Housing, Finance, Policy and the Wider Economy

Abstract

Building an understanding of the complex dynamics between housing, finance, policy and the wider economy is a critical step towards the development of a strategy that permits policy makers to leverage resources and enable the housing market to function better in the pursuit of economic, financial and social objectives. Powerful real, legislative and financial circuits suggest that an enabling strategy for housing can support societal progress and wellbeing. By summarizing the key findings in the existing theoretical and empirical literature, this study helps to explain the complex interrelations between housing, finance, policy and the wider economy by using a simple model; it also deals with housing-related policies and their effects, examines the rational for housing market regulation, investigates whether housing market corrections threaten financial and macroeconomic stability, and asks whether policies are efficacious at controlling housing market outcomes. The important takeaways from this study are: (i) policy setting should be evidence-based, which necessitates further efforts to address existing data deficiencies; (ii) finance trends are in flux and policy effects can be asymmetric, which necessitates regular and critical housing market reviews to identify misallocation, dislocation and reform needs; (iii) improvement in the functioning of the housing market requires a coordinating authority that takes steps to reconcile the various housing market stakeholders' mutually incompatible interests and arrange for concerted policy and institutional reforms. The study closes with an outlook on future research.

The Housing Financing Policy and Its Impacts on Low-Income Communities and Indonesian Economy

“…In Asian countries, housing takes up 20-50% of the total consumption and 40-70% of average household wealth . The wealth effect interrelates housing (including its financing) with the economy, in addition to the financial accelerator (Winkler, 2017).…”

Concepts of social sustainability based on social infrastructure and quality of life

“…The housing satisfies the need of human for shelter, it can be a major wealth component, and it is an important sector of the economy. Housing plays a critical role in labour economics and the urbanization process (Winkler, 2017). Understanding these circuits is critical in determining how housing market shocks economic activity, societal progress and well-being (Claessens et al, 2014).…”

“…We suggest starting the implementation of the model with market forces as social infrastructure outcomes which can have repercussions for societal progress and quality of life. Winkler (2017) found that the wealth effect and the financial accelerator are two aspects that connect the housing market and the broader economy. On the other hand, the sustainability orientation of executives (good housing policy) is a powerful driver for sustainable development goals.…”