Housing: an unfinished plan

Ihas the prospect of a “social bomb”, as housing players have been saying for weeks to talk about the looming crisis, has not caused the big night expected. The announcements made Monday, June 5 by the Prime Minister, after the restitution of the work of the National Council for Refoundation, plunged the sector into a mixture of spite and a feeling of incompleteness. Between a handful of immediate measures and a series of projects in the making, the roadmap drawn up by Elisabeth Borne has taken on a minimalist look that illustrates a clearly assumed change of direction: the era of all-out support from the State is over.

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Emmanuel Macron had already announced the color a few weeks earlier by describing the housing policy as “a system of public overspending for collective inefficiency” In “a sector where supply, investment and demand are financed”while, “despite everything, we produce less, and it’s rather more expensive than elsewhere”. This severe diagnosis from the Head of State comes at a time when the market is turning. Free money, which has fueled the rise in the real estate market, is a thing of the past. The tightening of credit conditions heralds a dismal tomorrow.

The government is rather right not to give in to the temptation to support the sector at arm’s length in an attempt to stem the looming drop in prices. Experience has shown that, if tax incentives painfully stimulate the supply of housing, they actively contribute to the increase in prices. Since the real estate crisis of the 1990s, these have multiplied by more than 3 and even by 3.5 in Paris, in total decorrelation from the underlying trends of the rest of the economy. The sector has benefited from this without preparing for bad days which now seem inevitable.

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If the improvement has boosted the wealth effect for half of French people who are homeowners, it has, at the same time, resulted in reinforcing inequalities in access to property. A recent note from the think tank Terra Nova recalls that in the space of forty years the rate of ownership among young modest households has been halved, which has been one of the driving forces behind the rise in the feeling of downgrading. A rapid and substantial fall in real estate prices can allow a certain rebalancing between generations, and between owners and tenants or first-time buyers. This is not necessarily bad news.

Faced with constrained public finances, the government is making choices. The abolition of the Pinel device, which is expensive for the taxpayer without having demonstrated its effectiveness, seems logical. Similarly, it is not absurd to exclude individual suburban housing from zero-rate loans, in order to limit urban sprawl, the environmental impact of which is pointed out.

On the other hand, the procrastination on the overhaul of the taxation of rentals is more incomprehensible. Long-term ones should be favored to the detriment of Airbnb-type furnished tourist accommodation, which benefits from an unjustified tax niche. However, the government is slow to decide. As for social housing, the “trust pact” established with social landlords will have to materialize through actions in terms of production and renovation. At this stage, the government’s plan looks like a construction site which will have to be completed to find out if it is capable of relaunching the sector on a sounder basis.

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