This chapter is similar to the previous one, investigating the connection between housing financialization and one major socioeconomic outcome; in this case, the outcome of concern is inequality. As with Chapter 3, I will articulate several channels through which housing institutions might affect distributional outcomes, then examine the empirical record for evidence of those channels at work. However, before delving into these links, we must pause to consider what we mean when we use a term like “inequality.” It is hard to specifically define and sometimes even harder to measure. What sort of inequality do we care about? What dimension of inequality – in incomes, purchasing power, wealth or outcomes – is most linked to housing markets?

The first section of the chapter focuses on disentangling the different notions of inequality – and discussing how each of these notions are (and are not) measured. The second part of the chapter transitions back into the mode of Chapter 3, identifying several ways that housing institutions can affect different formulations of inequality. I have called these the incumbency channel, the generational channel, the locational channel and the tradeoff channel. The chapter ends by isolating the major conclusions that emerge from this tour of the housing– inequality nexus.

Defining inequality

Inequality can arise in any context. I remember my sister and I being very concerned with inequalities of backseat space – and my daughter is keenly aware of ice cream-based inequalities wherever they emerge. These are silly examples, but they illustrate a serious point: we need to be specific about what kind of inequality we care about. In this particular case, we want to know what sorts of inequality are most closely tied to housing markets and policies. There are four key candidates to consider: income inequality, wealth inequality, inequality of purchasing power and inequality of housing outcomes (as in, does a house have running hot water?).

When “inequality” is referenced without any qualifiers, we are usually referring to income inequality. This is arguably the most straight forward measure of inequality available. Many governments already keep records of every individual’s income in a given year; using this data, researchers can measure how much the existing distribution of income differs from a perfectly even distribution.