The financialization of rental housing 3.0

Introduction

If this excellent special issue on “Institutional Investment in Urban Housing Markets: Global Trends, Local Manifestations and the State” makes anything clear, it is that the foundations of institutional investment in residential property have been in flux since the outbreak of the global financial crisis. While in the early 2000s the first wave of rental housing financialization predominantly revolved around property acquisitions by private equity firms and other speculative landlords (Bernt et al., 2017; Fields and Uffer, 2016), in the wake of the global financial crisis real estate investment trusts (REITs) and institutional investors marked their entry into the public and private rental sector (Aalbers et al., 2023; August and Walks, 2018; Nethercote, 2020). Arguably, we are still in the middle of this transition from “financialization 1.0” to “financialization 2.0” (Wijburg et al., 2018). Indeed, with global asset managers like The Vanguard Group and Blackstone now also owning an increasing real estate portfolio, the spread of institutional investment—both in direct and indirect portfolios—widens and is driven by the pursuit of long-term rental income and asset appreciation (Christophers, 2020; Holm et al., 2023; Sanfelici and Magnani, 2023).

Despite this observation, the state-of-the-art contributions to this special issue provide explicit and implicit evidence that we are potentially at the dawn of a new investment cycle. “Financialization 3.0”—as originally coined by Wijburg et al. (2024b)—is marked by intensifying state interventions and regulatory attempts to both constraint and facilitate institutional housing investment, particularly at the local level. Financialization 3.0 is not a stable or coherent policy regime, and many of its characteristics are present in less-amplified forms under financialization 1.0 and 2.0. However, given that the prolongation of long-term rental income and asset ownership increasingly depends on governing relationships with the multi-scalar state, financialization 3.0 is more than the sum of its predecessors (Waldron and Wijburg, 2025). Indeed, after prolonged phases of speculative market entry and long-term portfolio expansion, we are now entering a phase where state-supported market consolidation—particularly in times of increasing social resistance and decreasing portfolio returns (D’Adda and Kusiak, 2025; Vollmer, 2023)—is becoming an essential driver of rental housing financialization (see also Vidal, 2025).

In the remainder of this commentary, I build on this argument and examine how the contributions to this special issue provide evidence for a changing institutional investor landscape. In doing so, I adopt a qualitative meta-synthesis approach aimed at interpreting individual research findings with the substantive goal of creating overarching insights and conceptualizations (cf. Walsh and Downe, 2005; see also Nijman, 2007). First, I construe that under financialization 3.0 global financial investors increasingly attempt to negotiate favorable housing policy and urban planning arrangements. Second, I reconstruct how shifting state-finance compromises lead to the development of market-oriented crossholdings and state-supported investment schemes. Finally, I argue that portfolio diversification and asset class hybridization—both aimed at creating new value and reducing risk—are additional characteristics of financialization 3.0. Whether these global tendencies will result in a durable “asset ecosystem” reconciling public housing needs and global financial profits remains an open question. Therefore, I conclude this commentary with a broader reflection on the contradictions of financialization 3.0.

Financialization of rental housing 3.0

Institutional investment in rental housing is not new but has become more pronounced in the last decades of financialization 1.0 and 2.0 (Aalbers et al., 2023; Wijburg et al., 2018). While private equity firms and other speculative landlords—often with the goal of “buying low and selling high”—became prominent portfolio investors during financialization 1.0, under financialization 2.0 long-term oriented landlords like REITs and institutional investors gained importance in the public and private rental housing sector (Fields and Uffer, 2016; Özogul and Tasan-Kok, 2020). In this transition from speculative to long-term investment, the role of the state is sometimes described as market enabler, facilitating the assetization and rentierization of residential property (Çelik, 2023; Norris and Lawson, 2023). For example, during financialization 1.0, sweeping capital market reforms and privatizations contributed to the first wave of speculative property acquisitions (Byrne, 2016; Nethercote, 2020). During financialization 2.0, regulatory focus switched from unlocking market potential to facilitating long-term investment by institutional investors and REITs (García-Lamarca, 2021; Gil García and Martínez López, 2023; Rolnik et al., 2024). Gabor and Kohl (2022) associate these shifting state-finance compromises with de-risking regimes tinkering the risk/reward profiles of residential asset classes.

