What’s the problem?
At the centre of today’s financialised capitalism is an enormous mountain of mortgage debt that is distorting the way society works. Too many mortgages are a problem for many reasons, for example…
- An excess of mortgages is a financial stability problem. Housing debt was at the heart of the 2008 financial crisis and many banking crises before that.
- Research tells us that growing mortgage debt is linked with rising house prices. First, this leads to increased inequality and affordability problems. Property owners get richer while finding housing gets harder for the rest. Second, it leads to property bubbles, and their bust an issue for homeowners and for financial stability.
- Shifting more and more housing to private ownership reduces the chances for many people to find adequate, affordable housing. Part of the shift from public to private ownership across society has been a reduction in social housing of various sorts. More and more of us are forced to rent privately or to become even more entangled in the financial system by taking a mortgage to secure housing.
- As banks shift more of their balance sheet to providing mortgages, they inevitably shift some away from long term patient investments in productive projects, including those that can help with a transition out of our social and environmental breakdown.
Banks remain the core of the mortgage market. The European Central Bank’s data shows us that 22% of bank balance sheets is taken up with lending to households – almost entirely in mortgages.
Allocation of Bank lending
What should we change?
Basic goods and services such as housing, education and health care should be available to all without having to pay the financial system. This is perhaps especially true of housing because it represents such a substantial investment, individually and collectively. This is first and foremost a problem of provision – more provision should be public as well as through mutual, cooperative, associational and new collective forms. Social housing of many different sorts can provide us with ground breaking, exciting places for people to live well; eco-villages are popping up all over Europe as people experiment with new ways to live collectively that put us back in tune with our environment.
In the private sector, more housing regulation could help reduce poor quality and over-expensive housing. Financial regulation could slow mortgage provision and reduce the tendency for housing to be just another financial asset. You can find more detailed policy ideas elsewhere on the Finance Watch website and on the Change Finance website.