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Financialisation and the private housing market
Why is housing more unaffordable than ever? Could new regulation change this?
FINANCE
Jamie Don
Policy and Research Officer, Campbell Tickell
Jamie Don
Policy and Research Officer, Campbell Tickell
Issue 82 | February 2026
The unaffordability crisis in the UK and abroad has been largely driven by increases in property prices. House prices have increased at around double the rate of standard inflation since 1975 and in London, house prices have more than tripled. Meanwhile, housing costs as a proportion of household expenditure have doubled since 1950.
To understand why house prices have increased so dramatically and why so many people are struggling as a result, we must look at the structural origins of this problem.
The concept of ‘financialisation’ provides a powerful framework for doing so. This can broadly be defined as the increasing role of financial institutions, financial tools and financial motives in the operation of the economy and wider public life.
This process has affected the UK housing market in two significant ways:
- Liberalisation of the banking sector
- The securitisation of housing
These factors are not independent but interact with each other, creating feedback loops and vicious cycles.
Liberalisation of banking
In the early 80s, both in the UK and abroad, political and economic shifts led to the increasing deregulation of the banking sector and the introduction of ‘free market’ policies across public institutions. The belief was that this would lead to financial innovation, opening up new avenues for growth at a time of economic crisis.
One impact of this political decision was that credit markets expanded quickly and completely independently of wage or productivity growth. This expansion of credit came mostly in the form of mortgages, which banks were confident they would receive reliable interest on and if not, had a tangible asset they could reclaim in the event of a default.
This easier access to cheap mortgage rates without the need for large deposits drove up house prices as demand increased, which further increased the requirement for mortgage lending – a vicious cycle.
The securitisation of the private housing market
The process of financialisation has also (culturally and economically) turned housing from a place of shelter into a financial asset.
As mortgages became easier to obtain and house prices continued to rise at a much faster rate than wages, it became more attractive for those with money to buy multiple properties and earn income from letting them. Meanwhile, the government gave tax incentives to those who owned their homes and the 1988 Housing Act allowed landlords to increase rents with more ease. This trend further reduced supply of houses to buy, pushing more people into the rental market and increasing prices.
Additionally, banks increasingly began to use housing and mortgages as a financial tool. People could use their homes as collateral to obtain loans for other ventures or to buy more property. Banks also package and sell mortgage debts to other institutions to make more profit and de-risk their loans. This increased use of housing as a financial tool has made it a more attractive investment for buyers and banks, which again, has driven prices up.
Solutions
What can be done to halt these feedback loops making both buying and renting more unaffordable for so many people?
The Renters Rights Act (2025) (RRA) may be a positive first step by increasing the regulation surrounding rent increases and making renting more stable, as evictions become more difficult for landlords. The RRA may also reduce house prices by reducing the demand for ownership – particularly making buy-to-let a less attractive investment, therefore increasing supply of homes for sale.
This policy could move the UK towards a highly regulated rent-based market, as seen in Germany, where 50% of households privately rent. Yet this may be difficult to square culturally, as homeownership is seen as the ultimate financial goal of most British people.
Nevertheless, no single policy can resolve the housing crisis, given the number of interdependent forces at play and it remains to be seen just how significantly changes such as the RRA will benefit both tenants and buyers. Still, a government that prioritises homes as places to live rather than assets to accumulate would represent a significant step forward.
“A government that prioritises homes as places to live rather than assets to accumulate would represent a significant step forward.”