Despite these ongoing state commitments, the authors of the special issue—along with other key contributors to financialization studies—point out that we are possibly entering a new phase of state-supported market consolidation. Indeed, under financialization 3.0, the role of the state in regulating and stabilizing long-term rental income and ownership patterns is becoming increasingly subtle (Ward et al., 2024; Wijburg et al., 2024b). For better or for worse, global financial investors now own an increasing part of the global housing stock while policymakers, urban planners and community members increasingly challenge their market hegemony and rent-seeking activities (D’Adda and Kusiak, 2025; Vidal, 2025; Vollmer, 2023). Regulatory attempts to both regulate and constraint institutional investment—for example, in support of affordable housing, rent controls, and tenant protections (Wijburg, 2021)—have led to advanced negotiations where global financial investors both compromise to desired policy practices, but also negotiate favorable housing policy and urban planning arrangements supporting their overarching financial goals (Brill, 2022; Gustafsson, 2022; Taşan-Kok et al., 2023). Accordingly, global financial investors are compelled to embed themselves in local planning networks even when their ongoing strategy is to increase rents or evict tenants (Bonshoms-Guzman, 2024; Crosby, 2020).

Financializing urban governance and planning

How these subtle state-finance interactions are shaped and reshaped becomes clear in the empirical examples of this special issue. Indeed, in their excellent case study on the Swedish housing system, Kadıoğlu and Listerborn (2025) discuss how following decades of neoliberal restructuring (cf. Blackwell, 2021) many municipal housing companies (MHCs) have sold parts of their rental portfolios to global financial investors like Heimstaden and Vonovia. By law, these global financial investors are now allowed to negotiate rents with the Swedish Union of Tenants (SUT). However, rather than advocating for moderate rent increases as ordinary landlords normally would, they seek to use this regulatory tool to “game” the system by negotiating extra-economic rent increases. In doing so, they use regulatory loopholes and quasi-monopolistic power to “actively strain the system by implementing new moves such as the systematic use of new, selective renovation strategies or aggressive negotiation tactics, including letting tenants sign NDAs and/or circumventing rent negotiations altogether” (Kadıoğlu and Listerborn, 2025: 13).

Such a deliberate straining of the housing system resonates with investor strategies already exercised under financialization 1.0 and 2.0 (see, for example, Bernt et al., 2017; Wijburg et al., 2018). And yet, on a more structural level, Kadıoğlu and Listerborn (2025) entertain the idea that with this “game of rental housing financialization” becoming a common policy practice, its cumulative outcomes may lead to substantial (and sometimes unplanned) policy interventions. For example, by gaming the Swedish housing system, actors like Heimstaden and Vonovia can negotiate policy agreements with the SUT but also increase pressure on local authorities to accommodate changing market conditions. Although it remains to be seen how successful this strategy is, Kadıoğlu and Listerborn (2025: 12) point out that Swedish authorities are currently considering whether a non-negotiated market rent could add more flexibility to the Swedish housing system. Therefore, the authors conclude that “changes in housing systems do not necessarily have to be the result of radical decisions and clearly visible shifts but can accumulate over time, also depending on how rule-takers—in this case, housing providers—behave” (Kadıoğlu and Listerborn, 2025: 13). Sanfelici and Halbert (2019) associate this process with the coaxing of state bodies into using “their regulatory powers and financial resources to transform real estate into an asset class” (p. 83).

