Uncovering JAPA

The Need for Greater Transparency in Financialized Rental Housing

Over the past decade, a growing body of research has delved into the financialization of housing, highlighting the increasing influence of financial actors and markets in the housing sector. While much attention has been paid to mortgage lending and homeownership, recent focus within planning research has shifted towards understanding the financialization of rental housing.

In rental housing construction, limited partnerships have become a favored financing model. Developers and funding sources become shareholders, shifting risk to the latter, traditionally creditors. This shift boosts funding sources' yield expectations, limiting new housing production to lucrative building types. As investment funds engage more in rental unit production, a greater share of rental housing adopts a financialized logic.

Research Methods and Data Triangulation in Montreal

In "High Rises and Housing Stress: A Spatial Big Data Analysis of Rental Housing Financialization," (Journal of the American Planning Association, Vol. 90, No. 1), Cloe St-Hilaire, Mikael Brunila, and David Wachsmuth introduce a novel method for scraping public data to explore the relationship between financialized landlords, land use, and demographic variables in Montreal. Their research marks the first analysis of financialized rental housing ownership conducted at an urban scale.

Montreal is an excellent case study, with 63 percent of its population living in renter-occupied housing, a higher share than any other mid- or large-sized city in North America. However, the landscape changed in the 2010s, with the emergence of new financial actors in purpose-built rental housing construction and challenges in enforcing rent control measures due to limited accountability and exceptions for newly constructed units, amidst tightening housing market conditions.

Despite the recognized significance of financialization in the housing market, the dearth of data on property ownership impedes both research and the formulation of effective policies by planners and communities to address rental market outcomes.

To address this challenge, the authors triangulated public data sources to uncover ownership structures in Montreal's housing market, identify financialized rental properties, and correlate ownership patterns with housing market and land use characteristics. They combined this data with demographic information from the Canadian Census at the census tract level and conducted statistical analyses.

Figure 1: Bivariate regressions analyses with the percentage of rental housing units under financialized ownership as the outcome variable.

Figure 1: Bivariate regressions analyses with the percentage of rental housing units under financialized ownership as the outcome variable.

Neighborhood Typology: Identifying Financialized Rental Housing

The study identified two neighborhood types with high concentrations of rental housing financialization:

  • Precarious type — these areas had ethnically diverse, young populations with low incomes and many students, consistent with research on financialized landlords targeting marginalized groups.
  • Affluent type — these areas were mostly white and well-off, and showed low housing mobility and high spending on housing despite dense housing and tenants facing housing stress.

Information asymmetry poses a critical issue in housing fairness. The rental housing market, largely characterized by extreme information asymmetry, often reflects an imbalance of power. Landlords have access to tenant information, while tenants lack insight into the reputation or behavior of their landlords.

The study's innovative approach to identifying owners of financialized rental properties underscores the deliberate complexity underlying ownership networks. Establishing rental registries requiring the identification of beneficial ownership could help mitigate this complexity and enable better enforcement of rent control measures and policies regarding rental property ownership.

Greater transparency would empower planners and communities to advocate for policies that protect tenants from predatory practices of financialized landlords and improve rental market outcomes.

Top image: iStock / Getty Images Plus - Anatoli Igolkin

Lucas Flint is a master's in urban planning program student at Harvard University.

February 8, 2024

By Lucas Flint