“Public action for housing should be a priority with intermediate housing for the benefit of the middle class”

2023-10-07 07:00:20

Housing stakeholders are sounding the alarm of a violent crisis. They criticize the rise in interest rates and urge the government to take budgetary measures to address this crisis. Once the diversion of attention has been made by some, let us return to the reality of the facts. Let us instead look at the continued high level of housing prices to explain the current real estate difficulties.

Housing benefits in France from 40 billion euros of public spending. A very high amount without equivalent in Europe. Instead of adding billions of public money, shouldn’t we better question the effectiveness of this policy? A policy where everything is a priority: social housing, intermediate housing, private housing, access to property in new buildings, in old buildings, first-time buyers, young people, tense, relaxed areas. A policy where taxation is heavy on real estate capital, offset by a host of exemptions: tax credits, tax deductions, reduced VAT rates.

Public action in favor of housing should choose a priority, assume it, implement it and monitor its effectiveness. By focusing, for example, on intermediate housing to support the middle class: those whose members work and have incomes that are both too high to occupy social housing, but insufficient to rent in the private sector.

In France, higher credit production than in Germany

Concerning the alleged role played by the rise in interest rates in the current crisis, we must reestablish the truth: property loans in France still remain accessible to all categories of borrowers. First-time buyers are not priced out of the market. They continue to represent almost half of the production of housing loans, and the 18-29 year old category has seen its share increase significantly (+ 3%).

The recent figures presented by the Banque de France thus challenge many preconceived ideas. The production of home loans reached more than 10 billion euros in July. Over twelve months, this production amounts to 178 billion euros, an amount much higher than that of Germany (137 billion), Spain (54 billion) and Italy (49 billion). The French advantage lies in interest rates lower than elsewhere and negotiated at a fixed rate for 99% of them.

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A general law of finance is that the price of real estate assets falls when interest rates rise. This phenomenon is observed in Germany and other European countries. None or little in France. A delay between rising rates and falling prices is conceivable. But the French delay is curiously long in contradiction with the alarmist comments on the duration, depth and breadth of the real estate market crisis.

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