Another great example illustrating this dawning shift from financialization 2.0 to financialization 3.0 is situated within the case study of Berlin. Although stable and long-term partnerships between global financial investors and local authorities have not yet developed in the German capital, Bernt and Holm (2025) examine how the status quo has somewhat changed due to shifting local politics and the local referendum to expropriate corporate landlords under German constitutional law (see also Berfelde and Heeg, 2024; D’Adda and Kusiak, 2025). While the referendum sparked increasing confrontation between corporate landlords, tenant organizations, and left-wing political parties, the more conservative local government led by the Social Democratic Party Germany chose to neutralize political tensions by deflecting the referendum results and forming an “Alliance for New Construction and Affordable Housing in Berlin” (Bernt and Holm, 2025: 9). Rather than breaking potential ties with private housing partners, the local government sought to collaborate with global financial investors and committed them to the public housing challenge of building at least 100,000 new residential units by the end of 2026. In addition, the alliance revolved around

subsidies for up to 5,000 social housing units per year by the state of Berlin, the commitment of 30 per cent of all lettings to low-income households, a cap on rent increases for low-income households and an expansion of the “protected housing segment” for homeless people. (Bernt and Holm, 2025: 9)

Although this alliance was short-lived due to an “unfavorable business climate resulting from a mixture of inflation, energy price increases and rising interest rates” (Bernt and Holm, 2025: 9), it nevertheless illustrates the willingness of local authorities and corporate landlords to find common grounds amid highly contested global housing markets. For both sides, the stakes of such partnerships are high and state-finance compromises are intrinsically complicated and contradictory. However, it is also true that increasing collaboration is nonetheless required to navigate the complex waters of financialization 3.0 (Wijburg et al., 2024b). With global financial investors becoming too large to ignore, other case studies also illustrate how they increasingly penetrate local planning and governance networks or adopt public images of “socially responsible” landlords willing to “give back to get ahead” (Alexandri and Janoschka, 2025; Gil García et al., 2025; Hyde, 2022). At the same time, state authorities seek to regulate their goodwill and institutionalize what Rosenman (2019) calls the “financialization of good intentions.” Indeed, by regulating these modes of investment, state authorities legitimatize their role as public stewards and effectively incorporate institutional investment into national and local housing practice. Alexandri and Hodkinson (2025) see this emergent state-finance nexus as a social articulation of strategic relationality.

Market-oriented crossholdings and institutional investment schemes

The aforementioned case studies illustrate the distinctive ways in which financialization is unfolding unevenly across globally integrated housing markets. These studies do not stand alone and align with broader patterns observed in the urban and regional housing literature. For example, scholars on the financialization of public and affordable housing demonstrate that the implementation of financial innovations like social bonds, tax credits and planning contributions progressively transform the relationships between state authorities and global financial investors (Gustafsson and Vogt, 2025; Kay and Tapp, 2022; Wainwright and Manville, 2024). Second, the gained importance of market-oriented crossholdings and public–private partnerships is another phenomenon pointing at shifting state-finance compromises (Adisson and Halbert, 2022; Gimat, 2017). For example, in countries like France, Spain, and Italy, state-owned enterprises increasingly mobilize institutional capital to invest in heterogenous tenures at the intersection of social and private rented housing (Belotti and Arbaci, 2021; Fernández et al., 2025; Wijburg et al., 2024b). Finally, with increasing emphasis on new investment schemes such as Build-to-Rent, temporary, and niche rental housing, a whole new asset ecosystem is emerging where state authorities seek to reconcile public housing needs with global investment priorities (Brill and Durrant, 2021; Gustafsson and Vogt, 2025; Wu et al., 2025).

Regardless of this emergent state-finance nexus, the role of the state is “selective” when it comes to regulating and facilitating investments (Alexandri and Hodkinson, 2025). Under financialization 3.0, state authorities are increasingly aware that financial regulation is needed to curtail the negative externalities of rent-seeking investment (Hochstenbach, 2023; Ryan-Collins, 2021; Wetzstein, 2021). However, amid a situation of limited public funding and resources, governments also crowd-in institutional capital to close the funding gaps of capital-intensive housing projects (Fernández et al., 2025; Gabor and Kohl, 2022). Within that context, Alexandri and Hodkinson (2025) present an excellent analysis on how institutional housing investment is simultaneously regulated and facilitated in “post-crisis” Athens and Barcelona. In the aftermath of the global financial crisis, the Greek central state successfully protected Athens’ indebted households from aggressive debt securitization and home repossessions associated with interventions by the Troika institutions. And yet, while recognizing that economic recovery also relies on urban entrepreneurialism, it soon prepared ground for profitable re-investment in the city’s expanding short-term rental sector (see also Balampanidis et al., 2021). Lease-back options were negotiated to avoid any future foreclosures, but institutional investment was nonetheless encouraged to launch urban regeneration and economic growth (Alexandri and Hodkinson, 2025).

