Financialization in the Backyard: Shrinkage, Welfare State Restructuring and New Housing Investments

The paper discusses the interplay of local  planning policies, welfare restructuring and global financial markets in the “making” of social segregation.  It builds on an empirical study in Halle-Neustadt, a shrinking New Town in East-Germany and uses a mix of survey data, interviews and document analysis and as well as fieldwork.

In Halle-Neustadt, the paper argues, different developments come together:  First, Neustadt has experienced dramatic population losses, which stimulated large scale demolition programmes as well as planning policies which aim to transform parts of the neighbourhood to a green space. Second, Neustadt has experienced two waves of privatisation in the last two decades, leading to a complete change of ownership structures. Thereby, municipal and cooperative owners have been largely displaced by national and international financial investors which hold their stock as an asset and aim on short-term gains, rather than long-term development. Third, welfare cuts have put more pressure on welfare-recipients to accommodate in cheapest housing available on the local market which led to a “business-model” profiting on low, but state-subsidized, rents in peripheral estates.

The paper discusses how these developments work together to produce new concentrations of poverty households in a prototypical shrinking city. With this, we expand on the already fairly developed debate on the financialization of urban development and provide new insights on (a) financialization in shrinking, low-demand markets, and (b) the relation between planning, state-restructuring and financialization in a German context. We demonstrate that the political economy of housing follows different dynamics here which are owed to both the weak-market situation and the path-specific restructuring of the German planning and welfare system. We conclude that research should put the state more into the centre of explanations and take different paths of state restructuring as well as different socio-economic contexts more serious.