Competing Interest Coalitions and Lobbying in the EU-led Financialization of Housing: A Bayesian Process-tracing Analysis

Bayesian process tracing is increasingly drawing attention in the Political Science realm, as a theoretically rigorous and standardized methodology to test causal hypotheses and explanatory mechanisms in qualitative and mix-method studies. However, still, very few attempts have been made to systematically adopt the Bayesian approach to the analysis of interest groups and lobbying. This is quite surprising if we consider the importance of process tracing in the literature on lobbying and the potentialities of Bayesian inference to refine the analysis and testing of interest groups’ influence in policymaking. In this paper, we try to contribute to such an emerging research strand, by applying the Bayesian process tracing methodology to a relevant and still unexplored case for the study of the interest groups’ lobbying resources and dynamics in the EU: the regulation of real estate finance in Europe from the Global Financial Crisis (GFC) to the Pandemic outbreak. By setting the financial regulatory framework for the Member States’ real estate markets, the EU played a key role in shaping the trajectories of housing financialization in the run-up, and response, to the European debt and economic crisis. In the context of the Covid-19 pandemic and its aftermath, such financialization of housing came to be increasingly contested across Europe as a main factor behind the growing housing affordability crisis and related inequalities, becoming a salient policy issue in different EU Member States. We argue that the case of real estate finance regulation represents thus a policy-relevant and theoretically interesting case to shed light on the determinants of the EU-level regulation mostly impacting housing while allowing us to test hypotheses on the factors shaping the influence capacity of interest groups. This study wants to contribute to the literature strands in the political economy of housing and the EU lobbying by focusing on a highly relevant piece of financial regulation for the real estate finance sector: the implementation and reform of the Solvency II Directive, setting the capital requirements and investment incentives for the insurance industry, which is the largest institutional investor in the European real estate. The single-case study design, focused on a highly relevant piece of regulation within a long timeframe (2013-2023), allows us to apply a Bayesian process tracing methodology suited to test specific expectations on the conditions enabling interest groups’ influence in lobbying. In particular, we want to test three main explanatory factors on lobbying influence derived from EU and IPE literature: the structural power resources, the politicization of policy issues, and the coalition-making capacity of interest groups. These three dimensions are integrated into a more general explanatory mechanism on interest groups’ influence in the EU policymaking, to be tested in the process tracing analysis.