Key points

The context is characterised by a timid upswing – since 2016 – in the housing construction (+2.5% in 2018 according to the Fédération française du bâtiment, the French building Federation). This upswing should not mask the worrying imbalance between supply and demand that fuels a persistent property price inflation. The French housing policy remains complex and costly (€40 billion, namely 2% of GDP, compared to an EU average of 0.7%).

During the presidential campaign, Macron promoted a supply-shock principle in order to build more housing units, and the equal treatment in access to housing – for instance, housing construction for young adults and low-income households. One of the measures lies in exemptions from the local residence tax (taxe d’habitation), which are particularly costly for public finances and which are one of the key symbols of Macron’s fiscal policy in favor of the spending power of middle- and lower-income French people.

The Housing Strategy (stratégie logement) presented by the government in September 2017 aims to make public savings – with a budget reduction of 9.8% in 2018 – whilst improving housing supply with simplification measures and tax rebates. If the housing allowances (aides personnalisées au logement, known as “APL”) had to be remodelled, this reform does not entirely meet the imperative of expenditure reduction and does not meet the beneficiaries’ needs.

Key numbers

  • Evolution of construction projects: from February 2017 to January 2018, the construction of 425,000 housing units has started, that is to say an increase by 13.2% compared to the cumulative previous 12 months.
  • Evolution of building permits:  from November 2017 to January 2018, the number of authorized housing continued to decline: -2.3% compared to -0.9% in the 3 previous months.
  • Property prices: a +4% increase in the fourth quarter of 2017, compared to the fourth quarter of 2016.
  • Despite a decline in real estate credit rates, the average loan term has increased by 4 months since last year.
  • 
Stables rents, which do not expand as quickly as incomes and even decrease in many territories.

Key dates

1 july 2017 - 30 september 2017

Consultation with housing, construction and development players to identify needs and proposals

july 2017

20 september 2017

Presentation of the housing strategy

september 2017

1 october 2017

Decrease of housing grants (APL)

october 2017

12 october 2017

Presentation of the plan to strengthen the attractiveness of medium-sized towns

4 april 2018

Presentation of the Housing Bill

april 2018

Figures

Personal housing grants decrease

Description: Reduction of the amount of personal housing grants by €5 per month, decided on 1st October 2017, then reduction of personal housing grants in the social sector.
Campaign promise? Yes
Overall savings of €2 billion per year
Savings breakdown: 
Savings for the State: 100%
Savings for local authorities: 0%
Savings for social security: 0%

The reduction of personal housing grants (APL), decided on 1 October 2017, concerns all current beneficiaries, i.e. 6.5 million households. This decrease of €5 per month enables the State, which pays this aid, to save around €32.5 million per month and €390 million over a full year.

In the 2018 Finance Bill, a further reduction in personal housing grants was introduced in social housing. For the State, this represents savings of €1.5 billion.

Overall, the State will thus save around €2 billion in a full year.

Campaign promises

During the presidential campaign, candidate Macron committed to:

  • Creating a supply shock, in order to “compress the prices” in territories with the strongest housing needs
  • Facilitating housing for young people and mobile workers, thanks to the construction of 80,000 youth housing units and the establishment of a new “occupational mobility” lease
  • Transfering, in priority areas, land use authorisations – especially building permits -, currently managed by municipalities, to the inter-municipal scale (French EPCIs, public inter-municipality cooperation establishments), or where required to the metropolitan scale and even to the State
  • Increasing housing solutions for households with modest resources, by keeping the construction of social housings at the same level as in previous years
  • Making more transparent the process of  allocating social housing
  • Creating 10,000 additional places in boarding houses within 5 years and ensuring the “right of domiciliation” for the homeless
  • Speeding up housing renovation in order to accelerate environmental transition, by transforming the Crédit d’impôt transition énergétique (CITE, a tax credit for energy transition) into a bonus which would be immediately received at the time of construction – and not the following year – and by bringing the “programme de rénovation urbaine” (urban renewal programme) to €10 billion.