In Barcelona, powerful urban social movements contested the entrance of international investors and successfully lobbied for the introduction of affordable housing policies (see also Bonshoms-Guzman, 2024; Rossini and D’Adda, 2025). However, because these policies align with certain corporate social financial logics (Alexandri and Janoschka, 2025), they have not fully “tamed” the financialization of housing (cf. Norris and Lawson, 2023) and in some cases even reinforce it. For better or for worse, Alexandri and Hodkinson (2025) thus conclude that investors in Athens are “endorsing a lease-back option for repossessed households [….] while in Barcelona, the establishment of corporate social responsibility projects by financial investors elude social confrontation and transform previously non-income generating assets into novel revenue resources” (p. 16). Although state-finance commitments thus dampen excessive rental housing financialization, they also lead to institutional co-optation and the insertion of financial logics into the quasi-public housing sector (Van Gent and Hochstenbach, 2020; Wainwright and Manville, 2024). As financial profit-making remains the leading pursuit of global financial investors, new strategies are implemented to generate appropriate investment returns (cf. Gil García et al., 2025; Vidal, 2025). Oftentimes, these strategies facilitate financializing tendencies as “public welfare tasks are increasingly produced, managed and funded by institutional or corporate investors—and largely in accordance with their financial needs and expectations” (Wijburg and Waldron, 2020: 115).

From a different angle, Kadi et al. (2025) also touch on these contradictions of the emergent state-finance nexus. Despite a much more regulated housing context, Vienna—the “city of social housing”—has opened increasing parts of its housing market to institutional investors. Indeed, with 120,030 historic and new-built private rental units directly or indirectly owned by institutional investors, 11.1 percent of Vienna’s entire housing stock is owned by institutional actors. Accordingly, very subtle crossholdings have emerged as global financial actors employ strategic maneuvers to maximize investment returns within the parameters of housing policy and rental regulations. However, although such market-oriented crossholdings in Germany and Sweden stem from the direct privatization of subsidized rental portfolios (Holm et al., 2023; Kadıoğlu and Listerborn, 2025), Kadi et al. (2025) observe that the local government in Vienna almost exclusively encourages investment in the private rental sector. Therefore, with the state promoting flexible rent setting, location bonuses and temporary contracts in this resurging market segment, the case study of Vienna demonstrates how avenues for profitable investment are being negotiated in alternative housing tenures (Kadi, 2025). According to Aigner (2022), this strategy coincides with the revival of private rented housing and creation of new investment products like the Vorsorgewohnung.

These observations resonate with other studies where market-oriented crossholdings and hybrid tenure structures provide new outlets for institutional investment (Belotti and Arbaci, 2021; Fernández et al., 2025; Wu et al., 2025). While emerging “affordable” housing schemes incentivize global financial investors to charge rents at a higher level than traditional social rent, they also permit them to convert restricted units into market-rate units once underlying affordability requirements expire (Van Gent and Hochstenbach, 2020; Wijburg, 2021). Within the context of a global affordability crisis, such policies thus contribute to a blurring of public housing needs and global financial profit-seeking. That said, Kadi et al. (2025) make a good point that housing scholars must remain wary about concluding that institutional investment automatically leads to rent-extracting financialization. After all, under the postwar settlements, institutional investment was a key driver of economic reconstruction, but affordability aspects were not subordinated to the profitability principle, prompting institutional investors to compromise to broader community needs (Haffner and Hulse, 2021; Wijburg et al., 2024b). In other words, progressive housing policies are not alien to modern capitalism and social policies can encapsulate institutional investment within a postwar-like housing system where emphasis on common welfare becomes once again the central driver of urban and regional development (Holm et al., 2015; see also Blackwell, 2021).

