{"id":10930,"date":"2025-11-21T12:10:40","date_gmt":"2025-11-21T11:10:40","guid":{"rendered":"https:\/\/www.rivistaeco.com\/?p=10930"},"modified":"2025-11-21T12:10:40","modified_gmt":"2025-11-21T11:10:40","slug":"the-house-that-fuels-inequality","status":"publish","type":"post","link":"https:\/\/www.rivistaeco.com\/en\/2025\/11\/21\/the-house-that-fuels-inequality\/","title":{"rendered":"The House that Fuels Inequality"},"content":{"rendered":"

Housing is now a central issue in many countries across the world, in part because it plays a significant role in amplifying economic inequalities. It is not only a consumer good; it reflects income and lifestyle, gains value over time, and determines access to better or worse opportunities. Rising housing costs weigh especially on renters and low-income families, while homeownership reinforces inherited privileges and intergenerational disparities. Initial disadvantages are further aggravated by market volatility, forms of segregation, and outright ethnic and racial discrimination. Unequal tax policies, a shortage of affordable housing, and urban planning that tends to exclude the less privileged also contribute to widening divides. How can we escape this trap? Through bold reforms\u2014from strengthening tenant protections to revising zoning regulations. Only then can housing become the foundation for equity and inclusion.<\/em><\/p>\n

 <\/p>\n

Housing has become, almost everywhere in the world, one of the key economic issues of our time. It is the place where macroeconomic forces intersect with the intimate rhythms of personal needs and daily life. It is a commodity and, at the same time, a right for most people. It is a source of stability, shapes neighborhoods, and acts as an engine of exclusion. More and more, it represents the silent and, to some degree, insidious architecture behind the widening of inequalities.<\/p>\n

Why It Is an Engine of Inequality<\/strong><\/h3>\n

In Europe and especially in North America, housing markets struggle to meet rising demand in certain areas\u2014the most attractive ones\u2014where large shares of the population are concentrated. At the same time, other groups remain excluded due to stagnant wages and decades of political indifference. But the crisis is not only economic\u2014not merely about whether a household can afford to buy or rent a place to live. Housing shapes access to opportunities, reinforces the concentration of wealth, and fuels social divides. In short, housing is not only a mirror of inequality; it is one of its most powerful engines.<\/p>\n

To understand the role of housing in cementing inequality, one must recognize its threefold function in modern economies. It is a consumer good that reflects income and lifestyle: wealthier families live in larger houses, in better locations, with higher-quality services. But it is also capital, a store of wealth: owning property allows households to accumulate assets, pass them on to future generations, and borrow against their value. Geography is equally important: housing determines access to schools, jobs, transportation, and social networks. Where one lives shapes the opportunities that mark the course of a lifetime, which is why scholars and the public are paying increasing attention to it.<\/p>\n

These three dimensions are deeply interconnected. The ability to enjoy better housing services and the opportunities they provide often depends on ownership. Ownership, in turn, is influenced by geography: some locations generate substantially higher returns than others, even after adjusting for cost of living. And all three dimensions are stratified by income, age, and ethnicity.<\/p>\n

Housing Devours Household Income<\/strong><\/h3>\n

In many European cities, housing costs have risen faster than incomes\u2014especially for renters, who obtain no benefit from the implicit gains generated by rising property values. In Italy, for instance, nearly one renter in three spends over 40% of their income on housing. In Milan or Rome, the percentage is even higher. Similar trends can be found in Paris, Barcelona, London, Athens, New York, Boston, San Francisco, Los Angeles, and Berlin.<\/p>\n

But not everyone faces the same challenges. Wealthy families generally spend a smaller share of their income on housing, benefit from favorable tax treatment, and profit from rising home values, since in most countries governments do not tax the implicit income associated with occupying one’s own home. Meanwhile, low-income families are squeezed\u2014often forced into overcrowded, poorly maintained units, pushed toward urban peripheries, or even falling into homelessness, a growing phenomenon in major Western cities.<\/p>\n

The consequences are enormous. When housing consumes such a large share of income, families have less money to spend on food, healthcare, education, or savings, undermining both their financial stability and their social mobility.<\/p>\n

An Inherited Privilege<\/strong><\/h3>\n

In advanced economies, housing is the main component of household wealth. In Italy, for example, it accounts for over 60% of total family assets. But this wealth is highly concentrated: the richest 10% of families own most of the housing value, as is the case in other European countries and even more so in the United States, while poorer and younger households struggle even to enter the market.<\/p>\n

Rising home prices benefit owners, widening the gap with renters. Young adults increasingly rely on parental help to buy a home, reinforcing intergenerational inequality and turning homeownership into a marker of inherited privilege\u2014supported in some countries, such as the United States, by the exemption of housing wealth from estate taxes.<\/p>\n

