Manuel B. Aalbers

The financialization of home and the mortgage market crisis

Financialization can be characterized as capital switching from the primary, secondary or tertiary circuit to the quaternary circuit of capital. Housing is a central aspect of financialization. The financialization of mortgage markets demands that not just homes but also homeowners become viewed as financially exploitable. It is exemplified by the securitization of mortgage loans, but also by the use of credit scoring and risk-based pricing. In the past century, mortgage markets were transformed from being a ‘facilitating market’ for homeowners in need of credit to one increasingly facilitating global investment. Since mortgage markets are both local consumer markets and global investment markets, the dynamics of financialization and globalization directly relate homeowners to global investors thereby increasing the volatility in mortgage markets, as the current crisis shows all too well.

Centring Housing in Political Economy

Abstract The issue of “housing” has generally not been granted an important role in post-war political economy. Housing-as-policy has been the preserve of social policy analysis and of a growing field of housing studies; housing-as-market has been confined to mainstream economics. This paper insists that political-economic analysis can no longer remain relatively indifferent to the housing question since housing is implicated in the contemporary capitalist political economy in numerous critical, connected and very often contradictory ways. The paper conceptualizes this implication by identifying the multiple roles of housing when “capital” – the essential “stuff” of political economy – is considered from the perspective of each of its three primary, mutually constitutive guises: as process of circulation, as social relation and as ideology. Mobilizing these three optics to provide a critical overall picture of housing-in-political-economy (more than a political economy of housing), we draw on and weave together the many vital contributions of housing research to our evolving understanding of capitalism.

Neoliberalism is dead.... Long live neoliberalism

In this essay I argue that the ideology of neoliberalism may have failed, but that neoliberal practice is alive and kicking. Most of the ‘solutions’ to the crisis are in the spirit of neoliberalism, rather than enraptured by neoliberal spirit. Yet, this neoliberal solution is not a solution; it is part of the problem in the sense that it is leading to more problems — not just today but also in decades to come. This so-called solution is often presented as Keynesian, but it is only partly so. A better way to classify this solution is as an attempt to save the existing, neoliberal, system. The big crisis of our time did not become a crisis of the hegemony of neoliberalism, because actually existing neoliberalism is flexible enough to influence policy in other ways than through the mantra of free markets: it thrives on presenting existing socioeconomic conditions as failing and neoliberalism as the best solution. Considering the many blows neoliberal ideology has received during this crisis, it should already be dead, but like a creeping cancer neoliberal practice is able to resurface and show up in both new and unexpected, and old and predictable, ways.

Financialization and housing: Between globalization and Varieties of Capitalism

In the literature, one finds various explanations for the rise of financialized capitalism. In the different strands of financialization literature, housing either plays a minor role or is simply seen as one of the bearers of financialization. The relations between housing and financialization are under-researched and under-theorized. This article, first, looks at the rise of housing finance as an integral part of macro-economic policy, and second, at the role of financial globalization in the rise of housing finance. Housing is seen as an absorber of a ‘wall of money’, but the absorption of finance by housing is a very uneven process. Four trajectories of national institutional structures are suggested, and it is discussed how capital flows are absorbed in each of these trajectories. Finally, it is discussed what this tells about the geographies of financialized capitalism, and its relations to debt, housing, mortgage markets and the spatial fix.

London and New York as a safe deposit box for the transnational wealth elite

The paper focuses on transnational wealth elites buying residential properties in New York and London as an investment rather than as a primary residence. The transnational wealth elite is a group of people that have their origin in one locality, but invest their wealth transnationally since they entertain transnational jobs, assets and social networks. New York and London real estate has the unique quality that it is perceived to be highly liquid, i.e. easily resold to other investors. Together with the safe haven and socio-cultural characteristics of both cities and the way the real estate market and its professionals are organised, global city residential real estate functions as a ‘safe deposit box’. The paper brings together different geographies: of the wealth elite, of offshore financial centres through which most real estate purchases are organised, and of real estate investment locations. It also maps the consequences of the safe deposit box function of real estate, in terms of not only house prices increases, but also of economic, social and cultural changes and how elite decision-making impacted this comprehensive set of changes in the fabric of the city. In doing this, the paper substantiates work on the financialisation of real estate by focusing attention on the agency of the wealth elite and their investment and legal networks rather than on property developers, housing associations or institutional investors.

