As a result, its managers can not only influence rental rates to investors’ advantage. They also have a peculiar ability to affect who gets housing at all: to improve the security of its investments, its managers establish long-term leases with government and corporate tenants who then sublease to their employees—often from the South.
Such exclusive housing markets particularly burden indigenous people who migrate from rural to urban centers. In the 1950s, the Canadian government embarked on a project of settling formerly nomadic indigenous hunters around old fur trading posts, in part as a solution to their immiseration with the decline of the fur trade and the rise of resource development. But settlement promised to fulfill an even grander objective: their assimilation into Canadian society and the wage economy. Without any sustained economic base in settled areas, however, rural northerners lacked opportunities for secure employment.
In the twenty-first century, rural indigenous people have continued to rely on seasonal, part-time jobs and unstable sources of income in industries like arts and crafts and tourism. Their dependence on credit in the fur trade has thus morphed into reliance on government relief and services. Not the least of these services is social housing, which is poorly funded and thus inadequate in quality and quantity. Poor housing, along with paltry incomes and related social and psychological strain have incited many rural northerners to move to urban centers to seek work, education, housing, or government services. “[F]or me, it was too crowded at home,” as one migrant to the town of Inuvik told ethnographer Julia Christensen. “I couldn’t get away from all the problems.” But once they’re in the towns and cities, the monetary and institutional barriers to entry into the private rental market can be difficult to surmount. Reenacting an old colonial scenario, urban housing markets restrict the control of indigenous people over their shelter and bodily security.
Bustling New York City and arctic northern Canada couldn’t be more unlike. But in both, systematic racial inequality has been essential to valuable real estate investment. It’s not that the inhabitants of redlined neighborhoods in New York, or indigenous northern Canadians, have been in the way of real estate investors. On the contrary, the prior devaluation or non-valuation of their homes and lands have enabled profitable investment at later moments in history.
The Global Financialization of Housing
The stories of financialized housing in New York and northern Canada are merely pieces of a bigger story.
In the U.S. single-family housing market, Black and Latinx homeowners disproportionately received the subprime mortgages at the heart of the 2008 housing crisis—an instance of what historian Keeanga-Yamahtta Taylor calls “predatory inclusion.” After 2008, private equity firms bought up the foreclosed homes of such homeowners across the U.S. sunbelt in bulk, then turned them into single-family rentals. They managed to capture significant portions of markets in such metropolitan areas as Charlotte, Tampa, and Atlanta, and they’ve followed methods to squeeze out higher returns that tenants of private equity firms elsewhere know all too well.
The reach of institutional investors in rental markets is by no means limited to North America. Elsewhere, they’ve often followed the strategy of privatizing social housing. In Germany, for instance, private equity firms purchased apartments in Berlin en masse from state-owned housing companies beginning in the early 2000s. In Sweden, Blackstone’s arm Hembla has acquired over 21,000 apartments in Stockholm since entering the market in 2014. In a different strategy, in Spain, Ireland, and the U.K., private equity firms and REITs swooped in after the 2008 crisis to purchase soured real estate assets, much as they had in the United States. Following a major purchase in 2017, Blackstone became the largest private real estate firm in Spain.
If financialized housing is international, so too are the investors. Besides the global economic elite, sovereign wealth funds of nations such as Abu Dhabi, Norway, and China have heavily invested in real estate. Public pensions are also major investors, either directly or via private equity funds. According to one estimate, the Canadian Pension Plan Investment Board, the California Public Employees’ Retirement System, and the National Pension Service of Korea are among the top twenty-five largest investors in private real estate. All this can get quite convoluted. As a Toronto couple who appear in the 2020 documentary Push can attest, a landlord trying to displace you may be the very pension fund in which you’re an investor.
We’ve arrived at the scope of the problem.
Within the span of just several decades, the asset value of housing has rapidly risen in significance, relative to its functional value as a place to live. That valuation has become so deeply woven into our global economic system that many of us—not just the one percent—have, perhaps unwittingly, bought into it—literally, metaphorically, or both.
What is more, it’s the deep structures of inequality in our society that have made speculative investments in housing so potentially profitable. And when it comes to housing, in North America, those structures were shaped by the age of welfare state, from the 1930s to 1970s. That’s an age many of us today too willingly embrace as model, even while acknowledging its flaws. But it’s worth remembering the ways in which the policies of those decades are less an alternative to than a historical basis for the troubles we’re now in: with its utopian vision of endless growth and consumption, and its reality of racial exclusion and dispossession.