me this real estate/financial complex is a metaphor to understand what happens at different levels of analysis: urban, national, and also international. The trend towards mortgage securitization or REITs—these are essentially international developments driven by the interests of the City of London and Wall Street. The number of REIT regimes has almost exploded since the global financial crisis. Only a few countries had them before 2007. This again tells us how the question of regulation is complex, and how mainstream economists with their idea of the state and the market being in opposition is empirically mistaken.

VW: To conclude this interview, Steffen, what should we do to make housing affordable?

SW: There is no single solution. Unaffordable housing is a structural problem that intersects with other structural problems that have accumulated over a long time, and that cannot be easily changed. It requires work in a number of areas in order to create synergies to bring about positive outcomes. I am currently writing a book, in which I try to develop a perspective that I call “a political economy of shared prosperity”. We really need to start to think anew how to build a political economy that works for people. It is certainly needed in a period ridden with many different crises and with the geopolitical landscape turning into a new Cold War.

Part of this perspective is that we have to think about housing and cities differently. We need more social science thinkers and critical economists to work on housing. Behavioral economists have done a good job, but we need more. Through the multiple crises we have, something new is clearly emerging right now, but we have a very little understanding of what it is. We need new good ideas, and I am rather skeptical that they will come from mainstream economists. They are great people, but the problem is that they dominate the world of urban and regional economic analysis and policy too much. That, in our discussions, we approach housing as a “market” seriously limits both our understanding and imagination. Rather, we should see it as a system that has market elements alongside with other elements: elements of informal housing, elements of subsidized housing, etc. So, we need to create an alternative vocabulary and to disseminate it. It is not enough to criticize simplistic pro-market arguments; we need to further work on our own arguments and models that help to choose an alternative way of looking at the world.

This alternative way should help constructing non-financialized housing systems, perhaps municipal housing systems. And I think that the key point here is really the ownership of land. I mean, why is it so safe for capital to go into residential property? The essence of the urban land question is: “Who does own urban land?” In Singapore and other countries where the government owns land, dynamics other than the prices going up take place. This means that the urban land question is absolutely central to housing affordability, to the financialization of the economy, and to what we probably would talk about as global residential capitalism. We need to know more about how urban land markets work and based on this, we should help municipalities to create leasehold systems where they own the land. This is a program for the next decades.

Along with it, we need to think more about how to build cities for everyone. Homeowners and landowners have gained too much power, which makes the rest of people basically slaves for them. When I was a tenant in Australia, I felt strongly how the money I earn mostly works to make others rich. Societies cannot be built on this long term; at some point the tension becomes destructive. In my upcoming book, I present the affordable city model that has a structure of a house with a floor, pillars, crossbeams, and a roof. This is an intuitive and memorable visualization that helps people to easily recall the affordable city building blocks in their entirety. The model’s foundation consists of common good-oriented foundational contracts and principles, and the second layer is made up of the two cornerstones of political mobilization and ethical activation. Then, there are five strong pillars: municipal urban land systems; recoupled urban housing systems; ongoing affordable housing-constituency building; urban common good-directed governance; and an adequate municipal resource and power base. Finally, there are the crossbeams of a productive urban socio-economy and safeguarding our planetary resource base, finished off by a roof that stands for longevity and renewal. These are conceptual models to help us to think across domains such as finance, landmarks, housing, the urban economies, the constituents, and also local governments, and so forth.

We have to think across different social domains, because this is the only way how to change the system. Learning from the past, you realize that building the housing system such as that of Vienna required the tax system that allowed for redistribution from the rich back to the poor, then it required creating a limited-profit housing sector over time in parallel to expanding municipal housing stock while resisting urges to sell and privatize housing. So, there is no quick answer, but we should start working quickly on developing an alternative that recognizes the importance of working across different domains.

VW: Thinking in a different framework seems essential. But are there some things that we can do right now, Manuel?

MA: The problem is that it is far from evident that governments want the prices going down. In many countries, homeownership is the majority tenure, which means that most people depend on that for their pension, for their investments, for their future, for helping the kids out, for helping their grandchildren out. They have an interest in the housing prices at the very least staying the same. And if most people have an interest in this, then politicians have an interest in this. So, politicians might be interested in housing prices not going up too much, but they also have interest in the prices not falling. Finding the balance here is of course very difficult. When you focus on young people who cannot afford a house, there is a certain irony. They cannot buy a house because they are so expensive, so they need to rely on their parents. Parents can sometimes help them because they made the right investment into housing. But this investment was one of the reasons of why housing got more expensive in the first place. And then, there are parents who cannot provide any help. Breaking this housing-finance cycle is bordering on political suicide but is a difficult but crucial first step.

