Due to a favourable EU regulatory framework, institutional landlords, such as private equity firms and pension funds, are increasingly buying houses in European cities, sparking fears of rent increases and unfair access to housing, experts warn.
The European housing market has become increasingly attractive for large investors, like Blackstone, BlackRock and Patrizia, according to a recent study commissioned by the Greens/EFA political group.
More and more institutional investors are entering the urban housing market, in search of “safe assets,” Sebastian Kohl, one of the authors of the study and researcher at the Max Planck Institute for the Study of Societies, told EURACTIV.
In 2020, the volume of purchases by institutional groups in Europe reached €64 billion, while the overall stock of housing assets held by large investors is estimated at €150 billion.
One consequence of the growing footprint of institutional landlords is that “housing has become an asset class.”
“It’s moved from being a place where people live and have a use value to one where you can basically make money with 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 finance basically determining your housing policy or finance determining the makeup of your city,” said Sorcha Edwards, secretary general at Housing Europe.
In her view, when houses become an investment, they are often left vacant or rented on short-term, causing a “hollowing out effect” in downtown areas and pushing people on lower incomes further away from the city centre.
“The average people on average salary – teachers, nurses, any of us – will be pushed out further, so they have to commute,” she said.
According to Edwards, large investors also have a negative impact on housing affordability.
House prices and rents in Europe have been growing over the past decade. According to Eurostat, since 2010, rents have increased by 16% and house prices by 38.7% across the bloc.
When housing becomes an investment vehicle for large players, affordability tends to decrease, according to a 2020 research by the European Commission on seven cities in Europe.
However, group investment 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 impact broader rent trends.”
Daniela Gabor, a professor of macro-finance at the University of the West of England and co-author of the Greens/EFA study, confirmed that. “Indeed, institutional landlords have a small footprint so far,” she said.
However, she said, they are bound to grow and she warned about “the way in which they can exert political influence.”
“There is something fundamentally different between you and me, buying two or three flats in the cities where we live and renting them out, and Blackstone or BlackRock, or a Dutch pension fund, with billions and billions in funds ready to go into the housing market.”
Last year, Blackstone “opposed plans for a 30% target for social housing in institutional portfolios” in Spain, where the group is the biggest landlord owning over 40,000 housing units, the study reports.
According to Gabor, the disparity of resources between private citizens and these investors is also compromising the “fairness of access” to housing, especially for the younger generation.
“What eventually happens is that we will stay forever Generation Rent, and instead of renting from small landlords, we will end up renting from Patrizia or from a large private equity fund that owns our building on behalf of our pension fund.”
The study argues that the EU financial regulation has so far made it easier for institutional investors to increase their footprint in the European housing market.
“Instead of addressing this problem, EU rules are actually facilitating this trend,” said Kim van Sparrentak, one of the MEPs who commissioned the study, calling for “strict regulations to counter large investors from taking over our housing stock”.
The European Commission did not answer EURACTIV’s question on whether EU financial regulation has facilitated buying houses for large investors but confirmed the increase of institutional landlords over the past decade.
“Further work is needed to understand its impact, given that there are significant differences across member states and regions,” a Commission spokesperson said.
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 data but found this to be insufficient as not all deals are reported.
“It’s perhaps telling that we have to spend a five-figure number to buy a private database, in order to know something about who owns European cities,” Kohl said.
[Edited by Zoran Radosavljevic]
Source: euractiv.com
