Authors: Rachel Weber*, University of Illinois At Chicago
Topics: Urban Geography, Economic Geography, Development
Keywords: financialization, urban morphology, urban geography
Session Type: Paper
Start / End Time: 2:00 PM / 3:40 PM
Room: 8224, Park Tower Suites, Marriott, Lobby Level
Presentation File: No File Uploaded
Does financialization accelerate the pace of urban change? Buildings represent sunk costs not only in large-scale fixed capital but also in the economic and political arrangements governing that capital. However, treating buildings as financial commodities engenders a process of abstraction with potentially serious consequences for the built form. Financialization can convert something as idiosyncratic and long-turnover as real estate into fungible commercial paper and to strip assets of their distinctiveness to facilitate their quick sale.
My research on commercial real estate in Chicago during the 2000s suggests a positive empirical relationship between particular kinds of financial activity (as measured by the sale and securitization of mortgage debt) and the magnitude of new construction and demolition (Weber 2015). Securitization expanded the volume of funds available to refinance existing buildings and erect new ones. When mortgage-backed bonds sold for escalating prices in capital markets, it sent a strong signal to loan officers to make more loans and to developers to pursue ambitious building plans. The history of the city reveals several periods (often 15 years apart) when new debt instruments were introduced followed by a building boom and, subsequently, valuation bubble. These booms and bubbles were also times when buildings dematerialized; existing buildings, many constructed in the previous booms, were devalued, deigned obsolete, and demolished.
Financial instruments are obviously not the only drivers of urban change. In this paper I draw contrasts with other cities (Tucson, Fresno, Milwaukee), which experienced slower rates of change and little commercial securitization activity.