Portfolio diversification and asset class hybridization

A third characteristic of financialization 3.0 is that global financial investors increasingly search for niche asset classes to diversify their overall real estate portfolio and related rentier models. Portfolio and income diversification is not a novel phenomenon as investors typically own multiple asset classes diversified across regions and sub-markets (Lizieri, 2013). However, what is new under financialization 3.0 is that global financial investors increasingly mobilize the heterogenous nature of single asset classes as a tool for property and income diversification (Wijburg et al., 2024a). For example, what could otherwise be rented out as a single-family home can be advertised on digital platforms as a holiday rental or temporary residence offering more flexible services to tourists, expatriates and digital nomads (Gil García et al., 2023; Sciuva, 2025). Heterogenous property uses are also emerging within multifamily housing where flexible and smart floorplans enable investors to build properties that could equally service as co-living spaces, nursing or senior homes, student dorms, and other subsidized forms of special needs-based rental housing (Aveline-Dubach, 2022; Casier, 2024; Reynolds, 2024). In many ways, this “value-added” strategy revolves around economizing space allocation and finding the “highest and best use” for property, sometimes even at multiple points of a building’s lifecycle (Nethercote, 2020; Wijburg et al., 2024a). Platform rentierization and the implementation of “Proptech” (property technology) and artificial intelligence further contribute to this ongoing process of asset class hybridization (Birch and Ward, 2024; Rogers et al., 2024).

These examples of “emergent financialization” are not core assets within global financial investors’ overall portfolios (Revington and August, 2020). However, as Oxenaar et al. (2024) demonstrate in their excellent case study on Brussels, “niche asset classes” are highly profitable precisely because they can be mobilized for their rent-increasing fee-for-service models. Moreover, niche market segments “open up previously inaccessible segments of [the] rental housing stock,” enable the bundling of “otherwise dispersed small-scale properties for large-scale institutional investment,” and allow for “capital switching in times of lower returns in non-residential asset classes” (Oxenaar et al., 2024: 3). Oftentimes, niche asset classes also receive lucrative state subsidies and housing allowances which can offset operating costs and turn them into a rewarding business model (Wijburg et al., 2018).

In the urban and housing literature, the creation of niche asset markets is sometimes conceptualized as a spatial fix for overaccumulated capital in otherwise saturating housing markets. However, given that niche asset classes are also emerging in many other European and North American cities, Oxenaar et al. (2024) correctly hypothesize that “the emerging financialization of niche rental assets is the more common, more ordinary, form of housing financialization in a wide range of cities in Europe and beyond” (p. 13). They are considered a “niche” only insofar as traditional renting remains the core asset class underpinning rental housing financialization. However, with shifting demographics, technology and market dynamics calling for increased asset class hybridization, it can only be expected that under financialization 3.0 niche asset classes will be mainstreamed into the capital flows of global financial markets (Oxenaar et al., 2024). Evolving housing needs of diverse target groups like students and the elderly drive the emergence of specialized housing models and reflect the increased heterogeneity of real estate portfolios (Horton, 2022; Oxenaar et al., 2024). What is more, algorithms and Proptech further optimize the lifecycle of residential properties and add value by economizing multifunctional asset potential (Porter et al., 2019; Rogers et al., 2024).

In the end, the ultimate contradiction of financialization 3.0 is that real estate is only in theory a liquid asset class (Gotham, 2009; Tapp and Weber, 2022). Since it cannot be reproduced indefinitely or removed from its physical location, limits to its hybridization remain in place. That said, the opportunity to exploit its increasingly heterogeneous nature for profit-seeking and market-consolidating motives is one of the defining features of financialization 3.0. This also reinstates the importance of the emergent state-finance nexus. While global financial investors rely on policymaking and urban planning to regulate and facilitate emerging niche asset classes, they also need state commitments to catalyze market change in related sectors like construction, property management and Proptech (Birch and Ward, 2024). Rogers et al. (2024) see new governing relations as a key facilitator of rent extraction at the intersection of rental properties and platform rentierization. However, in the spirit of Oxenaar et al. (2024), it can also be contended that a wider asset ecosystem is emerging where fee-for-service models are increasingly becoming the standard for both niche and mainstream asset classes. This is where financialization 2.0 transcends into financialization 3.0. Rather than merely securing long-term rental income, global financial investors emerge as co-coordinators of the urban development process and collaborate with state authorities to institutionalize heterogenous investment models.

