Statecraft strategies and housing financialization at the periphery: Post-socialist trajectories in Russia and Poland

Büdenbender, MIrjam; Lagna, Andrea Article Statecraft strategies and housing financialization at the periphery: Post-socialist trajectories in Russia and Poland Finance and Society Provided in Cooperation with: Finance and Society Network (FSN) Suggested Citation: Büdenbender, MIrjam; Lagna, Andrea (2019) : Statecraft strategies and housing financialization at the periphery: Post-socialist trajectories in Russia and Poland, Finance and Society, ISSN 2059-5999, University of Edinburgh, Edinburgh, Vol. 5, Iss. 2, pp. 105-125, https://doi.org/10.2218/finsoc.v5i2.4136 This Version is available at: https://hdl.handle.net/10419/309373 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by-nc-nd/4.0/ Statecraft strategies and housing financialization at the periphery: Post-socialist trajectories in Russia and Poland Corresponding author: Andrea Lagna, School of Business and Economics, Loughborough University, Loughborough LE11 3TU, United Kingdom. Email: A[email protected]. https://doi.org/10.2218/finsoc.v5i2.4136 MIrjam Büdenbender Deutscher Bundestag, Germany Andrea Lagna Loughborough University, UK Abstract A new literature on housing and financialization has emerged in recent years, but scholars have yet to examine how political actors shape national trajectories of housing financialization. In this article, we address this shortcoming by examining the cases of Russia and Poland in the 1990-2018 period. We argue that in both contexts political elites implemented a radical market-oriented reshaping of housing finance. However, by pursuing distinct statecraft strategies and modes of integrating the domestic economy into global markets, Russian and Polish political elites created two divergent trajectories of housing financialization. Russian political elites pursued patrimonial statecraft strategies and a mode of global economic integration based on raw material exports. The Putin administration channeled revenues from raw material exports into the securitization-based housing finance system and used this infrastructure as an instrument of hegemonic power. In doing so, the Russian government shielded homeowners from exposure to financial risk. In contrast, Polish political elites pursued liberal statecraft strategies and a mode of global economic integration based on foreign capital inflows. Polish political parties therefore enabled foreign banks to dominate the housing finance system and sell foreign currency mortgages, which exposed homeowners to considerable financial risk. In light of these findings we call for further research into the political factors that shape the process of housing financialization, both in the post-socialist space and beyond. Keywords Housing, financialization, financial innovation, statecraft, post-socialist capitalism Finance and Society 2019, 5(2): 105-25 © The Author(s) 10.2218/finsoc.v5i2.4136 Article 106 Finance and Society 5(2) Introduction A new literature on housing financialization has emerged in recent years, exploring how housing has been transformed into an arena for global risk-oriented investors and marketbased financial innovations (Aalbers, 2016, 2017; Aalbers, Van Loon, and Fernandez, 2017; Bernt, Colini and Förste, 2017; Bohle, 2018; Fernandez and Aalbers, 2016, 2017; Fields, 2017, 2018; Pereira, 2017; Romainville, 2017; Wijburg, Aalbers and Heeg, 2018). According to Fernandez and Aalbers (2016), housing and housing finance systems in different countries are now exposed to a global pool of surplus capital – a ‘wall of money’ seeking investment opportunities worldwide – and this pressurizes policymakers into liberalizing national systems of housing and housing finance, hence integrating them into global financial markets. The primary objective of this market-oriented transformation of housing and housing finance is to convert residential property and its associated mortgage debt into assets that can absorb the global surplus of capital. In essence, we are told that housing has entered a neoliberal and financialized phase, where “both mortgaged homeownership and subsidized rental housing are there to keep financial markets going, rather than being facilitated by those markets” (Aalbers, 2017: 543). This means that homeowners and tenants around the world are confronted with growing financial risks (Aalbers, 2008). But different countries do not necessarily experience this market-oriented transformation in the same way as one another; instead, the trajectories of housing financialization are variegated and uneven (Aalbers, 2017; Fernandez and Aalbers, 2016). Scholars contributing to the housing financialization debate have often emphasized how states create the conditions necessary for the financialization of housing to emerge (Aalbers, 2017: 550). However, researchers have not yet examined in sufficient detail how political actors shape housing financialization, whether through domestic political regimes or their response to external economic constraints and opportunities. In this article, we address this shortcoming by examining the cases of Russia and Poland in the period from 1990 to 2018. We argue that in both countries, political elites implemented radical