The crisis undermines the foundations of construction - Normandy Business Journal.

Due to a significant decline in their activities, participants in the construction industry are seeking support and solutions. As a result of the crisis caused by the Covid-19 pandemic, inflation, and excessively high interest rates, real estate purchase projects for future owners have become unaffordable, forcing them to abandon or postpone these plans. This warning comes from Olivier Roussel, president of the French Federation of Construction (FFB) for the Rouen metropolis and territories.

"The construction of new housing has been in a constant decline for twelve months. New construction has decreased by 15.8%, especially in the segment of private homes, and by 21.3% in building permits in the Normandy region." The decline in activity also affects new construction of various buildings (agricultural, public, territorial, etc.) and amounts to 11.5% of permits for projects over the twelve months (as of the end of August 2023, according to SDES).

Another problem troubling representatives of the construction industry is the sharp decline in housing bookings, which have decreased by 44.9% for individual housing and by 32.4% for multi-family housing. The only sector that continues to show growth is block sales, which have increased by 35%: "But this is a different sign, as combined sales occur when a developer cannot sell their housing separately and decides to sell it in a block to social landlords," notes Olivier Roussel, adding that the maintenance/repair sector remains at +3.7%. "This is what is boosting activity in the construction industry, especially in Normandy, where 70% of our companies are engaged in maintenance and repair, while the remaining 30% are in new construction. Small and medium-sized enterprises involved in repairs are doing well. The most affected are medium-sized, large, and major companies, as real estate construction is a long-term task. It takes time to find a plot of land, determine what can be built, and obtain permits. All of this can take from 24 to 36 months."

The decline in demand and orders has led to a sharp increase in the number of businesses that have gone bankrupt, according to data from the Bank of France for the second quarter of 2023. Compared to a year ago, this is 331 businesses, which represents an increase of 31.9%, affecting a total of 1,378 employees. The number of bankruptcies is expected to continue rising, according to Olivier Roussel: "This is just the beginning, as businesses need to repay loans received with government support and pay social security taxes. In fact, the situation will really start to worsen in 2024."

To stop this bleeding, the president of the Normandy Construction Federation, Olivier Roussel, sees several ways to improve the situation, such as extending measures like the Pinel law, providing more funds for housing repairs through "Ma Prime Rénov," or adjusting the timeline for the impact of the land use planning law. "All of this is in the hands of the government, but it could revive activity. Without strong measures, 130,000 jobs could disappear by 2025," worries Olivier Roussel, the CEO of the Rouen roofing company Verhege.

In light of the decreasing purchasing power and rising interest rates, which burden family budgets and hinder access to property, Paul Lotellier, president of the Lotellier construction group (1700 employees, turnover of 310 million euros), states that the situation requires collective intelligence: "We need to find the intellect and ways to build economical buildings. The decrease in purchasing power should drive us to seek solutions for construction at less than 1000 euros per square meter, especially in rural areas. We know how to do this, but we are held back by standards with projects that are lengthy, labor-intensive, and expensive, and unfortunately do not yield results.

Although the head of Lotellier criticizes the rising construction costs, he points to the increasing restrictions faced by entrepreneurs: more and more administrative limitations, thermal regulations, restrictions on harmful emissions (ZFE) for fleets and transportation, extended producer responsibility (REP) for managing construction materials and products, and other material usage regulations. "All of this leads to an overall increase in costs. We are trying to combat the negative consequences for our operations. We have made significant strides towards energy transformation in recycling, creating buildings with a more efficient carbon balance. Despite our efforts and the implementation of quite costly processes (Lotellier has a plant for recycling contaminated soil and a prefabrication plant), we still face the problem of rising costs. In light of this situation, we are currently more in a phase of retreat rather than development."

In response to repeated requests from representatives of the construction industry regarding the construction of new housing, the Ministry of Economy and Finance has agreed to extend and increase support for the Zero Interest Rate Mortgage Loan program (PTZ). The zero-interest loan will be extended until 2027, instead of ending at the end of this year, said Bruno Le Maire on October 18. Additionally, the support program for first-time buyers will be revised by 2024. The Ministry has introduced a new income threshold table, taking into account the ABC housing zones (tight or relaxed). As part of these measures, it has been decided to raise income limits for more advantageous categories of the population in order to cover more families; to implement more effective support measures for the least affluent borrowers, increasing the share of the project financed by PTZ to 50% (up from the current 40%); to double state assistance for social housing tenants wishing to purchase their own homes ("PTZ for the sale of cooperative housing"), who currently receive PTZ at 10% (in 2024 - 20%); and to create a fourth income category (from 37,000 to 49,000 euros per year) for families who currently cannot expect to receive PTZ with 20% financing, which amounts to an average of 5,000 euros in state assistance. The proposed changes to the PTZ program are expected to increase the number of potential zero-interest loan recipients from 23 million to 29 million people (73% of the population eligible for the loan, compared to 60% previously), the government states. As a result, approximately 40,000 people will be able to become property owners. The state has allocated a budget of 800 million euros annually for the PTZ program. The created assistance is expected to reduce the average interest rate on transactions from 4.4% to 3%. Furthermore, the Ministry of Economy and Finance reports that banks should provide additional help, starting with Crédit Agricole, which already issues half of the PTZ loans. If PTZ accounts for 50% of the loan amount, additional support from the bank can be 20%, leaving only 30% as a regular loan.