As for other measures, I usually start with one which, talking to people from governments and civil servants, is attractive because it costs no money. It is the regulation of the private rental sector. A lot of governments have some regulation, but they are often insufficient. What is needed is the regulation of rent increases, allowing for increases that correspond to inflation or are based on the development in pensions, social security, or income, or you can mix these things together in an index. It can be done in different ways, but it has to protect low-income households from being rent overburdened. This policy is not difficult to set up; you can do it relatively fast, and it will not deter investors and developers. Of course, they will complain that they cannot make money. But if they can make money now on renting, why would not they be able to make money next year with the rent being 2% higher? There is no reason why they could not make profits anymore.

In cases where some market actors gained dominance in housing, it might be useful to exploit the government’s anti-monopoly regulation. You probably know of the 2021 Berlin referendum that was about seizing the rental housing from large private companies. But this is very challenging and expensive. Limiting monopolies might be more feasible. There are smaller cities in Germany, where half of the rental housing is owned by one or two landlords, because they bought up most of the former social housing. This gives them power to set the rents in a way that should not be allowed by the monopoly rules. So, this should be regulated as well. And that should help in a way.

The next piece of policy has to do with land, land zoning, and urban planning regulations. For example, the Dutch regulation allows Amsterdam to require using 30% of the housing stock within every new development for social housing (housing with a rent of less than EUR 750). In some countries, it might be difficult to implement such regulation. But it does not have to cost a lot of money; you can do it without giving any subsidy.

Setting the right incentives not just for social housing but also for non-profits and grassroot organizations is another measure. I believe we should not focus on state initiatives at the expense of bottom-up initiatives. Although I support them, we need to do both things at the same time. Grassroots and non-profit organizations are often great at reaching a particular part of the population; states might be able to house a different part of the population. Plus, betting on more horses means better chances of success. We know from the history of bottom-up housing initiatives that some will do amazingly well, some will need some further subsidy, and some will fail. And there is no guarantee that an initiative that is successful in the United States, where they separated the land from the house itself, will succeed in Czechia. There are manifold solutions—tenant syndicates, mutual housing associations, community land trusts—that provide public service and, therefore, should be taxed less than market-based housing. The more these solutions are promoted with the right kind of tax system at the same time, the better.

I would like to emphasize that the state should be always part of this framework. It is necessary for the state to step back in housing; we need the state to provide housing directly or indirectly, through non-profits. The problem with bottom-up initiatives is that it takes a lot of time. And I think many people, especially poor people, do not have it. People who work 40 hours a week or more for a low income that is mostly spent for maintaining family and childcare do not have time for learning about the latest trends in housing cooperatives.

Along with it, governments should set up support organizations that would help to share information on successful bottom-up initiatives so that new people do not have to start from scratch. This would cost some money, but it is definitely worth it, as it aims to prevent failures in this area. These organizations should also focus on getting and spreading information about successful projects from other national contexts. There are many reports and studies that can be used in this way: “‘My Home is an Asset Class’: The Financialization of Housing in Europe” by Daniela Gabor and Sebastian Kohl (2022), “#Housing2030: Effective Policies for Affordable Housing in the UNECE Region” by Julie Lawson, Michelle Norris, and their colleagues (2021), and the United Nations’ “Guidelines for the Implementation of the Right to Adequate Housing” (Farha 2020).The former United Nations’ housing rights rapporteur, Leilani Farha, runs the website https://make-the-shift.org/, with a whole range of directives, which builds on the human rights approach to housing. Finally, I would like to mention a paper by my former PhD student Gertjan Wijburg, in which he presents different solutions that can be used to de-financialize housing (Wijburg 2021). If you combine these sources—and they refer only to some of the available solutions—you learn about many ideas about how to make housing better.


The interview was conducted by Václav Walach, a criminologist associated with the University of Ostrava, Czechia. His research interests include, inter alia, housing exclusion, predatory renting, and landlord–tenant relationships.

Many thanks, from everyone at Antipode, to Václav, Manuel and Steffen for contributing such a vital conversation.

The featured image, “Brownstones in the Back Bay neighborhood of Boston, as viewed from the 19th floor of the Westin Copley”, is by Pi.1415926535, CC BY-SA 3.0 https://creativecommons.org/licenses/by-sa/3.0, via Wikimedia Commons https://commons.wikimedia.org/wiki/File:Back_Bay_brownstones_from_the_Westin.jpg


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