Housing Financialization and Political Opportunism

• In Event: Contemporary Challenges of Democracy and Inclusive Growth

Abstract

House prices across the US have escalated, causing significant economic hardship. Politicians and the media increasingly attribute affordable housing crises to financial investors, who stand accused of inflating prices, diminishing inventory, and pushing out regular homebuyers. Though investor activity has risen, we argue that the financialization narrative serves as a convenient scapegoat, diverting attention from politicians’ failures to expand the housing supply and shifting blame on Wall Street. This populist narrative is politically expedient: it appeals to the electorate at-large while simultaneously protecting organized housing insiders who seek to limit supply.



We provide several types of evidence in support of this argument. First, fine-grained address-level data on investor purchases reveal that neighborhoods exposed to housing financialization do not necessarily experience faster house price growth compared to unexposed areas. Second, despite this disconnect, original survey data show voter aversion to housing financialization and support for placing restrictions on investor activity, even in areas without significant financialization. Third, analyzing local government public meetings and politicians’ speech, we find that anti-investor rhetoric occurs irrespective of financial investor activity. Fourth, an examination of news media demonstrates that coverage of housing financialization has increased and has become more negative in tone. We conclude that the national appeal of housing populism compounds existing local-level constraints and creates another barrier to solving contemporary housing crises.

Authors

• Rafaela Dancygier, Princeton University

• Andreas Wiedemann, Princeton University

• Vincent Heddesheimer, Princeton University