Tools to tame the financialisation of housing

Figures & data

Table 1. Credit guidance policy tools.

Tools affecting demand for credit

Tools affecting supply of credit

Loan-to-value ratios Debt-to-income ratios Loan-to-income ratios Margin requirements Loan maturities Affordability test scenarios Subsidies for home purchase and mortgage guarantee

Credit ceilings and quotas Interest rate ceilings Reserve requirements leverage ratio (exemptions) Capital (risk-weight) requirements Portfolio restrictions Supervisory pressure and moral suasion Loan-to-deposit ratios Collateral requirements Funding for lending and targeted longer-term refinancing operations (TLTRO) Proportional lending ratios Central bank asset purchase programmes State investment banks and specialised public credit intermediaries

Source: Bezemer (2018).

Table 2. United Nations Environment Programme’s tools for a more sustainable and inclusive finance system.

Financial sector reforms	Application to circuits of housing finance
Enhancing market practice: disclosure, analysis, risk management	Establish reporting frameworks on affordable and sustainable housing for investors in special purpose bonds which can be used to finance this type of housing Adaption of criteria for assessing social, sustainable, and affordable housing providers and investment vehicles by credit agencies Integrating housing market stability and climate change risks into central banks’ financial stability reviews and similar reports, e.g. Improving granularity of mortgage data in relation macroprudential targets and credible environmental monitoring of investments to avoid ‘greenwashing’
Harnessing the public balance sheet: fiscal incentives, public financial institutions and central banks	Ensure that government funding and subsidies for housing and housing procurement processes promote more sustainable and inclusive outcomes.
Directing finance through policy: requirements and prohibitions, enhanced liability	Ensure public procurement is designed to deliver sustainable and inclusive outcomes and improve societal well-being, economic development and environmental sustainability Establish priority lending programmes to increase financial access for first-time home buyers, not-for-profit social housing providers and co-operatives. Introduce rules prohibiting speculative investment in affordable housing.
Cultural transformation: capacity building, behaviour, market structure	Devise national compacts and road maps to reform finance for housing Support the development of values-based finance institutions and social impact investing. Establish systems of certification and labelling for socially and environmentally responsible real estate companies.

Source: Lawson et al. (2021).

Figure 1. Operation of the Danish centralised social housing revolving fund.

Bezemer, D., et al., 2018. Credit where it’s due: a historical, theoretical, and empirical review of credit guidance policies in the 20th century. London: UCL Institute for Innovation and Public Purpose.

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Lawson, J., Norris, M., and Wallberg, H., 2021. Housing2030: effective policies to deliver affordable housing. Geneva: United Nations.

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