market-oriented transformations of domestic housing finance systems, thus creating the institutional preconditions for housing financialization. However, as political elites in Russia and Poland pushed towards different statecraft strategies and modes of global economic integration, they formed two distinct trajectories of housing financialization. Russian political elites pursued patrimonial statecraft strategies and a mode of global economic integration based on raw material exports. During the 1990s, political power in Russia was divided among different regional elites and business groups. Unable to control these dynamics, the Yeltsin administration focused on implementing pro-market reforms and buying political support from competing business oligarchs. In this context, the Yeltsin government developed a securitization-based system of housing finance in consultation with United States (US) governmental actors. However, Russian banks were not interested in providing mortgage lending and investors avoided buying Russian mortgage-backed securities. As a result, the securitization-based housing finance system failed to meet its goal of generating assets for global investors. In 2000, Putin came to power and centralized the state apparatus under his aegis, at the same time promoting economic growth based on raw material exports. At this point, the Putin government transformed the housing finance system into an instrument of patrimonial-hegemonic power. Putin transferred export revenues to the housing finance system and enabled mortgage lending to grow (although mortgage securitization still failed to take off). Russian banks complemented this export-driven mortgage boom by borrowing on international capital markets to finance their mortgage 107 Büdenbender and Lagna lending activities. Due to its patrimonial nature, the Russian housing finance system shielded homeowners from exposure to financial risk. In contrast, Polish political elites pursued liberal statecraft strategies and a mode of global economic integration based on attracting foreign investment. During the 1990s, the political parties alternating in power allowed advocates of different housing finance models to compete. Moreover, these parties continued to subsidize housing loans until 1996. In this context, mortgage lending failed to grow. As of the late 1990s, Polish political elites set the country firmly on a path towards European and global market integration. In so doing, they enabled foreign banks to enter Poland and dominate banking and financial services, including those related to housing finance. These banks increased mortgage lending and sold a large number of foreign currency mortgages, and political parties encouraged these risky practices as a way of increasing mass consensus. By selling foreign currency mortgages, banks exposed Polish homeowners to significant financial risk. We have selected Russia and Poland because both countries joined the capitalist world in a subordinate position at the turn of the 1990s (Bohle and Greskovits, 2012; Myant and Drahokoupil, 2011). Hence, as peripheral economies, Russia and Poland provide an ideal vantage point from which to view how global political and economic hierarchies influence the variegated and uneven nature of housing financialization. Methodologically, we have chosen Russia and Poland based on a 'diverse case method' research design (Seawright and Gerring, 2008: 300). Our objective is to achieve maximum variance along the relevant dimensions of housing financialization in the post-socialist space, where Russia and Poland represent two different groups of post-socialist economies. Russia is a raw material exporting economy that is grouped together with other members of the Commonwealth of Independent States. Despite this status, Russia aspires to become a political, military and ideological counterpoint to existing centers of global power (Lane, 2010). In contrast, Poland is part of the Visegrád group of countries that joined the European Union (EU) from a position of political and economic dependence (Bohle and Greskovits, 2012). As we anticipated, differences in statecraft strategies and modes of global economic integration played a critical role in shaping how Russia and Poland experienced housing financialization. We develop the above points as follows. In section 2, we situate our research within the housing financialization debate. In particular, we underline the importance of studying how statecraft strategies and modes of global economic integration shape the way housing financialization unfolds. In section 3, we draw on King and Szelényi’s (2005) categories of ‘patrimonial capitalism’ and ‘liberal capitalism’ in the post-socialist space, using these to frame how Russian and Polish political elites pursued different statecraft strategies and modes of global economic integration from the 1990s onwards. In sections 4 and 5, we analyze the different trajectories of housing financialization in Russia and Poland based on their respective statecraft strategies and modes of global economic integration. Finally, in section 6 we use our results to identify a range of avenues for future research. Accounting for variegated and uneven housing financialization Scholars in international political economy, economic