The Housing Paradox

Table of Contents

The detrimental effects of housing financialization can be noticed first and mainly on a local level, in urban housing markets. As a result, the most important questions are: what are local governments doing? Or, more importantly, to what extent can the growing affordable housing problem be addressed at the municipal level?

The disparities between European cities are much greater than those between countries; depending on political affiliation, localities within the same country may respond to the same difficulties differently.

Here is a quick rundown of positive instances or occasions where cities successfully mitigate or prevent housing market difficulties — either by removing land from the market (thereby curbing speculation) or by establishing more resources to make housing more affordable. International meetings and Patti-excellent Polyák’s book (link is external) are the sources of knowledge (2017).

Housing models that are driven by the community

A variety of community-led housing (CLH) models has emerged across Europe, according to Patti-Polyák, including the Danish co-housing model, which focuses on shared spaces and environmental sustainability, and the traditional cooperative housing model in Germany, Switzerland, and France, which is undergoing a renewal with a focus on democratic governance and anti-speculation. Meanwhile, the Anglophone Community Land Trust model, which tries to remove land from the property market, is gaining traction in continental Europe.


Community-Led Housing projects are expensive and necessitate investments beyond the financial means of most residents, particularly low-income families. Community-driven housing initiatives must organize a wide range of actors around their project and recruit external donors to be viable and leverage significant economic resources. For example, the non-profit organizations Stiftung Trias(link is external) and Edith Maryon Stiftung(link is external) acquire land for non-profit purposes and lease it to civic actors for lengthy periods to enable non-speculative housing developments. Most Community-Led Housing initiatives begin by pooling their economic and financial resources in the form of savings. The resources pooled together are then leveraged to attract additional public and private investment. In reality, the ability of residents to negotiate favorable external financing terms (low-interest rates, for example) and argue for governmental support mechanisms such as public guarantees or enabling public laws is critical to the success and adaptability of Community-Led Housing schemes.

Barcelona (ES) has been introducing innovative ideas for affordable housing since 2015. Giving public land to cooperatives is one way to do this. In the Smart City Expo(link is external) World Congress in Barcelona (November 2018), Javier Buron Cuadrado, Housing Manager of Barcelona City Council, outlined this idea, beginning with the fact that in Spain, cities have no authority over housing policy because it is regulated at the regional level. Despite this, Barcelona has established the Right to Housing Plan(link is external) 2016-2025 intending to construct around 18 000 affordable housing units, primarily on a rental basis. New concepts are employed, such as the construction of temporary structures and the usage of rooftops. Barcelona also strives to reach out to the metropolitan area’s towns, where at least 75 000 affordable housing units are needed. All kinds of financial and technological ideas are discussed, including how to develop more quickly and for less money. Barcelona is open to all existing solutions in other cities and those proposed by people and academics to address the affordable housing crisis.

An intriguing Anglophone model is the Community Land Trust(link is external) (Patti-Polyák). This type of organization is where residents band together to address housing difficulties. A group of people recognizes a need and begins looking for land. This can take the form of obtaining funding from a trustworthy lender to purchase land, requesting municipally owned land, or engaging in private discussions with a farmer. The next phase is constructing new residences or remodeling existing ones to make them more affordable. When the community owns the site, they can build affordable housing on it. They can sell houses and properties for half the market price. It can be a socially rented model or a shared ownership model.

The Granby Four Street Community Land Trust(link is external) case is discussed in depth in the book. In 2011, a previous resident organization in a poor neighborhood of Liverpool (UK) was renamed Community Land Trust. They got together with a few partners and started sketching concepts for a small-scale urban revitalization initiative. The organization won a small urban garden competition in 2012, which the Steinbeck Studio social investment organization observed. They observed what was happening in the neighborhood, loved the idea of residents participating in community activities, and provided a £ 500 000 loan. From that point forward, Liverpool City Council became aware of the situation and initiated conversations with the Community Land Trust, ultimately opting to transfer ten properties to the Granby 4 Streets Community Land Trust. The Community Land Trust keeps the land in trust, separating the value of the land from the value of the structures on it, and it sets the price at which the structures can be sold later. The Community Land Trust locks in any growth in value for the benefit of the community; thus, there is no profit motive.

Creating innovative ways to use public land

Berlin (DE) is well-known for pioneering efforts to shift away from traditional market-oriented strategies. After a long period of experimenting with temporary use projects and organizing protests against large-scale development projects such as the Media Spree, the idea of developing economically sound and secure tenancy models based on long-term rental contracts or cooperative ownership arrangements emerged. The initiative StadtNeuDenken(link is external) with a novel privatization concept (Patti-Polyák) is an example. The primary aim is to switch from the highest bidder to fixed rates and the best concept for privatization.

The municipality of Paris (FR) quickly adopted this notion, and immediately after Anne Hidalgo’s election in 2014, they initiated a series of competitions to implement their own top-down version of concept-based privatization. In addition to outlining affordable housing goals, Hidalgo and deputy mayor Missika announced the Reinventing Paris urban development competition (link is external). In Paris, 23 municipally owned properties were chosen, some in very disadvantaged and distant places, to sell public land, with the sale price linked to its future use. Only multidisciplinary teams could win in an attempt to simulate real estate innovation and expand the reach of urban commons, and the final users had to be included from the start. The tournament was a huge success, and two more rounds have since been launched on the same model.

Housing speculation is prohibited under municipal regulation.

Vienna (AT) is known around the world for its commitment to sustainable and equitable urban development, with housing policy as a cornerstone. With 220 000 public rental apartments, the city is likely the world’s largest public landlord. The city’s rapid growth, with 12-20 000 people arriving in Vienna every year in recent years, has posed a particular problem. This would necessitate the construction of at least 6 000 extra housing units per year. As a result, there is an increasing demand for land suitable for future dwellings.

