We remember this old saying from the Sixties: “when the building trade is doing well, the whole economy is doing well”. We would update it because today building trade is not going well as the whole economy. French figures are overwhelming. Housing permits delivered during these last twelve months at the end of February were 364 800 units, i.e. a 21.8% fall year on year. During the same period, housing starts number (291 100) felt by 24.6%. In 2023, household investment has dropped by 5%, heavily weighting on the GDP growth. Their saving rate remained unchanged but the diminution of the expenses dedicated to a real estate acquisition was offset by the increase of the financial saving which has reached during 2023 4th quarter 7% of their gross available revenue.
The increase of the interests offered by the banks (4% during the 2nd half) occurred after a long period of very low rates. That has excluded from the market hundred of thousands household which had to renounce, at least temporarily, to acquire their home. The volume of granted credits has so fallen in 2023 by 10%. That situation has also affected the ancient accommodations with a number of transactions in 2023 falling by 20%. That double fall has had an immediate impact on the economic activity. Building companies and their suppliers of materials have known a significant reduction of their activity; the services sector (real estate agencies, notaries) has also been affected in unknown proportions for thirty years. The receipts of the local authorities coming from taxes on the properties transfers, have been in diminution by 5 billion in 2023.
This new trend is worsening a structural situation already worrying where the needs of accommodations are increasing due to the demographic evolution with the increase of the life duration and with the rise of the number of single parent families. To get a home in France becomes so more and more difficult when we observe a growing number of vacant accommodations (3.5 million at the end of 2023) which comes from the geographical disequilibrium: the homes vacated after a death are frequently located in rural areas where the jobs supply is low and where public services are non-existent. The situation is inverse in the center of the big metropoles where the prices are unaffordable for a very large majority of families. There are so 29 000 inhabited accommodations in Paris.
To these disequilibrium factors between the demand and the supply must be added the investors behavior, frequently foreign ones, which see a well-located real estate asset as a financial investment. The asset is not offered for renting and the owner comes sometimes to stay in it few days per year. It is what it explains, for example in Paris, the number of flats in prestigious locations whose shutters are closed during the day. There is also the generous deliverance by townhalls of permits dedicated, in theory, to make renovations. Their tenants are evicted because the owner hopes to get a better price when he sells it because it will be unoccupied.
The State, yet, devotes huge amounts to the housing sector. In 2023, expenses have reached 41 billion, near 1,5% of the GDP. The direct contributions in favor of the tenants (housing allocations) allow to the most unfavored social categories to reducing their renting charges. But they are social transfers and not incentives to build or to improve the existing real estate assets. The State also gives important tax advantages to the buyers and even to the investors who commit themselves to rent the home under some conditions. But these measures have been unsuccessful to cope with the growing unbalance between the supply and the household demand of accommodations when we know that these ones, as an average, spend 29% of their revenues to stay in them.
The economic consequences are going much further than the mechanic effect on growth as it appears today. The difficulties to get a home have first consequences on employment. It is already a reason, and maybe the main one, which hurts enterprises when they want to hire when there are more than 3 million persons looking for a job. If it is at the center of a large metropole, the level of rents is, most of the time, incompatible with the offered salaries and transportation services do not always allow to connecting a peripherical home, where the rent is low enough. And if the job is in middle towns or around them, the supply of accommodations for renting is frequently non-existent.
This situation results from the abandon by the State of the concept of regional development which in the past had rightly consisted in that the construction of the infrastructures and of the accommodations were accompanying the economic development and the employment in the regions. To that must be added decentralization which has given to the landlords the power to deliver housing permits. Too frequently, to avoid to displease electors due to the works or to modify the structure of the electorate with the risk to lose the following election, landlords have been reluctant to allow the realization inside the city of new accommodations; it has even been necessary to have a law which makes obligatory a certain level of social ones.
The construction fall also provokes an important diminution of the tax receipts, which goes much above the reduction of the transfers taxes. The losses of jobs in the housing sector generates as much social contributions which do not come into treasuries of the organisms and the State is affected by a reduction of the VAT receipts generated by the achievement of every accommodation. But the transfers in favor of household to help them to pay their rents are not reduced and so there is a double penalty inflicted to the public finances by the housing crisis: an increase of the expenditures and a reduction of the receipts.
The forecastable diminution of the interest rates, if it is well transferred by the banks, can stop this downgrading but it will not be enough to reverse the trend. The State must intervene in order to have a start, inside the urban policies, of the abandon of a Malthusianism condemning any construction development and excessively restraining the use of the car in the cities center. Homes which are located there are losing attractivity and become unoccupied and the local shops close one after the other. In the same time is stigmatized the “artificialization of the grounds”, a new concept denouncing the replacement of agricultural lands most of the time non exploited by transportation ways or buildings in the name of the defense of environment and biodiversity.
The protection of nature is an indisputable duty and France which has at its disposal the largest forest surface in Europe is everything except a bad pupil in that domain. But the excesses committed in the name of these principles constitute one of the main structural factors of the housing crisis which is coming.
Along with the necessary reforms of the regulatory processes which slow construction and a better adaptation of the public expenses and of the real estate tax system, it is a change of the paradigm of its development France needs in order that the reduction of the life quality of an important share of the population is stopped which results from a housing and building policy which does not anymore meet its expectations.