The Political Economy of Housing Affordability: When Homes Become Assets Instead of Shelter

theconvergencys
Nov 20, 2025
4 min read

By Maya Brown Oct. 31, 2024

I – Introduction

Few issues embody the intersection of politics and economics as starkly as housing. Once viewed as a social right, housing has evolved into a financial instrument — a store of wealth, a speculative asset, and increasingly, a symbol of generational inequality. The OECD Housing Outlook (2025) reports that median home prices in advanced economies have risen over 220 percent since 2000, while real wages grew by only 29 percent. The result: a global affordability crisis that transcends national borders but reflects similar structural forces — deregulated finance, constrained supply, and political inertia.

This article explores how housing’s transformation into an asset class distorts urban economies and democratic priorities. By tracing the feedback loop between policy choices, financialization, and voter behavior, it argues that the housing crisis is not an economic inevitability but a political construction.

II – From Shelter to Speculation

The postwar housing boom was built on state-backed affordability: mortgage guarantees, zoning for middle-class suburbs, and public housing programs. But by the 1980s, neoliberal deregulation reframed property as a financial vehicle. The securitization of mortgages — epitomized by Fannie Mae and Freddie Mac in the U.S. — linked housing markets to global capital flows.

Today, that link dominates. According to BlackRock Global Real Assets Report (2025), institutional investors now own 27 percent of all single-family rental homes in the U.S., 19 percent in the U.K., and 15 percent in South Korea. Private equity treats neighborhoods as portfolios, bidding up prices faster than incomes can follow.

This financialization has social consequences: renters face precarity, young workers delay household formation, and cities stratify along wealth rather than occupation. Urban economists call this “spatial inequality compounding” — where property appreciation widens income gaps even without wage divergence. The IMF Fiscal Review (2025) estimates that real estate now accounts for 68 percent of household wealth in advanced economies, but 40 percent of that value is held by the top 10 percent of owners.

III – Political Capture and Policy Paralysis

Housing policy illustrates the political logic of asset protection. Homeowners — often the majority of voters in advanced democracies — demand rising property values but oppose supply-side reforms like densification, rent control, or land-value taxation.

This creates what political scientists term the “homevoter paradox.” Elected officials rely on property-owning constituencies for electoral support, so they privilege asset stability over affordability. In the U.S., for example, exclusionary zoning restricts multifamily construction across 75 percent of residential land (Urban Institute, 2024). Similarly, Germany’s Mietpreisbremse rent cap policy was politically watered down in 2023 after protests from landlord associations.

Meanwhile, tax regimes amplify inequality. Capital gains on property remain lightly taxed or entirely exempt in many countries. Australia’s Grattan Institute (2024) estimates that capital-gains discounts and negative gearing subsidies cost the federal government A$11 billion annually, primarily benefiting upper-income homeowners. The resulting policy inertia transforms the housing crisis from a social issue into a structural feature of the modern political economy.

IV – The Globalization of Land and Capital

The housing market is now transnational. Cross-border investment in real estate tripled between 2010 and 2024, with sovereign wealth funds, pension funds, and private developers seeking safe returns amid low global interest rates. UN-Habitat (2025) reports that one in every four newly constructed luxury units in major cities is owned by a nonresident investor.

This influx distorts domestic policy. To attract foreign capital, governments market real estate as an export commodity through “golden visa” programs and urban megaprojects. Dubai, Lisbon, and Vancouver all experienced surges in foreign investment followed by double-digit rent inflation and affordability collapse. Yet restrictions remain politically risky — such investors underpin local construction and fiscal revenues.

Paradoxically, the housing market has become both too global to regulate and too local to ignore. When national leaders propose wealth taxes or vacancy penalties, developers threaten capital flight. Consequently, cities oscillate between overbuilding for investors and underbuilding for residents.

V – Toward a New Social Contract for Housing

Reversing the affordability crisis requires redefining housing as infrastructure rather than a private asset. Three reforms stand out:

1. Land Value Capture and Vacancy Taxation Cities like Seoul and Vancouver have introduced steep vacancy taxes — up to 5 percent of assessed value — on unoccupied investment properties. The Korea Institute for Land and Urban Policy (2025) found that vacancy fell 12 percent in the first year, freeing 40,000 units for rental supply.

2. Public and Cooperative Ownership Models Vienna demonstrates that public housing need not mean low quality. With over 60 percent of residents living in municipally or cooperatively owned housing (City of Vienna Housing Authority, 2025), the city maintains stable rents and vibrant private construction. A similar model could be adapted through public-private housing trusts that cap investor profit margins while guaranteeing long-term affordability.

3. Fiscal Equalization Across Tenure Tax incentives should favor tenure neutrality: treat mortgage interest deductions and rent support symmetrically to avoid biasing policy toward ownership. This reduces speculative demand while maintaining political fairness.

Together, these reforms frame affordability as an outcome of governance, not merely markets.

VI – Conclusion

Housing crises persist not because societies lack space or money, but because politics rewards scarcity. When homes are assets, every reform that lowers prices threatens voter wealth, and when wealth defines political legitimacy, reform becomes impossible.

Recasting housing as a public good — integral to labor mobility, family stability, and democratic inclusion — requires confronting the structural power of property owners and financiers alike. A home should generate security, not speculation; belonging, not balance sheets. Until policymakers embrace that distinction, the promise of equitable urban life will remain trapped behind rising walls of capital.

Works Cited (MLA)

OECD Housing Outlook 2025. Organisation for Economic Co-operation and Development, 2025.
BlackRock Global Real Assets Report 2025. BlackRock, 2025.
IMF Fiscal Review 2025. International Monetary Fund, 2025.
Urban Institute Zoning Report 2024. Urban Institute, 2024.
Grattan Institute Housing Taxation Study 2024. Grattan Institute, 2024.
UN-Habitat Global Housing Brief 2025. United Nations Human Settlements Programme, 2025.
Korea Institute for Land and Urban Policy Annual Report 2025. KRIUP, 2025.