Housing markets play a key role in shaping political, social and economic outcomes across the developed world. For many European families, the family home is the most valuable asset they will ever own – and the mortgage used to buy that home will be their largest debt. Across the European Union (EU), there are €7 trillion in residential mortgage loans outstanding (EMF 2018). That is just under half the EU’s annual gross domestic product (GDP), smaller than the €10-trillion market for non-financial corporate loans but far larger than the €2-trillion European market for those companies’ bonds (OECD 2018). Moreover, €7 trillion is a significant understatement of the financial importance of European households; banks create secondary assets derived from consumer lending, especially from mortgages (i.e., “derivatives” like mortgage-backed securities or collateralized debt obligations). This effectively results in the creation of multiple layers of financial-sector liabilities sitting on top of a smaller amount of household debt. As more of these mortgage-derived financial products are bought and sold across borders, malfunctioning housing markets in one major country increasingly have profound global consequences – as the late 2000s financial crisis definitively revealed.

In short, housing matters. When assessing the drivers of economic volatility and of inequality, housing must be part of the discussion. When analyzing the effects of capital sloshing from one national financial system to another, housing must be part of the discussion. And when debating the politics of risk and distribution, housing must be part of the discussion. More and more, experts from a variety of backgrounds have begun to realize this, generating a growing wave of studies into the social, political and macroeconomic consequences associated with housing institutions and policies. These investigations have clustered around two core arguments. First, housing market structures can generate both national and international macroeconomic volatility; second, policies and institutional configurations within housing markets can affect inequality (particularly wealth inequality). Two 2014 academic books that each caught mainstream attention present a good starting point for these arguments.

Atif Mian and Amir Sufi’s (2014) House of Debt forcefully made the case that malfunctioning housing markets cause macroeconomic instability.