France's housing crisis: critics condemn Macron's failed 'strike pitch

The housing crisis in France is much worse than expected, industry and political leaders say, pointing to French President Emmanuel Macron's failure to fulfill his promise to increase new construction.

The draft budget, due to be presented at the end of September, has already sparked demands from the opposition to make real estate in France more affordable and increase the proportion of communal housing.

New building construction fell 3.3% in January 2023 compared with the same period a year earlier, while building permits fell 22%, according to interest group the French Building Federation.

New building construction is expected to fall 9% in 2023 compared to the previous year.

"We should have dealt with this problem before it became a full-blown long-term crisis," Véronique Bedag, CEO of French real estate tycoon Nexity, told Le Monde in an interview on Thursday (Sept. 7), adding that she had tried several times to warn the government but to no avail. "It was a predictable chronicle of disaster," she complained of an economic and social reality that would be "violent".

Global construction costs and land prices have been rising since Russia launched a full-scale invasion of Ukraine in February 2022; meanwhile, the overall disruption to global supply chains after the COVID-19 pandemic never recovered, making access to building materials more expensive - a perfect combination of factors, economist Pierre Madec told Le Monde.

The research publication Investigate Europe also found that house prices in the EU have risen 40% since 2015, while wages have stagnated.

On the buyers' side, mortgage interest is rising in line with the European Central Bank's (ECB) interest rate hikes after a nearly 10-year period of near-zero rates. "Last year there was a significant curtailment of mortgages, with mortgage offers down 45%," Bedag said. "There will be less new build, fewer rental opportunities and [...] the neediest will be forced off the streets," she warned.

Trouble with the rental sector

At the same time, the rental housing sector is becoming increasingly expensive and unaffordable, with wide variations in prices in different parts of the country.

Demand fell 39.1% between the last quarter of 2021 and the second quarter of 2022, the most recent period for which data is available, according to the real estate association Fédération des promoturs immobiliers.

The experts at the Bien'ici website found that housing supply across France as a whole fell by 6% in the second quarter of 2023 compared to the previous year, while rents rose by 2%.

In some areas, particularly in student cities, the figures are even more impressive. Paris, for example, saw a 26% drop in housing supply and a 10% rise in rent to €1495.

It's time for Europe to take action to tackle the housing crisis, say

The pandemic has exacerbated many housing policy problems such as homelessness and affordability. While cities and states have taken some measures to protect renters, experts say it's time for Europe to develop long-term solutions.

Many point to Emmanuel Macron's failure to fulfill his promise of a "supply shock" in the housing market to bring prices down. In 2021, a note from the Institut Montaigne, a liberal think tank, pointed to an overall decline in construction from 2018, as well as a reduction in funding for public housing in 2017 as a result of tax reform.

French Economy Minister Bruno Lemaire said in late August that this year's budget will include a €5 billion cut in public spending. In this regard, he has already announced the phasing out of the existing tax break applicable to rental properties.

A delegation of French MPs who met with newly appointed Finance Minister Thomas Cazenave on Tuesday (September 5) also warned of the government's intention to reduce access to interest-free mortgages available to those in greatest need.

Local housing taxes are also on the rise with a country average rate of 7.1%, reaching 52% in some parts of Paris, due to inflation and a tax reform that limits other sources of revenue for municipalities - which, according to those demanding more affordable housing, ultimately adds fuel to the fire.

"The sector is in dire straits for working class families. There is not enough public housing and energy prices are only making the situation worse," leftist La France Insoumise MP Eric Cockerell told the press last week. "The government is deaf to the warning signs that the housing crisis is getting worse," Green MEP Mounir Satouri wrote on X (formerly Twitter).