Published on: 27 July 2023
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Housing crisis in France: Is there a housing shortage?
On June 5, 2023, the government spoke about the various measures being considered to revive the housing sector, which is currently in great difficulty. Indeed, more and more French households are finding it difficult to find affordable housing. Let's decipher together the causes of the housing crisis in France and the different measures taken by the government.
Why do we talk about a housing crisis in France?
3 millions vacant homes in 2022
According to Datagouv, 9.3% of private housing was vacant in 2021, including 3.5% for at least two years. In some cases, these are simply properties waiting for relocation or undergoing renovation. In others, homes remain unoccupied because they are located in less attractive areas, are too expensive, or do not fit the market. Therefore, they cannot house those seeking accommodation or the homeless.
Price of housing doubled on the last 20 years
The price of housing has doubled in the last 20 years, making homeownership increasingly difficult for many and escalating the demand for social rental properties. The rise in mortgage interest rates has diminished the purchasing power of French citizens, excluding low-income households from credit access and leading to a decline in real estate transactions.
Mortgage rates are skyrocketing
Another reason for the housing crisis in France: the average mortgage interest rate for loans of 20 years and more is 3.30%. Compared to the end of 2021, that's a 2 point increase! The purchasing power of the French is reduced and their borrowing capacity decreases. The most modest households are excluded from credit, which partly explains the drop in the number of real estate transactions in recent months.
Fewer new constructions
According to figures from the "Centre d'Analyses et de Prévisions Immobilières (CAPEM)", there has been a decrease in the number of building permits granted for new real estate in the last quarter, with a drop of 26.7% compared to the same quarter of the previous year. Urban planning projects are declining due to the increase in construction costs (rise in energy prices and raw materials), but also due to the scarcity of usable land. As mentioned above, the increase in credit rates impacts the financial capabilities of buyers, and new homes are seen as too expensive.
What are the measures announced by the government?
To combat the housing crisis in France, the government has implemented measures to facilitate homeownership for all households:
- Zero-interest loan or "Prêt à taux zéro (PTZ)" : the PTZ was supposed to end in 2023, but it will be extended until 2027 for the acquisition of new collective housing in tense zones and old housing with renovation conditions
- Monthly update of the wear rate : the wear rate corresponds to the maximum rate at which banks are allowed to lend. Its monthly update, rather than quarterly, helps avoid a blockage of loans.
- Real estate lease or "bail réel solidaire" : this mechanism will be extended to more households to help them acquire a new home without necessarily owning the land.
Promoting access to rental
The housing crisis in France is also impacting tenants! It's becoming more and more challenging to find affordable rentals in big cities and high-demand areas. In response to these issues, the government has decided:
- The end of Pinel system in 2024 : the program has been deemed ineffective, and the focus will shift to intermediate housing with rents capped below market prices.
- Extend of the Visale Guarantee "Garantie Visale" : access to this public guarantee for tenants will be extended to benefit more recipients.
- Seasonal rental : restrictive measures should be taken to encourage long-term rentals rather than tourist furnished rentals like Airbnb.
Create new buildings of residential structures
It is almost impossible to combat the housing crisis in France without supporting the creation of new homes or the renovation of existing properties, always respecting the latest energy performance standards. Here are the main measures envisaged by the government:
- supporting investment in social housing to renovate the housing stock and create new homes.
- The Caisse des Dépôts and Action Logement plan to buy back 50,000 unsold new homes as part of an emergency plan;
- strengthen the recycling of brownfield sites and accelerate the transformation of state-owned land to free up building land;
- dialogue with local authorities in tense areas to identify barriers leading to building permit rejections;
- encourage and accelerate the energy renovation of buildings, notably thanks to a simplification of 'Ma Prime Rénov'.
Impact of housing crises of rentals
The rental housing market is impacted by both the tightening of access to property ownership and a saturation of social housing. The rental tension is increasing and feeding the housing crisis. Indeed, the transaction market is slowing down and buyers are becoming rarer. All those who can no longer aspire to own property remain tenants, which means that they do not free up their rental property for newcomers to the market.
Access to low-rent housing (HLM) is also blocked, with an estimated 2.3 million vulnerable households waiting for social housing according to the Abbé Pierre Foundation. Emmanuel Macron's latest tax directions are driving investors away from rental real estate, notably through the replacement of the Solidarity Wealth Tax (ISF) with the Real Estate Wealth Tax (IFI). As a result, wealthier households are turning more towards financial assets rather than real estate.
Housing crisis: what you need to know
The housing crisis is indeed a reality in France. It is due to a difficult macroeconomic context (energy crisis, conflict in Ukraine, inflation, etc.) coupled with an increasingly significant demand for housing. Numerous measures are expected to be taken in 2023 and 2024 to mitigate the effects of this crisis and house as many French households as possible under good conditions.
What is the current housing situation in France?
The housing crisis is indeed a reality in France. It is due to a challenging macroeconomic context (energy crisis, conflict in Ukraine, inflation, etc.) coupled with a growing demand for housing. Numerous measures are expected to be taken in 2023 and 2024 to mitigate the effects of this crisis and accommodate as many French households as possible under good conditions.
How to explain housing crisis?
The housing crisis in France can be explained by a relatively low construction rate and a decrease in housing turnover, particularly due to the increasing rent gap between social housing (HLM) and the private rental sector.