The Financialization of a Social Housing Provider

Why does a social housing provider bet on interest rate fluctuations? This paper presents a case study of the financialization of both housing and the state. Social housing in the Netherlands is provided by housing associations, private non-profit organizations that provide public services. Until 1989 the housing associations formed a de facto arm of the state. Since then, the associations have been placed at a distance from the state. Many associations started developing housing for profit and several started lending money to other associations, borrowing on global capital markets and buying derivatives, even though cheap credit was available through an AAA-rated social housing fund. Vestia, the largest of them all, is an extreme – but not an exceptional – case of what can happen when public goals need to be realized by under-supervised and poorly managed private organizations. As a result of gambling with derivatives, Vestia had to bailed out for over €2 billion. To make up for the losses, housing was sold off and rents were raised. At a smaller scale, the same happened at other housing associations. The changes in the housing sector that led to its financialization cannot be separated from the wider financialization of the state.