Affordable housing under threat as big investors buy up European homes – EURACTIV.com
Due to a favorable European regulatory framework, institutional landlords, such as private equity firms and pension funds, are increasingly buying homes in European cities, sparking fears of rising rents and inequitable access to housing, experts warn.
The European housing market has become increasingly attractive to large investors, such as Blackstone, BlackRock and Patrizia, according to a recent to study commissioned by the Greens/EFA political group.
More and more institutional investors are entering the urban housing market, looking for “safe assets”, said Sebastian Kohl, one of the study’s authors and a researcher at the Max Planck Institute for Housing. study of companies, at EURACTIV.
In 2020, the volume of purchases by institutional groups in Europe reached 64 billion euros, while the overall stock of real estate assets held by large investors is estimated at 150 billion euros.
One consequence of the growing footprint of institutional owners is that “housing has become an asset class”.
“It’s gone from a place where people live and have use value to a place where you can basically make money off of it,” Kohl said.
This phenomenon has a considerable impact on European cities and their inhabitants, according to experts.
“You have a situation where you have finances that basically determine your housing policy or finances that determine the makeup of your city,” said Sorcha Edwards, general secretary of Housing Europe.
According to her, when homes become an investment, they are often left vacant or rented out on a short-term basis, causing a “crowding-out effect” in city centers and driving low-income people away from the city center.
“Average people with average salaries – teachers, nurses, any of us – will be pushed further away, so they’ll have to commute,” she said.
According to Edwards, large investors also have a negative impact on housing affordability.
Housing prices and rents in Europe have increased over the past decade. According to Eurostatsince 2010, rents have increased by 16% and house prices by 38.7% across the block.
When housing becomes an investment vehicle for big players, affordability tends to decline, 2020 study finds to research by the European Commission on seven cities in Europe.
However, investment group Blackstone, which held 117,000 residential units across the continent in 2020, denies such a link.
“Blackstone owns a tiny fraction of the tens of millions of rental properties in Europe,” a spokesperson said, adding that the group is “a small player” with “no ability to influence broader rental trends.”
Daniela Gabor, professor of macro-finance at the University of the West of England and co-author of the Greens/EFA study, confirmed this. “Indeed, institutional owners have a small footprint so far,” she said.
However, she said, they are bound to grow and she warned of “how they can exert political influence”.
“There is something fundamentally different between you and me, buying two or three apartments in the cities where we live and renting them out, and Blackstone or BlackRock, or a Dutch pension fund, with billions and billions of funds ready to go into the housing market.”
Last year, Blackstone “opposed plans for a 30% social housing target in institutional portfolios” in Spain, where the group is the largest owner owning more than 40,000 homes, reports the study.
According to Gabor, the disparity of resources between private citizens and these investors also undermines “equity of access” to housing, especially for the younger generation.
“What ultimately happens is that we will forever remain Generation Rent, and instead of renting to small landlords, we will end up renting to Patrizia or a large private equity fund that owns our building on behalf of of our pension fund.”
The study argues that EU financial regulation has so far made it easier for institutional investors to increase their footprint in the European housing market.
“Instead of solving this problem, EU rules actually facilitate this trend,” said Kim van Sparrentak, one of the MEPs who commissioned the study, calling for “strict regulations to prevent large investors to take over our real estate”.
The European Commission did not respond to EURACTIV’s question on whether EU financial regulations have made it easier for large investors to buy homes, but confirmed the increase in institutional donors over the past decade.
“Further work is needed to understand its impact, given that there are significant differences between Member States and regions,” said a Commission spokesperson.
Meanwhile, experts are calling for more transparency when it comes to transactions involving institutional investors.
For their study, the researchers had to use a private database to access the data, but found this insufficient because not all transactions are reported.
“It’s perhaps telling that we had to spend a five-figure amount to buy a private database, to find out who owns European cities,” Kohl said.
[Edited by Zoran Radosavljevic]