But housing wealth is not limited to the value of the property itself; it extends to what that value allows households to do. Homeowners can take out mortgages to finance their own or their children’s education, start a business, or cope with financial hardship. Renters, on the other hand, have few assets to draw upon and face unpredictable rent fluctuations.<\/p>\n

When It Turns Into a Risk<\/strong><\/h3>\n

Ownership offers financial advantages, but it also carries risks. Housing markets are volatile: sudden drops in value can wipe out savings and even lead to foreclosures and repossessions. Young buyers\u2014already struggling with high prices\u2014are particularly vulnerable.<\/p>\n

In countries like Spain and Ireland, the 2008 crisis revealed the fragility of real estate\u2013based wealth. In the United States, it fueled resentment against elites deemed responsible (and never punished) for the financial crash. The crisis, which spread extremely quickly around the world, caused thousands of families to lose their homes, and many are still suffering the consequences. The lesson is clear: housing is an important component of wealth, but it is not a safe path to prosperity. For many, it is a high-risk investment, subject to market cycles and political choices.<\/p>\n

How Much Geography Matters<\/strong><\/h3>\n

Geography matters greatly. Where one buys or rents a home shapes one\u2019s destiny. Access to quality schools, safe streets, and strong labor markets varies enormously by postal code. Yet high housing costs and zoning constraints can be significant obstacles to accessing those advantages. Moreover, parents with higher education, incomes, and assets make it easier for their children to access privileged areas.<\/p>\n

As a result, low-income families tend to be concentrated in areas with fewer resources. This spatial segregation limits social mobility and perpetuates inequality, while evictions, foreclosures, and forced relocations further destabilize vulnerable communities and make it harder to build social and economic capital.<\/p>\n

In many European countries and in North America, urban planning has failed to address these issues. Public housing is scarce, though some interesting initiatives exist. In Paris, for example, the city has the right of first refusal on properties put up for sale and purchases them to convert into public housing. Zoning laws often favor low-density development, restricting affordable housing in high-opportunity areas.<\/p>\n

Housing inequality also manifests along ethnic and racial lines. Historical practices such as redlining (the discriminatory and illegal practice of denying mortgages to people in certain\u2014often minority\u2014areas deemed \u201crisky\u201d or unfit), discriminatory lending, and planning designed to exclude certain groups have left deep scars. Minority families face greater obstacles to homeownership and are more likely to live in neighborhoods with few resources. Racial gaps persist today in mortgage approval rates, property appraisals, and neighborhood investment.<\/p>\n

In these processes, the real estate sector plays a subtle yet significant role. This is particularly evident in multiethnic cities like New York, Los Angeles, London, Paris, and Brussels, where immigrant communities often face hidden discrimination in rental markets, despite strict policies in many countries. They are also less likely to own homes. To address disparities, strict enforcement of laws is not enough; cultural change is needed as well.<\/p>\n

How to Design Fairer Housing Policies<\/strong><\/h3>\n

Housing inequality cannot be tackled simply by building more homes. Structural reforms are needed to expand the supply of affordable housing\u2014especially in high-opportunity areas; to reform tax policies that disproportionately benefit wealthy homeowners; to strengthen tenant protections without discouraging investment; to revise zoning regulations to allow more inclusive development; and to rigorously enforce anti-discrimination measures in lending and renting. These actions must be coordinated and long-lasting, because isolated interventions cannot undo decades of entrenched inequality. They must also be adapted to local contexts: what works in Stockholm may not work in Naples or Chicago.<\/p>\n

Technology and remote work can help. They are reshaping housing demand. Online platforms influence how and where people search for homes. The growth of hybrid work may reduce pressure on city centers, but it could also deepen divides between attractive regions and \u201cleft-behind\u201d areas.<\/p>\n

Climate change adds complexity to complexity. Rising temperatures, flooding, and energy costs will affect housing markets in ways that are hard to predict. In many cities around the world, the issue is visible in the geography itself: low-lying neighborhoods are both the most vulnerable to extreme climate events and the ones where less privileged families often live, with no alternative options. Here, housing policy must be rooted in adaptability and sustainability.<\/p>\n

Politicians, economists, and citizens must recognize that housing is not only a market\u2014it is the foundation of social equity. Without radical change, it will remain a silent engine of economic inequality. But with vision and courage, it can become a platform for inclusion, stability, and shared prosperity.<\/p>\n

 <\/p>\n

Yannis M. Ioannides is a research professor and Max and Herta Neubauer Chair emeritus at Tufts University. He is the author of over 120 scholarly works, including highly cited contributions on housing economics as well as studies in urban, labor, social, and macroeconomics.<\/em><\/p>\n

L. <\/em>Rachel Ngai is Professor of Economics at the London School of Economics. She is a macroeconomist specializing in structural transformation, gender, labor, and housing.<\/em><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

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