The housing crisis is one of the most pressing challenges of our time. The cost of renting or buying a home has far outpaced wage growth in countries around the world, a pattern that has only intensified with the pandemic. It’s driving inequality and making cities unaffordable for the people who make them thrive. The causes of this global crisis are many, but the financialization of the residential real estate market plays a huge role. Within the current model, investors use homes to make as much money as possible while governments are often passive or even skew the market rules to favor the interests of big investors. But housing should not be treated as just another tool for speculation; it’s a basic human right and an essential element of everyone’s life.
The Shift Directives are the first-ever comprehensive framework providing governments and investors with guidance to effectively address the financialization of housing in accordance with human rights law.
Check out the interactive map above to see some of the many forms of financialized housing across the world, and some attempted solutions. Have an example you’d like added to the map? Tell us about it!
Sam Freeman: Residential real estate has become a global money-making scheme. It is worth around US$258.5 trillion, 3 times the value of global GDP and 20 times the value of all the gold ever mined. This phenomenon – termed the ‘financialization of housing’ has become the entrenched model of housing provision in many States, many of which have actively encouraged it through deregulation, policy, and various incentives. But the financialization of housing has significantly reduced the enjoyment of the human right to housing around the world. As entities such as private equity firms, pensions funds, and real estate investment trusts hungrily search out greater profits from their housing ‘assets,’ they implement policies that impact affordability, security of tenure, and habitability for their tenants.
Leilani Farha: The Shift Directives represent a growing consensus. The harm caused by the financialization of housing is real and the plunder of housing for capital regardless of the cost to tenants must be stopped. In an unprecedented move, a diverse group of experts working on these issues from various frameworks and disciplines (leading economists, academics, urbanists, human rights experts, grassroots tenants movements, those working with investor-clients) have come together to assert the need for The Shift Directives. A fundamental shift in the way we understand and interact with housing is now required. Governments and investors alike need to move away from housing as a financial asset, and towards the recognition and treatment of housing as a human right. The Shift Directives offer this reimagination.
Leilani Farha: The human rights framework has as its ambition the creation of societies that are more equitable, peaceful, democratic, and non-discriminatory. Around the world, people have taken to the streets in protest because life is becoming too expensive. The cost of housing – the single biggest expense for most households – is at the heart of this. If The Shift Directives were implemented, cities would simply be happier places. Human rights are legal obligations to which governments have committed. Having accepted to be bound by human rights, means states must take steps to ensure that all of their laws, policies, and programmes align with human rights standards. The Shift Directives provide a roadmap for states to do so using international human rights obligations to guide the way to ensuring the full realization of the right to housing for all people.
Leilani Farha: The right to housing simply means the right to live in peace, security and dignity. Under international human rights law, adequacy has been defined as having seven characteristics including affordability (defined as commensurate with household income, not what markets can command), habitability (decent conditions including access to affordable water/sanitation, electricity, heating and cooling where relevant), and requiring secure tenure (where tenants aren’t living in fear that their rent will be raised beyond affordability, or that they may be evicted without cause or for minor issues).
Leilani Farha: In The Shift Directives, the “financialization of housing” refers to structural changes in housing and financial markets and global investment whereby housing is treated as a commodity or asset, a means of accumulating wealth and often as security for financial instruments that are traded and sold on global markets. It refers to those institutional investors in housing who cater predominantly to their shareholder or investor clients and in the process — inadvertently or not — cause harm to tenants. It refers to the way capital investment in housing increasingly disconnects housing from its social function of providing a place to live in security and dignity and hence undermines the realization of housing as a human right. The Shift Directives look at everything from single family homes, apartment buildings, student housing, long-term care home, and tourist accommodation listed on short-term rental platforms.
The financialization of housing in The Shift Directives does not refer to individuals who own a second home that they use seasonally. Nor does it refer to all capital investment in residential real estate, in particular where investment is part of a business model that promotes the human right to adequate housing and its fundamental principles as defined in international human rights law and that is consistent with Target 11.1 of the Sustainable Development Goals.
The Shift Directives recognize that beyond regulating and restricting financialization and its specific manifestations, states must create strong human rights-based legal frameworks to better protect tenants and re-direct financial actors like commercial and central banks and international financial institutions in keeping with international human rights standards.
Sam Freeman: No. The Shift Directives do not call for a dismantling or a rejection of capitalism. They simply call for the implementation of existing and applicable legal standards to capitalist structures and policies to ensure that capitalism does not do harm to anyone, and particularly those who are already the most vulnerable.
Sam Freeman: The primary audiences for The Shift Directives are governments (national and subnational) and institutional investors (as defined in The Shift Directives, such as private equity, pension funds, asset management firms), both of whom have international human rights obligations and responsibilities to tenants. At the same time, The Shift Directives are crafted to be widely applicable. The Shift Directives should be read and used by a vast array of actors, including tenants (and their movements), homeowners, advocates, National Human Rights Institutions and international bodies engaged in housing and finance issues.
Leilani Farha: The Shift Directives put forward powerful yet practical recommendations for change. They should be harnessed by those seeking to drive their societies away from financialization and towards the realization of the right to housing. They should be applied by decision-makers, incorporated into policy and legislation, used as a tool for monitoring and accountability, and built into advocacy. Investors should allow The Shift Directives to guide their internal policies and processes to ensure they comply with their responsibilities under international human rights law.
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