geography and other cognate fields have done a great deal to explore the interface between housing and financial markets. Notably, in their pioneering work on varieties of residential capitalism, Schwartz and Seabrooke (2008: 243-45) explain the formation of different housing systems across the world as institutional ensembles that include tenure, housing finance and welfare state provisions. Schwartz and 108 Finance and Society 5(2) Seabrooke categorize housing systems in twenty-seven countries by using two main metrics: the owner-occupation (homeownership) rate and the mortgage debt-to-gross domestic product (GDP) ratio. The homeownership rate measures the share of homeowners vis-à-vis renters. The mortgage debt-to-GDP ratio indicates the level of mortgage debt and is a proxy for housing finance liberalization. Based on these two metrics, Schwartz and Seabrooke identify four ideal types of housing systems, namely: (1) the corporatist market model (as in Germany and Netherlands), characterized by high levels of mortgage debt and low levels of homeownership; (2) the liberal market model (as in the US and UK), where mortgage debt and homeownership levels are both high; (3) the statist-developmentalist model (as in France and Japan), characterized by low levels of owner occupation and mortgage debt; and (4) the familial model (as in Spain and Italy), characterized by high homeownership levels but low mortgage debt. According to this four-by-four matrix, Russia and Poland would belong to the familial ideal type. In fact, current homeownership rates in Russia and Poland are 85 and 84 per cent respectively (DOM.RF, 2017: 14; EMF, 2018: 119). Current levels of mortgage debt-to-GDP are 5 per cent in Russia and 20 per cent in Poland (CBR, 2019; EMF, 2018: 116). In comparison, a highly financialized country like the US currently has a homeownership rate of 64 per cent and a mortgage debt-to-GDP rate of about 70 per cent (FRED, 2019a, 2019b). Schwartz and Seabrooke clearly demonstrate how housing institutions are crucial to the development of capitalist economies. However, their study does not properly account for how national housing systems are exposed to the risk-oriented universe of global finance. To remedy this, Fernandez and Aalbers (2016) highlight how domestic housing and housing finance systems are being integrated into global financial markets while still retaining their context-specific features – a process they define as housing-induced financialization or, more simply, housing financialization. Fernandez and Aalbers therefore shift the analytical focus more squarely onto housing finance and its transformations vis-à-vis modern-day marketbased finance.1According to these authors, the combined actions of asset-rich institutional investors, trade-surplus economies, cash-rich corporations and, last but not least, dovish central banks implementing loose monetary policies, have created a large pool of capital scouting global markets for investment opportunities. This wall of money represents a structural and system-wide stimulus to the financialization of housing. It fosters the marketoriented reshaping of national housing and housing finance systems so that they can absorb globally mobile capital. In particular, residential property and mortgage debt need to be converted into assets that investors can use both as investment targets and quality collateral when conducting financial transactions (Fernandez and Aalbers, 2016: 73-75). Although housing financialization is a commonly shared process in advanced and emerging markets, Fernandez and Aalbers (2016: 78) argue that several “institutional filters” determine the degree to which national housing systems are insulated from global financial markets and their risk-oriented practices. These institutional filters operate in three interlinked domains: (1) housing finance (including aspects such as loan-to-value ratio, tax deductibility of interest payments and mortgage equity withdrawal); (2) the welfare state (including factors such as types of tenure and the level of social rental); and (3) the broader financial sector (including elements like cross-border capital flows, securitization and other market-based financial innovations). Furthermore, Fernandez and Aalbers (2016: 80-83) identify four trajectories of housing financialization, characterized by: (1) very high rates of homeownership, low mortgage debt, low cross-border capital flows, and low levels of financial market sophistication (as in Italy and Brazil); (2) high levels of homeownership, high mortgage debt, large cross-border capital flows, and a deep and sophisticated financial sector (as in the US, UK and Canada); (3) moderate 109 Büdenbender and Lagna homeownership levels, high mortgage debt, high cross-border capital flows and a sophisticated financial system (as in Netherlands and Denmark); and (4) low homeownership, low mortgage debt, deep and sophisticated capital markets and large international capital flows (as in Germany, Switzerland and France). Trajectories 2 and 3 are those where housing financialization reaches the highest levels, while trajectories 1 and 4 are those were such developments have yet to reach a critical stage. Both Russia and Poland would belong to trajectory 1. Fernandez and Aalbers (2016) have