A new study published in City, Territory and Architecture examines how state-led regulatory interventions in Turkey following the 2018 currency crisis reshaped the housing market, disproportionately benefiting middle- and high-income groups while limiting access for low-income households. The research, conducted by Suheyla Turk, utilizes a case study methodology focused on Istanbul to analyze the socioeconomic effects of four key housing re-regulations introduced between 2018 and 2024. By combining policy analysis with secondary quantitative data from 2007 to 2025, the study reveals that the Turkish state housing agency, TOKİ, increasingly prioritized middle-income housing production over affordable units for low-income residents. This shift aligns with a broader trend of state-led financialization, where housing is treated as a financial instrument for economic growth rather than a redistributive welfare tool.

The 2018 currency crisis, marked by a 16% daily depreciation of the Turkish lira against the US dollar, prompted the government to use housing policy as a central tool for economic stabilization. In response, the state introduced measures to stimulate demand and boost the construction sector, which had seen a sharp decline in its share of GDP. These interventions included reducing mortgage interest rates, promoting citizenship through property investment, lowering savings interest rates, and implementing rent increase limitations. The study argues that these regulatory mechanisms functioned as causal drivers of housing market outcomes, moving beyond macroeconomic trends to explain how specific state actions influenced price dynamics and access across income groups.

One of the primary regulatory changes was the reduction of mortgage interest rates by the Turkish central bank. Following the crisis, rates were temporarily lowered from 16% to 0.99% and then to 0.64% for first-time buyers in 2019. This measure, combined with a reduction in Value Added Tax for first-time buyers from 18% to 8%, led to a significant increase in mortgage-financed home sales between 2018 and 2023. The study notes that while these incentives temporarily boosted construction activity and revived the sector’s growth by 2024, they primarily served to inflate property values rather than expand affordable supply for the most vulnerable populations.

Simultaneously, the state amended citizenship laws to attract foreign capital into the housing market. The minimum investment threshold for obtaining Turkish citizenship was reduced from $1 million to $250,000 after the 2018 crisis, leading to a surge in foreign home purchases. Although the threshold was raised to $400,000 in 2022, the influx of relatively wealthy foreign buyers, mainly from the Middle East and Asia, contributed to a 2% increase in house prices in districts with high immigrant concentrations in Istanbul. This policy not only commodified access to citizenship but also reinforced housing as a speculative asset, driving prices upward as foreign demand intensified.

The third regulatory intervention involved the reduction of central bank savings interest rates from 24% to 10% between September 2021 and August 2023. This policy aimed to provide commercial banks with capital to counter inflation but resulted in minimal returns for savings account holders, incentivizing investment in housing instead. Consequently, inflation surged from 14.5% in September 2021 to 56% by August 2023, and monthly housing price index volatility reached unprecedented levels. Nominal housing prices, which had doubled between 2011 and 2017, doubled again by 2021 and continued to rise sharply through 2024, reflecting the combined impact of credit expansion and inflationary pressures.

A fourth regulation, implemented in June 2022, limited rent increases to 25% for two years, a measure intended to protect tenants during high inflation. However, the study finds that this limitation led to unintended consequences, as landlords with financial backing chose to keep dwellings vacant while waiting for higher rental returns. A 2021 survey by the Istanbul Metropolitan Municipality indicated that 750,000 housing units were left empty by landlords anticipating future capital gains. Following the expiration of these restrictions in June 2024, rent prices doubled, illustrating the limits of policy intervention in safeguarding long-term affordability under high inflation conditions.

The study highlights a significant shift in the production priorities of TOKİ, the state’s mass housing agency. Originally designed to support low-income groups, TOKİ’s output for very low-income households declined after 2019, while production for middle-income groups increased substantially. In Istanbul, TOKİ built 16,732 middle-income units in the last five years, accounting for 74% of all such housing produced between 2003 and 2018. This reorientation reflects a broader transformation in which public housing institutions were aligned with market stability and revenue generation, often through partnerships with private developers and state-affiliated real estate investment trusts that cross-subsidize affordable housing with high-end projects.

The distributive outcomes of these policies were uneven, with rising income inequality and falling homeownership rates reinforcing each other. In Istanbul, the Gini coefficient for disposable household income rose from 0.41 in 2019 to a record high of 0.44 in 2022, before slightly decreasing to 0.40 in 2025. Homeownership among the lowest-income groups fell by 25% from 2007 to 2024, dropping from 61.65% to 45.8%. Although mortgage promotions expanded credit access, their effects were concentrated among higher-income groups, with homeownership among the highest-income earners briefly rising to 64.9% in 2019 before declining to 61.41% by 2024 due to price hikes.

