The Housing Crisis: from Trading to Housing

This is a summary of the policy brief of Luuk Van Weert for the course The Social Structure of Western Societies. The author reports that across Western countries a housing crisis has occurred. For his work, Luuk decided to look at the Netherlands, at how the housing crisis came about, its quirks, and the consequences for individuals and society. It is important to note that the topic of interest, the factors that will be mentioned as well as the implications, and the recommendations are not exhaustive. The author acknowledges the complexity of the housing crisis and the difficulty in disentangling the matter in this short brief. However, the proposed recommendations in his paper reflect the state-of-the-art literature about the housing crisis, the more general factors influencing the housing crisis, and the specificities of the Dutch case.

The eruption of the housing crisis: state-of-the-art

At the end of the 20th-century welfare states were becoming outdated due to economic globalization and modernization. The first process led to national borders opening up and making free trade, outsourcing of labor, and diffusion of goods and services possible [1]. The second phenomenon caused a change in socially-liberal values leading to more self-actualization. As a result, there was a socio-economic transition where minority groups demanded more rights [2][3].

These factors brought a shift towards a post-industrial which presented new social risks [2][4][5]. The best solution was thought to be having an asset-based welfare, whereby the state would step back from providing social protection and the individuals would be responsible for overcoming financial difficulties through assets [6]. According to the research done by the author, this welfare combined with financialization (referring to the use of products for trade in which financial actors dominate the market) [6][7][8] and neoliberal policies (e.g. deregulation of the economy, liberalization of trade and industry) [9] resulted in the inflation of the housing market as well as the creation of market barriers for the outsiders of the housing market( i.e. lower classes and young adults) [10][11]. The author highlighted that gentrification, which is the process in which investors buy cheap areas, raise rent to drive out occupants, renovate to rent or resell areas at a higher price, has often left the outsiders of the market in a growing wealth gap and unfavorable house conditions [8][12]. Luuk notes that whilst these developments leading to the housing crisis can apply to various Western countries, there are some oddities in the Dutch case. 

The Oddities of the Dutch Case 

The Netherlands stands out for three reasons. First, the Dutch housing market stands out for being amongst the most financialised in Europe [13]. This is due to, for example, low-interest rates, tax incentives promoting house trading, and banks accepting higher risks for mortgages which increased housing prices [14]. Second, the Dutch have among the highest amount of social housing in the world [14]. Lastly, Dutch policy led to state-led gentrification [15]. This was due to decentralization and urban reconstructing [15], which is a process in which the state pursues housing associations and private developers to build middle-class housing in less affluent neighborhoods for more tax revenue. According to the author, the oddities of the Dutch case compared to other EU countries have led to specific issues within the housing crisis, which overall has led to both a very weak housing market position for the lower and middle social classes and an increase in the wealth gap.  

“(asset-based ) welfare combined with financialization […] and neoliberal policies […] resulted in the inflation of the housing market as well as the creation of market barriers for the outsiders of the housing market”

Microlevel Consequences and Societal Implications

When looking at the microlevel consequences, financialization, asset-based welfare, and gentrification have all led to negative consequences for the outsiders of the housing market. The evidence presented by Luuk shows that financialization and gentrification can result in several psychological effects such as depression, anxiety, social isolation, stress, and more [16][17]. Aside from mental health, due to gentrification, people have experienced an increase in hospitalizations and poor access to health care [18]. This suggests that these processes can lead to a decrease in the overall well-being and health of individuals [16][17]. High housing prices reduce the possibility to spend money on necessities [19] and affect the cognitive achievements of children and their employment opportunities [19][20]. Another negative consequence is that asset-based welfare and its implementation led to the encouragement of the creation of mortgage debt, which increased and reinforced the transmission of poverty risks and life chances to future generations [6]. 

Due to the oddities of the Dutch case, the lower and middle classes face detrimental consequences. The lower class struggles to find affordable living outside the social sector [6] due to a decrease in the social housing stock, the rise in housing prices, and gentrification. To accommodate the housing of lower classes due to fewer social housing stocks, the middle classes fall between housing ownership and the social sector [21][22]. This forces them to enter the private rent sector. Luuk provides evidence showing that due to the bad care of rent and management buildings by financial investors, renters have experienced physical, psychological, as well as social issues [10]. 

Although there are a lot of societal implications to discuss, the author chose to focus on the socioeconomic divide as well as wealth creation and family creation. The socio-economic divide does not only present issues for the individual but also society. Microlevel consequences can put in motion feelings of relative deprivation [16] resulting in feelings such as decreased perceived importance for democracy, the rise of populism, and discrimination towards minorities which can increase social unrest between groups in society [23][24]. The housing crisis has also reduced the possibility to create wealth for the lower and middle classes [11] resulting in feelings of distrust towards politics and democracy [16][18][23][25] and has postponed family creation due to financial insecurities. 

The oddities of the Dutch case have presented another societal implication worth mentioning, aside from the ones mentioned above. More specifically, the growth of socio-spatial inequalities. This occurs because lower classes are being housed in less affluent neighborhoods, while the middle classes fall between private ownership and the social sector. Moreover, the lower reliance on social housing by the middle classes has resulted in a decrease in financial support in regards to social housing. This will reduce the number and status of social housing and will allow for private landlords to increase prices and further the issues [26]. 


It is clear that due to the wide range of implications that the housing crisis has on individuals and society, policy changes should be taken regarding financialization, social housing, and gentrification. To combat the issues surrounding the first aspect, Luuk proposes two options. The first is to provide greater protection for less affluent housing market competitors, for example by creating a financial rental cap, decreasing housing costs, or providing socio-legal assistance [27]. The second option is to de-financialise the market to make housing policies about housing instead of trading. To the shortage of social housing, the author presents the possibility of building new houses and that national policies concerning ownership are implemented (e.g. taxation), to tilt the playing field toward middle classes and newcomers [28][29]. For the Dutch case, more lenient means-testing and new houses can generate the opportunity for less affluent middle classes to enter social housing and reduce rent prices [26][. Lastly, to mitigate the consequences caused by gentrification, states should prevent the concentration of lower classes in decaying and less affluent neighborhoods.  The author proposes that social houses could be built in more affluent neighborhoods and prevent the selling of social houses overall [22][30]. The state should also be cautious when it comes to state-led gentrification. More attention should be directed to granting assistance for the relocation of residents into new neighborhoods [18]. 

” […] due to the wide range of implications that the housing crisis has on individuals and society as a whole, policy changes should be taken in regards to financialization, social housing, and gentrification.”

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