Conclusion: toward a durable asset ecosystem?

In this commentary, I have mobilized the concept of “financialization 3.0” to conceptualize the changing state of rental housing financialization since the aftermath of the global financial crisis. While early rounds of financialization 1.0 and 2.0 were characterized by speculative and long-term investment (Wijburg et al., 2018), the dawning cycle of financialization 3.0 signals a more complex configuration. This phase revolves around subtle state-finance compromises and regulatory attempts to both constrain and facilitate institutional investment and rent-seeking ownership models (Wijburg et al., 2024b). For all its contradictions, financialization 3.0 contributes to shifting modes of governance, enabling global financial investors to (1) negotiate housing policy and urban planning arrangements, (2) develop market-oriented crossholdings and investment schemes, and (3) diversify portfolio holdings and value-added rentier models across the real estate sector at large. As an emergent state-finance nexus, financialization 3.0 is inherently unstable and marked by fragile coalitions and social opposition (Bernt and Holm, 2025). However, to navigate the complex waters of financialization 3.0, governing relations are nonetheless emerging to accommodate the changing market landscape.

The contributions to this special issue provide explicit and implicit evidence for an emergent state-finance nexus (see, for example, Alexandri and Hodkinson, 2025; Bernt and Holm, 2025). Having engaged in the “game of rental housing financialization” for decades (Kadıoğlu and Listerborn, 2025), global financial investors no longer merely exploit rental regulations and urban policy regimes, but actively coordinate their roles within rulemaking frameworks, contributing to new policies that both regulate and facilitate their debt-driven investment models. Aalbers (2023) conceptualizes this social relation as a state/finance symbiosis. However, rather than merely consolidating financialization 1.0 and 2.0, financialization 3.0 also capitalizes on emerging market opportunities in construction, leasing, technology and finance. For example, the phenomenon of asset class hybridization—often driven by Proptech and emerging fee-for-service models (Rogers et al., 2024)—signals that new rentier models can be implemented to economize the increasingly heterogenous nature of real estate (Oxenaar et al., 2024). Central to such investment strategies is that state authorities must allow for the circulation of financial logics within domains of the state and urban housing governance. Accordingly, some researchers consider financialization 3.0 as a cumulative outcome of the financialization of the state (Çelik, 2023; Ward et al., 2024; see also Tulumello and Dagkouli-Kyriakoglou, 2024).

Whether regulatory commitments can lead to a durable asset eco-system reconciling potential tensions between public housing needs and global investment priorities, is an important question deserving future research attention. Crouch (2009) is hopeful that increased corporate real estate and asset ownership could make institutional investors subject to regulations and modes of corporate social responsibility. Yet, Alexandri and Hodkinson (2025) make a fair point that the emergent state-finance nexus is defined by strategic relationality, meaning that it sometimes opposes the interests of global financial investors but sometimes also facilitates them. Although social compromises become a common ground under financialization 3.0, these compromises often revolve around acts of symbolic goodwill while financial profit-making remains the leading pursuit of institutional investors and REITs (Gil García et al., 2025). Under financialization 3.0, a durable eco-asset system is therefore not emerging as global financial investors keep on searching for loopholes that optimize their global investment priorities. Only New Deal–like housing interventions can encapsulate institutional investment in a manner that prioritizes common welfare over profitability concerns. Holm et al. (2015) provide a valuable roadmap to how such a radical housing agenda can be executed in another political conjuncture. Norris and Lawson (2023) also present valuable insights on how the contradictions of financialization 3.0 can ultimately be overcome.