The research suggests that Turkey’s post-crisis housing strategy has deepened state-led financialization, treating housing as a substitute for traditional social provision. By promoting credit expansion and asset-based welfare, the state shifted social risk from public institutions to households, privileging those able to accumulate housing wealth. The study emphasizes that while these measures supported construction activity and economic recovery, they failed to address the housing needs of low-income groups, instead intensifying housing insecurity and weakening the social function of public housing.

The authors conclude that re-orienting TOKİ toward affordable rental housing, rather than dwellings that can be sold or rented freely on the private market, could help mitigate the ongoing assetization of housing. The findings underscore the importance of examining housing price dynamics through the lens of state-led regulatory intervention rather than macroeconomic shocks alone, offering insights for other emerging economies where the state plays a central role in advancing housing financialization through policy and institutional initiatives.

Methodologically, the investigation relied on an over-time case study framework designed to trace policy-outcome relationships and uncover structural mechanisms, rather than estimating causal effects. The author prioritized analytical generalisation to explain how institutional reconfigurations and state-led financialization altered urban housing patterns. Istanbul was selected as the focal metropolitan case because its real estate market reflects macroeconomic pressures most acutely. The metropolitan area accounts for 32 percent of Turkey’s total working employment, 55 percent of national trade volume, 25 percent of total tourism revenues, and 43 percent of foreign trade. Empirical tracing combined legislative reviews of Official Gazette decrees and institutional records from TOKİ and the Central Bank of the Republic of Turkey with secondary quantitative data from the Turkish Statistical Institute and the OECD covering indicators from 1998 to 2025.

The analysis contextualizes these developments within the institutional evolution of TOKİ. Between 1984 and 2001, the agency operated primarily as a housing credit institution rather than a direct developer, distributing cooperative loans through a specialized Housing Fund established by Law Number 2985. The abolition of this fund under Law Number 4684 in 2001 altered public housing finance. Subsequent reforms under Law Number 4966 in 2003 granted TOKİ authority to approve spatial plans, expropriate land, and acquire public parcels free of charge or below market rates. These powers supported public-private partnerships with private developers and Emlak Konut GYO, a state-affiliated real estate investment trust. Under this revenue-sharing model, public land was used to develop high-end urban complexes that generated capital to cross-subsidize affordable construction in other regions, a structure further centralized when TOKİ was transferred to the Ministry of Environment and Urbanization following Turkey’s 2018 transition to a presidential system.

TOKİ’s internal financing arrangement functions as an alternative to commercial banking, enabling buyers to purchase homes through down payments and monthly instalments spanning 15 to 25 years. While commercial banks charged mortgage rates around 10 to 14 percent in the early 2010s, TOKİ offered state-managed financing at approximately 4 percent, with payment increments indexed to public sector wage growth rather than market interest benchmarks. Geographically, TOKİ concentrated its Istanbul projects in major residential development nodes such as Küçükçekmece, notably Halkalı, Atakent, and Olympiakent, as well as Başakşehir, including Kayaşehir and Hoşdere. Secondary project clusters expanded across peripheral districts such as Çatalca, Tuzla, Arnavutköy, Silivri, Gaziosmanpaşa, and Maltepe, alongside smaller sites in districts including Şile, Sarıyer, and Pendik, within an urban market where 53 percent of residents are landlords.

The empirical analysis also contextualizes these shifts against wider macroeconomic trends. While Turkey’s construction sector peaked at 25 percent of national gross domestic product in 2006 and 2011, building activity dropped abruptly following the 2018 currency shock. Subsidized mortgage programs in mid-2020 temporarily fueled property inflation, where each one percentage point reduction in mortgage interest rates produced a 3.3 percent rise in mortgage demand and a 1.6 percent price increase. Concurrently, national homeownership among lower-income groups dropped by 12 percent between 2018 and 2024. Across the broader economy, national income inequality measured by the Gini coefficient rose from 0.38 in 2019 to 0.412 in 2022 and 0.415 in 2025, underscoring how debt-driven housing policies deepened systemic socioeconomic disparities.

Subject of Research: Financialization through regulation: affordable housing production in post-crisis Turkey

Article Title: Financialization through regulation: affordable housing production in post-crisis Turkey

Article References: Turk, S. (2026). Financialization through regulation: affordable housing production in post-crisis Turkey. City, Territory and Architecture, 13(1), Article 13. https://doi.org/10.1186/s40410-026-00309-8

Image Credits: AI Generated

DOI: 10.1186/s40410-026-00309-8

Keywords: Financialization, regulation, affordable, housing, production, post-crisis, Turkey, scientific research