paved the way for other researchers to explore housing financialization in its various sectoral and geographical manifestations, resulting in a vibrant literature on the variegated financialization of housing (see Aalbers, 2016, 2017; Aalbers et al., 2017; Bernt et al., 2017; Bohle, 2018; Byrne and Norris, 2019; Fernandez and Aalbers, 2017; Fields, 2017; Pereira, 2017; Romainville, 2017; Wijburg et al., 2018). As part of this debate, researchers have frequently pointed out how state actors play a key part in the financialization of housing.2As Aalbers (2017: 550) has explained, “different arms of the state are often the drivers of financialization processes, for example by pushing families into housing debt, enabling financial institutions to buy up subsidized housing, or simply withdrawing from providing or regulating the housing sector and opening it up to rent-seeking financial institutions”. However, despite foregrounding the role of the state in the financialization of housing, scholars have not yet given enough attention to how key political actors shape the variegated and uneven contours of housing financialization. We contend that in order to account for how and why housing financialization unfolds in the manner that it does, scholars should focus more squarely on power relations in the global economy and associated national strategies of statecraft, by which we mean the art of managing both domestic and foreign affairs (Baldwin, 1985: 8). In the following sections, we focus on the market-oriented transformations of housing finance in Russia and Poland, showing how political elites in these countries introduced market-based financial innovations in the housing domain while pursuing distinct statecraft strategies and modes of global economic integration. To account for Russia and Poland’s historical specificities, we draw on King and Szelényi’s (2005) categories of patrimonial and liberal capitalism in the post-socialist space. The next section therefore briefly introduces these two categories. Framing housing finance in Russia and Poland King and Szelényi (2005) show how key political actors and coalitions in socialist countries initiated different transitions to a market economy during the 1980s (see also King, 2002). While constructing market institutions, these political coalitions pursued specific statecraft strategies and modes of global economic integration that shaped distinct paths to postsocialist capitalism. Russia, for example, experienced a 'capitalism from above', wherein members of the political elite (nomenklatura) led the transition to capitalism in alliance with the technocracy, comprised of various middle-class managers, professionals and technical experts (King and Szelényi, 2005: 215-18). The Soviet economy was on a downward spiral since the 1970s and a significant part of the Soviet nomenklatura (both hardliners and reformists) had already begun to transfer public assets into private pockets, hence becoming increasingly invested in a new profit-oriented economic system (Aslund, 2013: 91). When Boris Yeltsin came to power in 1991 through an inter-elite struggle within the nomenklatura, his administration pursued 110 Finance and Society 5(2) statecraft strategies that involved privatizations and radical pro-market reforms. Yet these strategies aimed at benefiting a limited group of political and business insiders, a goal which became more clear during the opaque privatizations of the 1990s (Kotz and Weir, 2007). Gradually, Russia’s insider-type of transition to a market economy evolved into a widespread system of patrimonial capitalism, which was consolidated and stabilized under the aegis of the Putin administration. Patrimonial capitalism in Russia is characterized by numerous key attributes, including patronage relations between political and business elites in the context of multiparty authoritarianism; a limited role of foreign capital and foreign ownership in domestic economic activities; oligarchic control over important industries; and last but not least, raw material export as the main mode of integrating the domestic economy into global markets (King and Szelényi, 2005: 213, 215-18). As we will show below, Russian political elites transformed the domestic housing finance system in a market-oriented direction, thereby setting the stage for housing financialization to emerge. However, their patrimonial statecraft strategies and modes of global economic integration pushed the Russian housing finance system on a trajectory that is embedded into Putin’s hegemonic network, closed to outsiders, and dependent on raw material export revenues. In this context, Russian homeowners were shielded from an exposure to financial risk. In contrast to Russia, Poland experienced 'capitalism from without', which saw actors coming from outside of the communist bureaucracy initiating the transition to a market economy (King and Szelényi, 2005: 218-20). During the 1980s, an alliance between workers and intellectuals gained the support of technocrats. All these political forces converged in the form of the Solidarity Union, which came to power in 1989 with the Catholic intellectual Tadeusz Mazowiecki as prime minister (Ost, 2006). In the following years, the intellectual elite turned against technocrats and split