The Housing Crisis in Superstar Cities: Labour Markets, Price Inflation, and Financialization

Abstract

This article advances explanations of the housing crisis in modern political economies. It argues that the rise of agglomeration economies is driving the massive increase in housing prices in superstar cities. These concentrate high-paying jobs and life chances in central metropolitan areas, pulling in a highly skilled workforce who are willing and able to pay ‘whatever it takes’ for access to these opportunities. As a result, the value of homeownership in strategic urban locations has surged. Investors have thus found it rational to capitalize on longer-term price inflation and invest. Based on a comparison between New York City, London, Paris, and Berlin, this article demonstrates that housing prices in superstar cities move in lockstep with the reconfiguration of urban labour markets. Investors follow this trend in their decisions to invest in housing, which further compounds affordability pressures. The article concludes that access to homeownership in strategic urban locations increasingly mediates inequality and class formation in modern political economies.