Overview

After a consultation that took place last Summer, the government’s Housing Strategy was presented on 20 September 2017. This strategy develops  a rather classic approach to traditional topics: “Build more, better and cheaper; meet everyone’s needs; enhance the living environment.”

This Housing Strategy was followed by unprecedented and unexpected housing aids reductions, for most reflected in the 2018 Finance bill:

  • Decreasing housing allowances (APL) by €1 billion, only concentrated on public housing – counterbalanced by an equivalent rent reduction – and on first-time owners with limited income – via the abolition of the APL accession
  • Raising the VAT rate from 5.5% to 10% for social housing and creating a 10% tax on social landlords’ sales income
  • Getting rid of the State bonus for plans épargne logement (ownership saving schemes), open since 1st January 2018
  • Removing windows, doors and shutters as well as oil-fired boilers from the Crédit d’impôt transition énergétique (CITE)as of June 2018
  • Restricting the prêt à taux 0 (PTZ, interest-free loan) and in the Pinel Bill (tax credit for rental investments), extended for an additional 4 years: first, splitting by half in 2018 and 2019, then excluding 34,000 municipalities – representing 54% of the beneficiaries in 2016 – from the PTZ for new-build; starting in 2018, getting rid of the PTZ for work within old properties in certain areas.

In the beginning of November 2017, in response to concerns expressed by the private sector, the President of the Senate suggested a consensus conference to President Macron, before the beginning of the legislative projects.

The plan made to enhance the attractiveness of medium-sized towns, which was presented by the Minister of the Cohesion among the Territories on 15 December 2017 but with no budget of its own, will be built thanks to the different partners’ contributions. In December 2017, the French State and Action Logement (a major player in French social housing) signed an agreement which foresees an envelope of €1.5 billion for the medium-sized towns plan, and plans to raise the urban renewal envelope to €10 billion.

Finally, following the debates which occurred during the consensus conference which was over in early February 2018, the drafted bill ÉLAN (Évolution du logement, de l’aménagement et du numérique) was presented to the Council of Ministers on 4 April 2018.

Analysis

The impact of housing policies is, by nature, inevitably differed: 10 years were needed before the programme de rénovation urbaine (urban renewal program) became fully operational.

The major challenge the government had to face is linked to the gap between the strategy put forward and the measures implemented. Although there was no such indication in Emmanuel Macron’s program, the President decided, at an accelerated pace, to make budget cuts in housing – especially ones on social housing. This led to an important crisis, because the ill-prepared reduction in budget plan for 2018 ends up with an unstable system, which presents the risk of excluding households with the most modest resources from access to housing.

Focusing merely on a supply shock is a long-term vision that has to be reconciled with the evolution of French citizens’ incomes and with new needs by this horizon, which are related to separate living and population ageing.

The instability generated by the budget shock should not be underestimated. Nevertheless, it could be the opportunity to trigger structural measures in order to find a new balance for the housing chain and to reduce social and territorial inequalities.

And now?

In upcoming years, there will be a great expectation concerning reduction in housing costs because household budgets (€1.700 per household on average) are not extensible – and public budget isn’t either.

At the same time, new expectations will have to be satisfied: energy transition, high-speed cabling, diversification of family models, population ageing and resulting housing adaptations, in a context of demographic growth and urban concentration.

Over the past 20 years, the legislative logorrhoea on housing issues and urbanism has had counterproductive effects, which have increased prices and led citizens to lose trust.

The real risk of the future ÉLAN law (Évolution du logement, de l’aménagement et du numérique) on housing (and its 130 pages!) is to pursue too many goals, to take some trivial measures and to continue to create instability, when few but efficient reforms should be privileged, in order to:

  • Make housing policy more territorialized
  • Focus on a few concrete simplification measures that save time and foster innovation (and to massively downgrade the articles of the law which are related to construction)
  • Step out of the intellectual model of growth by consumption of new lands, by promoting an approach based on the building uses
  • Embrace better the possibilities of digital technology
  • Influence prices, in particular land prices, in order to bring them down and build a model that enables the construction of low-rental housing to ensure that the most vulnerable can find accomodation

In order to achieve this, the government will have to adopt a trust-based method, which will ensure a broad and continued dialogue with all concerned players.