A coming community: young geographers coping with multi-tier spaces of academic publishing across Europe

Little is still known about the publishing practices of scholars based outside the leading Anglophone countries. More generally, little is known about the contemporary machineries of writing spaces within human geography and the other social sciences. In responding to a recent editorial by Ron Johnston, this paper seeks to start filling this void by providing the results of a research project investigating the multi-language publishing practices pursued by a selected sample of young European human geographers. The research findings throw light on multi-tier publishing spaces in European human geography today. The paper concludes by outlining a critique of the homo publicans emerging from rationalist accounts of academic publishing. In particular, by embracing a critical perspective informed by the attempt to build a ‘social geography of scientific knowledge production’, the paper argues that publication strategies and practices do not only follow the direct paths of maximization of publication records, but can follow the more complex and differentiated paths of multi-level and heterarchical academic spaces and networks.

Promoting home ownership in a social‐rented city: policies, practices and pitfalls

Amsterdams housing market is dominated by the social‐rented sector. It comprises 56 per cent of the total housing stock, while home ownership comprises only 19 per cent, lower than anywhere else in the Netherlands, and among the lowest in the world. Central government policy is currently seeking to increase the share of home ownership in the Netherlands from 53 per cent (2001) to 65 per cent in 2010. This paper will summarise recent national and local (Amsterdam) housing policy developments, focusing on the recent practice of selling social housing in Amsterdam. Unlike the Right to Buy scheme in Britain, the Netherlands employs an ‘offer to buy’ strategy. Sales, however, have been disappointing so far. Two factors were found to be crucial in this regard: (1) the sluggish change in ‘policy mentality’ and bureaucracy and (2) the high prices in the home ownership market. By way of conclusion, the paper reflects on the desirability of shifting the tenure structure from tenancy to ownership and on the risks that an (over‐) emphasis on home ownership may bring.

The Great Moderation, the Great Excess and the global housing crisis

This paper explores the relationships between local or national housing markets and recent historic transformations in global capitalism. It proposes a periodisation of developments in housing markets, policies and practices distinguishing between, first, the pre-modern period; second, the modern or Fordist period; third, the flexible neoliberal or post-Fordist period; and fourth, the late neoliberal or emerging post-crisis period. This periodisation is a heuristic device that helps to make sense of the interdependence of national housing markets and the global financial crisis. The argument is not that the crisis caused the breakdown of the post-Fordist housing model, but rather that the shift to this model introduced certain dynamics to housing markets that a few decades later culminated into a crisis. The start of the Great Moderation was also the start of the financialisation of states and economies in various domains, particularly housing. In making this argument, I unpack the concept of the Great Moderation: what appeared to be a structural moderation of macroeconomic cycles was in fact the build-up of a bubble economy. The 1970s and early 1980s as well as the post-2007 crisis are critical junctures in the development of housing. The Great Moderation was also a Great Excess in terms of rising inequality and excessive credit and debt, suggestive of a finance-led regime of accumulation.

‘Cognitive Closure’ in the Netherlands: Mortgage Securitization in a Hybrid European Political Economy

There is a strong case that mortgage-backed securities were at the root of the 2007–09 financial crisis. Even though geographers have convincingly demonstrated that loan origination is strongly locally rooted and that the fallout from the subprime mortgage crisis clearly had spatially circumscribed effects, securitization is still generally perceived as a universal, private, and purely market-based financial technique. In this paper we use a description of the securitization chain in the Netherlands to contest these perceptions. Building on and adding to Thomas Wainwrights analysis of securitization in the UK, we first argue that securitization in the Netherlands has taken a form which reflects Dutch corporatist institutional arrangements, implying that both geography and states do matter for the supposedly aspatial process of securitization. Second, we argue that the Dutch state has been very much implicated in the construction of the securitization market in the Netherlands. Third, we suggest that this can best be seen as an effect of ‘cognitive closure’ rather than of ‘regulatory capture’: that is, Dutch pro-banking regulation is not so much an effect of bankers hijacking regulators but, rather, more the result of bankers seducing regulators with their stories. This paper is a detailed case study of the workings of financialization and adds to the growing body of work which seeks to analyze the different ‘varieties of financialization’ and the variegated geographies of the financial crisis.

The de-contextualisation of land use planning through financialisation: Urban redevelopment in Milan

This paper scrutinises the effects that the financialisation of land has on the land use planning process. Although finance is increasingly penetrating not only real estate but also land planning and development, there are few in-depth case studies describing and analysing this process. Contemporary urban development is characterised by the clustering of investments, the relocation of projects into peripheral areas and an instrumental approach to planning. These trends are expressions of a change in the development process, characterised by the increased detachment between land use planning processes at the local level and financial investor logics located at other scales. We call this the de-contextualisation of land capital. An in-depth analysis of the internal economic mechanics of an urban project in the Milan area is provided to illustrate these trends. We conclude by reflecting on the challenges that the conditions of financialised land capital pose to local and national governments.