itself into liberal-conservative and nationalistconservative factions. However, from the 1990s onwards, all parties that alternated in power – including the social democrats – pursued statecraft strategies that enabled a strong presence of foreign capital in the domestic economy. Their objective was to integrate Poland into European and global markets (King and Szelényi, 2005: 219). Furthermore, the unfolding of party competition in Poland’s democratic political arena and the presence of foreign economic actors prevented excessive insider-oriented privatizations (King, 2002: 12-13). In fact, foreign investment and the creation of new firms in export manufacturing, business process outsourcing and financial services played a key role in shaping Poland’s new market economy (Orlowski, 2011). As we will show in section 5, Polish political elites opened the domestic housing finance system to global financial markets and actors. Their mode of global economic integration enabled foreign financial actors to play a dominant role in domestic banking and housing finance. In this way, Polish political elites pushed housing finance onto a liberal and outsider-dominated trajectory, exposing Polish homeowners to significant financial risk. The evolution of housing finance in Russia In the following subsections, we explore the development of Russia’s mortgage markets by focusing on three phases: (1) the establishment of a securitization-based model during the Yeltsin era; (2) the evolution of housing finance during the rise of Putin’s patrimonial-capitalist system; and (3) housing finance under Putin’s patrimonial capitalism following the 2008 global financial crisis. 111 Büdenbender and Lagna The Yeltsin era and the creation of mortgage securitization system Between 1945 and the late 1980s, housing in Russia was embedded in the dynamics of state socialism. The state planned, financed and owned a major share of residential real estate. When the Soviet Union collapsed, Russia’s new president Boris Yeltsin, who came from the top of the Soviet political apparatus, implemented radical pro-market reforms. Housing was at the forefront of this liberalization process. The Yeltsin presidency dismantled the housing institutions of the Soviet era. It embraced homeownership – an ideology advocated by the World Bank and the US government (Ronald, 2008; World Bank, 2008; Zavisca, 2012) – and implemented mass-privatization programs that transformed housing into private property (Vihavainen, 2005: 8). Furthermore, it withdrew from the provision of social housing and made only limited efforts to support the development of a rental sector. Finally, the Yeltsin administration worked in cooperation with US-based agencies to establish a housing finance system that could provide mortgages to households and individuals. From the early days of this transformation, Russian state actors chose securitization as a central pillar of the country’s housing finance system. The Yeltsin administration signed an agreement with the US Agency for International Development (USAID) to develop the Housing Sector Reform Project (HSRP). The US Freedom for Russian and Emerging Eurasian Democracies and Open Markets (FREEDOM) Support Act funded the HSRP, and the Urban Institute – an American non-governmental organization – was put in charge of managing it (Zavisca, 2012: 49). USAID and HSRP actors strongly supported securitization and the issuance of mortgage-backed securities (Struyk, 2000). At the same time, representatives of both the German model of on-balance-sheet securitization (Pfandbrief) – which is based on mortgage banks using covered bonds – and the German system of Bausparkassen lobbied in favor of their respective systems. The Bausparkassen system is independent from access to capital markets. Hence, it would have presented several advantages in Russia, given the country’s undeveloped banking system, the absence of institutional investors and the lack of personal credit histories. However, as the Russian government embraced extreme pro-market reforms, US-based actors and their securitization model gained the upper hand over Germans and the Bausparkassen system (Interview 1). The latter was dismissed as an outdated model unable to benefit from cutting-edge financial innovations in mortgage markets (Diamond, 2002; USAID, 1999). By framing the issue of housing finance in these terms, the Yeltsin administration was able to establish the Agency for Housing Mortgage Lending (AHML) in 1997. This governmentsponsored enterprise was modelled after the US Federal National Mortgage Association, commonly known as Fannie Mae (Zavisca, 2012: 53). In other words, the AHML was supposed to make a secondary mortgage market by buying mortgages from lenders (e.g. banks) and converting these assets into globally tradable mortgage-backed securities. The creation of the AHML and the legal provision for securitization proceeded without any significant resistance domestically, as it appealed to Russian actors situated at several state levels (Interview 2). While securitization reflected the free-market spirit of some politicians at the federal level, civil servants welcomed the AHML – an organization that used federal budget funds for commercial operations – as an opportunity to move between the