Vienna rapidly realized that, in the case of open competition, international investors’ interest would lead to an increase in the prices of precious land reserves for housing. The city’s inclusion is one of the city’s guiding principles in urban development, avoiding changes in the housing market that would push particular strata out. Vienna acted promptly to avert price hikes as a result of speculative capital investments, which would make housing unaffordable in the long run. A new policy is going to be implemented that will restrict investors’ access to real estate that could be used for affordable housing. The policy intends to optimize the land purchase price by adopting a provision that prevents flats from being sold for 40 years in order to increase the rent of new units. Furthermore, another recent ruling mandates that half (later 2/3) of all new housing projects must meet the city’s affordable housing model. These are significant public-sector initiatives aimed at regulating the market and preventing price spikes as a result of the financialization of housing.


There is a need for a cross-national consensus on the social meaning of housing.

At the moment, national initiatives to address the harmful implications of the financialization of housing are yielding only limited results, while local efforts confront even greater difficulties.
Sorcha Edwards of Housing Europe(link is external) reported on a case in Dublin (IE) where a local group was bidding for an empty standing building to convert it into social housing, but their position was hopeless because their competition was the largest US pension fund.

To improve the social side of the housing, rather than the commercial commodity understanding of it, it is apparent that international cooperation and cooperative efforts are required.

A variety of suggestions were suggested during the Vienna Housing for All (link is external)conference (link is external)on how such a worldwide endeavor may be launched.

Intervention by the EU or national governments

The International Union of Tenants’ Barbara Steenbergen (link is external) underlined that real estate funds are merging to avoid national taxation. The EU and national governments should identify strategies to keep housing inexpensive, such as limiting or prohibiting real estate investors from buying up existing affordable housing supply.

A European Housing Forum is being held.

Kieran McCarthy, a member of the EU Committee of the Regions and a councilor in Cork, Ireland, proposed holding a European Housing Forum. Housing should be addressed more seriously by the Committee of the Regions; it cannot remain one of the last concerns.

A fixed-rate of income share, a fundamental right, and the repeal of the VAT

Evelyn Regner, a member of the European Parliament (link is external) (S&D), suggested the European Semester as one option for incorporating housing without requiring major modifications to the EU’s basic treaties. She advocated for the inclusion of the notion that people should not spend more than a certain percentage of their income on housing. Housing should be recognized as a fundamental right. The EU should take steps to eliminate or reduce VAT on housing-related charges, resulting in a real reduction in housing costs for ordinary people.

The European Semester is a period of time in which European countries.

Jörg Wojahn, the European Commission’s Representative in Austria(link is external), also stressed the importance of the European Semester in turning soft legislation into a more powerful tool. Currently, huge sums of EU money, totaling EUR 1,5 billion, are being invested in housing. Loans from the EIB(link is external) and some elements of the Juncker fund(link is external) (for building energy efficiency) could also be considered. However, because energy efficiency investments, for example, increase the cost of housing, such expenditures must be recognized as long-term financial commitments and therefore be protected from deficit constraints. The European elections are an excellent opportunity to vote for candidates who support the priority of urban and housing issues over agriculture and other investment goals.

Municipal and EU responsibilities

Deputy Mayor Lea Ortiz of Barcelona lamented dozens of evictions every week in the city (despite the municipality’s efforts) and the fact that investors are buying up developing areas of the city. She also proposed focusing on Europe in order to influence the next European Parliament elections. The belief that “housing is not the EU’s responsibility” should be challenged. Without an increasing public impact on housing markets, sustainable and equitable cities are impossible to accomplish, and the EU bears a significant share of the blame. Housing should become a topic of discussion in Europe as a result of the city-to-city movement and developing municipal cooperation.

At the G20, private equity fund investments and airtime are prohibited.

The UN’s Special Rapporteur on Adequate Housing, Leilani Farha, has proposed (link is external) putting the financialization of housing on the G20’s agenda, citing the relevance of the group’s finance ministers. Housing should be the next priority after food security. Private equity funds should be forbidden from investing in residential real estate, just as they are prohibited from engaging in detrimental environmental initiatives.

A fundamental human right

Leilani Farha stressed in her emotional speech at the Housing for All conference that gold is a commodity, but housing is not – it is a fundamental right. The current challenges are not merely market failings but also a failure to recognize housing as a human right, necessitating a seismic, paradigmatic transformation. Housing policies that are comprehensive and based on human rights must be adopted at all levels of government. Housing must be founded on laws that protect basic human rights, and housing policies must be based on human rights. She announced the formation of SHIFT(link is external), a new movement that already has 25 signatories, including Barcelona, Paris, Amsterdam (NL), and Seoul (KR).

Housing is a fundamental human right that should never be sold to the highest bidder.

Housing progress in the EU

In comparison to a decade ago, there has been some development in the European Union’s housing policy. Housing is not only considered from a competition policy viewpoint inside the EU Governance (European Semester, Macroeconomic conditionality, Reform Support Instrument, Rule of Law), but also as a matter of the Rule of Law, in which basic human rights are slowly gaining some relevance. Fundamental rights may be included as one of the horizontal enabling conditions in the post-2020 Cohesion Policy legislation.

According to reports from the Corporate Europe Observatory, there are ongoing negotiations between lobby organizations representing the sharing economy sectors (such as Airbnb, Uber, and others) and Commission departments responsible for competition and free-market regulation. Although the conclusion of these negotiations is unknown, the EU’s stance may unilaterally favor elements of a collaborative economy, despite national and local government’s efforts to regulate platforms in order to maintain affordable housing. In effect, the Commission may strike down Airbnb measures enacted in Barcelona, Amsterdam, Paris, Lisbon (PT), and other cities as violating competition law.