On Financialization of Housing

Assignment Essey on coursera "Financial Market"（Yale University）Graded 100/100
（https://ja.coursera.org/learn/financial-markets-global）

reference:https://www.ohchr.org/EN/Issues/Housing/Pages/AnnualReports.aspx

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I agree with financialization of housing. Financialization of housing liquidizes assets and provides us with the convenient means of accumulating capitals. In business, all players from individuals to companies need money to run their business. Especially for companies, their business performance directly affects the country’s or world’s economy, and thus, the quality of our life. Moreover,housing is one of the most popular assets among high-priced properties. Truly there are some other high-priced assets such as ships and forests. However,such assets are very rare and not easy to use. According to “Report of the Special Rapporteur on adequate housing as a component of the right to an adequate standard of living, and onthe right to non-discrimination in this context”(Hereinafter referred to as the Report), which published by United Nations Human Rights Council, The valueof global real estate is about US$ 217 trillion, nearly 60% of all global assets, with residential real estate comprising 75% of the total.

In this sense company must have financialization of housing as means of making money and stimulating economy. There are some examples of countries which become prominent by finance, such as Singapore. It functions as one of the biggest international financial centers and its presence has become strong these days.

However,we have one problem to be deeply considered : human right of housing. Different from ships or forests, housing is commodity and indispensable assets which all people needs in order to live in dignity and security. Therefore, when we invest in housing, we always must think much of it. The greatest example is the 2008 financial crisis. There are many factors of this crisis, but one of the main reasons why this happened is financialization of housing. There was the bubbles of housing price and many financial institutions such as Lehman Brothers issued lots of subprime mortgages. People fancied that the price of housing would go up infinitely and almost no one, even professionals in financial institutions could doubt it. From the point of views of behavioral economy, this is the most typical logical fallacy. If one good thing repeatedly happened, people tend to think the next one is also good thing with no logical reasoning. That is, if people see the price of housing increasingly go up untiltoday, they tend to think the price will go up tomorrow. Oppositely, if one badthing repeatedly happened, people tend to think the next one is NOT bad.

I think we cannot eliminate such tendency. If we are to do it, that demands infinite cognition of our weakness and improvement of our decision, which completely exhausted us and leads to failure at last. What is important is not our will but social system to “enforce” us not to commit logical fallacy.

One example is Dodd–Frank Wall Street Reform and Consumer Protection Act. We must monitor financial institutions and if we detect the potential danger of invading human rights of housing, do something to protect them. Otherwise, subprime mortgages continue to be bought, and some time, the crisis will happen and many people suffer from bailout and become homeless.

There are other examples of balancing the advantage and disadvantage of financialization of housing. According to the Report, the City of Vancouver recently approved a 1% tax, which would apply to both foreign and domestic investors, on vacant homes. The Mayor of London recently announced that builders will be required to ensure that 35% of new homes that are built are genuinely affordable.

In conclusion, I agree with the financialization of housing because of its convenience of stimulating economy and making people wealthier. However, above this advantage, we should recognize housing is the indispensable commodity for people to live in dignity and security. Human rights is of paramountcy. States,of all thing, have subsidized the excessive financialization of housing at the expense of programmes for those in desperate need of housing. It is completely imbalanced. What we must do is to balance the accumulation of capitals by financialization of housing, and, the protection of human rights of housing.