public and the private sector (Huskey, 2010; Khmelnitskaya, 2014a: 155; Shevtsova, 2009: 61). Furthermore, regional authorities were interested in setting up local branches of the AHML to use budget transfers in support of regional banks' mortgage operations (McGivern, 1997). Yet, despite such important developments, two main aspects prevented Russia’s new housing finance system from functioning properly. First, major Russian banks – which ended 112 Finance and Society 5(2) up being controlled by an oligarchic business elite as a result of the mass privatizations of the 1990s (Johnson, 2000; Kryshtanovskaya and White, 2005) – avoided mortgage lending and engaged instead in short-term speculation in government debt (Lane, 2002: 15). Even those few banks that were active in mortgage lending were confronted with obstacles such as the absence of personal credit histories and imprecise eviction rules. These problems constrained banks’ ability to offer mortgages at affordable interest rates (World Bank, 2003). Furthermore, these banks could not raise capital at a profitable level due to a lack of long-term credit on Russian financial markets (Khmelnitskaya, 2014a: 157). Second, foreign investors were not very interested in buying mortgage-backed securities in Russia, due to the country’s political and economic uncertainties, inter-oligarchic struggles and Yeltsin’s growing unpopularity. As an experienced banker put it during our interview, “who could have bought mortgage-backed securities in Russia? There were few domestic investors who could purchase these securities and foreign investors did not want ruble-based assets” (Interview 3). As a result, bank loans to the non-financial sector decreased from 25.1 per cent of total bank assets in 1993 to 18.7 per cent in 1995, or from 0.26 per cent to 0.10 per cent of GDP (Lane, 2002: 15). By 2000, only a few thousand mortgages had been issued and no emission of mortgage-backed securities had taken place (Johnson, 2000; Nesvetailova, 2004: 998). In the end, securitization failed to take off and Russia achieved “one of the least financialized housing systems” of all transition countries, despite having pursued “the most ‘financialized’ mortgage strategy” (Stephens, Lux and Sunega, 2015: 11). Housing finance and the rise of Putin's patrimonial system Putin won the presidency in 2000 and, over the next eight years, his administration embedded the architecture of mortgage securitization within hegemonic strategies directed at stabilizing Russia’s patrimonial capitalism (Robinson, 2011).3Putin played a key role in changing the country’s tax system, controlling state-business relations and centralizing the state apparatus into a so-called 'power vertical' (Monaghan, 2011: 8). This concept describes Russia’s political hierarchy in which the vertical ensures the fulfilment of the President’s instructions by replacing democratic processes – such as gubernatorial elections – with top-down mechanisms of decision-making. Domestic reforms under Putin were crucial in reducing the country’s risk profile and making Russia attractive for investment. In this context, the windfall of revenues from raw material exports became the most important factor influencing developments in housing finance (Nesvetailova, 2015: 3). The raw material industry has traditionally been one of Russia’s leading economic sectors (Gustafson, 1999: 219-20). After increasing investment in the energy sector (Robinson, 2011: 443), Putin channeled oil export revenues from the federal budget to the AHML, which transformed itself from a symbol of US free-market ideology into a policy tool of Putin’s power vertical (Ericson, 2009; Hanson, 2010; Interview 4). AHML bought mortgage loans from private banks in order to free up their accounts and allow them to lend more against their capital assets. Against these loans, AHML then issued mortgage-backed securities and covered bonds. The agency also provided advice and purchased mortgage-backed securities and covered bonds that were issued by other Russian banks (Khmelnitskaya, 2014b: 98). Furthermore, AHML was a key vehicle through which the government pursued its social housing policy of providing preferential mortgages to vulnerable population groups. In so doing, the government replaced the provision of rented housing with subsidized mortgages (Khmelnitskaya, 2014a; Zavisca, 2012). Finally, in addition to the AHML, the government also used state-owned banks to channel funding into mortgage lending (Khmelnitskaya, 2014b: 98). For instance, the major 119 Büdenbender and Lagna Justice regained a parliamentary majority in November 2015, the party has sought a compromise that accommodates both holders of foreign currency mortgages and the banks who sold these instruments (Groendahl, Strzelecki and Arons, 2019). Second, besides the immediate issue of foreign currency mortgages, the financing of future mortgages constitutes the more pressing problem. Considering a structural decline of private saving rates in Poland since 2000 (Kolasa and Liberda, 2015), the introduction of rules for lower loan-to-value ratios on banks’ balance sheets, and restrictions on cross-border funding, it seems inevitable that the current housing finance model will soon reach its limits (Lewicki, 2013). While there is