As France heads into 2024 budget negotiations, industry and political leaders warn the housing crisis is far worse than expected, highlighting French President Emmanuel Macron’s failure to deliver on his promise to speed up construction of new buildings .
The finance bill, which is due to be presented at the end of September, has already sparked calls from the opposition for new work aimed at making French real estate more affordable and increasing the proportion of social housing.
Construction of new buildings slowed by 3.3% in January 2023 compared to the same period of the previous year, while building authorizations fell by 22%, according to the French Building Federation, a group of stakeholders. He expects new construction to decline 9% overall in 2023, year-on-year.
“We should have dealt with this problem before it turned into a real long-term crisis,” said Véronique Bédague, CEO of French real estate tycoon Nexity. The world in an interview Thursday September 7, adding that she had tried several times to warn the government, in vain.
“It was the chronicle of an announced disaster”, whose economic and social realities will be “violent”, she lamented.
Globally, construction costs and land prices have increased since Russia launched its full-scale invasion of Ukraine in February 2022; Meanwhile, the general disruption of global supply chains following the COVID-19 pandemic never fully recovered, making access to building materials more expensive – a perfect storm of factors, the economist Pierre Madec. The world.
Investigate European investigative media, in addition find that property prices have risen by 40% in the EU since 2015 – while wages are stagnating.
On the buyer’s side, mortgage rates are rising alongside the European Central Bank’s (ECB) interest rate hike, following a nearly 10-year period of rates near 0%.
“There has been significant mortgage tightening over the past year, with mortgage offers down 45%,” Bédague said. “There will be less new construction, a scarcity of rental opportunities and […] those who need it most will be thrown out on the streets,” she warned.
Rental sector concerns
At the same time, the rental sector is also becoming increasingly expensive and inaccessible, with large price differences depending on the region of the country.
Demand fell 39.1% between the last quarter of 2021 and the second quarter of 2022 – the most recent period for which data is available, according to the Federation of Real Estate Developersan association of real estate companies.
Expert site Good here found that housing supply across France was down 6% in the second quarter of 2023 compared to the previous year, while rents were up 2%.
In some places – particularly student towns – the numbers are even starker. Paris saw a 26% drop in housing supply and an increase in rents of 10% to €1,495. Rennes, a famous student city in Brittany, experienced a 34% drop in its housing supply and a 6% increase in its rents.
The pandemic has exacerbated many housing policy issues, such as homelessness and affordability. Although cities and states have implemented some measures to protect tenants, experts say it is time for Europe to develop long-term solutions.
No housing “supply shock”
Many point to Emmanuel Macron’s inability to keep his 2017 promise of a “supply shock” of housing in order to “bring down prices”. In 2021, a policy note by Montaigne Institutea liberal think tank, pointed to a general reduction in construction starting in 2018, while a 2017 tax reform reduced overall funding for social housing.
Bruno Le Maire, French Minister of the Economy sworn At the end of August, this year’s budget would see a reduction of 5 billion euros in public spending. To this end, he has already announced the removal of an existing tax break applicable to rental properties.
A delegation of French MPs, who met on Tuesday (September 5) with the new Minister of Public Finance Thomas Cazenave, further warned against the government’s intention to reduce access to zero-rate mortgage loans, put at the available to the most deprived.
Local housing taxes are also exploding by an average rate of 7.1% nationally, exceeding 52% in parts of Paris, due to inflation and tax reform which have limited other sources of municipal revenues – which, in the eyes of those calling for more affordable housing, has finally added fuel to the fire.
“THE [housing] The sector is in a dramatic situation for working-class households. There is not enough social housing and energy prices are making the situation worse,” Eric Coquerel, far-left MP for La France Insoumise and president of Parliament’s Finance Committee, told the press.
“The government remains deaf to the warning signs of a worsening housing crisis,” says Green MEP Mounir Satouri. job on X (formerly Twitter).
[Edited by János Allenbach-Ammann/Nathalie Weatherald]