Each financial crisis — Savings & Loan in the 1980s, the subprime mortgage crisis in 2008 — led to even greater centralization of housing finance, as short-term fixes reinforced the dominance of national lenders and government-sponsored entities. The repeated cycle of risk, collapse and bailout has made housing a primary vehicle for financial speculation rather than a stable, accessible market for homebuyers.
Today, the product isn’t a home; it’s the promise to pay contained in the mortgage note. The buyer isn’t an individual or a family; it’s a financial institution acquiring that mortgage note and the decades of promised payments.
The innovations and efficiencies of scale we see in the housing market today are innovations in finance, not in home construction. These financial innovations have not been good for homebuyers or for affordability.
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Ironically, the one-dimensional efficiency of financialization has created a massive gap in the real market for homes. Large financial institutions are eager to fund single-family homes in bulk or large apartment complexes that fit their investment models, but they have no interest in small-scale, entry-level housing. A so-called "efficient" housing finance system has, in reality, left little to no capital available for small, incremental projects — like converting single-family homes into duplexes, adding backyard cottages, or financing small starter homes. This is despite the overwhelming demand for entry-level housing.