little doubt that Polish banks will need alternative mechanisms to fund mortgages, the precise typology of such mechanisms is being debated by advocates of different housing finance practices. But at least one thing is clear: the path of housing financialization going forward will be shaped by the strategies of the Polish state. Conclusion In this article, we have argued that statecraft strategies and global economic hierarchies decisively shape the way housing financialization plays out across the world. To illustrate this, we focused on the cases of Russia and Poland from 1990 to 2018. We showed that while political elites in both countries did transform their housing finance systems in a marketoriented direction, they did so depending on different statecraft strategies and distinct modes of global economic integration, yielding two divergent trajectories of housing financialization. Our study therefore offers insights that go beyond the specificities of the Russian and Polish cases, highlighting the need for further research on housing financialization as a function of statecraft strategies and global economic hierarchies. In this regard, three aspects in particular seem to warrant further investigation. First, more research is needed in order to account for how countries’ statecraft tactics and their positions in the global economy influence housing financialization in its variegated and uneven contours. For example, how and why do political forces pursue specific statecraft strategies and modes of positioning the national economy vis-à-vis global markets? What are the direct and indirect channels through which these two dimensions shape domestic housing finance systems? Second, we emphasized the importance of paying more attention to peripheral economies (Bohle, 2018; Pereira, 2017). Peripheral economies provide an invaluable window onto how statecraft and asymmetrical power relations in the global economy influence housing financialization. Both Russia and Poland experienced the practices of financialized housing from a position of subordination. Here, the transformation from a centrally-planned to a capitalist economy opened domestic housing finance systems to the financial practices of advanced economies such as the US and Germany. This attests to the fact that besides being altogether exposed to a global wall of money (Fernandez and Aalbers, 2016), housing finance systems situated in different countries interact with each other through hierarchical relations of power and core-periphery dynamics (Bohle, 2018). Third, given our Russian and Polish cases, we encourage researchers to explore the trajectories of housing financialization in the post-socialist space. At the risk of oversimplifying, we can identify two trajectories that are specific to the Commonwealth of Independent States and the Visegrád Group respectively. Members of the Commonwealth of Independent States share a position in the global economy as commodity exporters and a tendency toward patrimonial-authoritarian statecraft strategies. Hence, we contend that these countries are likely to exhibit similar forms of housing financialization.4Meanwhile, housing financialization 120 Finance and Society 5(2) in the Visegrád Group countries is also likely to exhibit some similarities. In fact, despite their differences in terms of welfare regimes and foreign capital dependence (Bohle and Greskovits, 2012; Myant and Drahokoupil, 2011), the Czech Republic, Hungary, Poland, and Slovakia are all characterized by a subordinate integration into European markets, a dependence on foreign capital in the domestic economy, and a tendency toward neoliberal statecraft strategies in the context of democratic institutions. In both groups of countries, then, there are patterns worth studying in greater depth and detail. Acknowledgments Mirjam Büdenbender was supported by the ERC grant 313376. Both authors would like to thank the members of the ‘Real Estate/Financial Complex’ research project for their constant support and feedback. We also thank the anonymous reviewers and the Finance and Society editors for their helpful and constructive comments. The usual disclaimers apply Appendix Mirjam Büdenbender conducted interviews in Moscow and Warsaw between April 2014 and April 2016. The selected interviewees are elite professionals with expertise in housing finance, banking and housing policy. Interviews have helped us uncover the political, economic and social complexities of Russia and Poland (Schoenberger, 1991). We have integrated these interviews with a historical analysis (Thies, 2002) based on primary and secondary sources, including governmental, media, professional and academic publications. 121 Büdenbender and Lagna Notes 1. Blackwell and Kohl (2019) also point out how Schwartz and Seabrooke (2008) pay insufficient attention to housing finance. 2. In this regard, housing financialization researchers are directly or indirectly building on early work about state actors and the globalization of real estate. See, for example, Gotham (2006) on the United States case. 3. This can be seen as a case of ‘institutional conversion’ (Thelen, 2004), in which the institutions of mortgage securitization were redirected to new objectives. 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