Patrice Vergriete: Triple crisis in the real estate market

It's hard to find a more intense baptism by fire. Appointed as Minister of Housing just four months ago, Patrice Vergriete had no choice but to dive headfirst into the pressing issues of a sector in the midst of a full-blown crisis. The housing crisis currently engulfing France is no longer hidden and is unfolding before everyone's eyes: from access to ownership to construction forecasts, from sales and rentals to renovations, all indicators are flashing red. The increase in interest rates by the European Central Bank is certainly one of the reasons, but more structural factors explain the current critical situation in real estate, which affects the entire country.

In an interview with L'Express, the former mayor of Dunkirk analyzes the obstacles. While the housing crisis is beyond doubt in his eyes, he claims that there are still levers to change the situation.

L'Express: Is there a housing crisis in France?

Patrice Vergriët: Yes. It is reflected in the numbers: a 28% decrease in construction approvals compared to last year, a 40% drop in mortgage lending, a 16% decline in construction starts, and a 30% reduction in real estate transactions. The reasons are well-known: the main one is, of course, the increase in interest rates, which reduces the ability of the French to purchase real estate.

But there are also structural factors that have long been present and are affecting supply: rising construction costs, increasing land prices in high-demand areas due to intensified competition among private operators, and political opposition to building in various locations. This creates three crises that we are experiencing: a housing supply crisis, a housing demand crisis, and a housing affordability crisis.

What are the government's priority areas on this issue?

First, it should be noted that despite the crisis compared to the situation in the market before the Ukrainian conflict, activity indicators remain at an acceptable level. Each month, 70,000 families are still receiving mortgage loans, which is the level of 2010. By 2023, 900,000 transactions are expected to be concluded. Over the past 12 months, the construction of 319,500 residential units has begun, and 380,000 residential units have been permitted for construction. Of course, all these figures are declining, but they remain at a level comparable to what it was just a few years ago, before the historic drop in interest rates that led to a "real estate bubble." I would add that, unlike previous years, significant support for energy renovation is a priority area that yields results both in terms of energy savings and in terms of activity in the construction sector.

In this situation, the government is pursuing three goals: to limit the impact of the crisis in the short term, to reform housing policy to make it more sustainable in the future, and to respond more clearly to the needs of different regions. This, of course, requires budgetary and tax measures starting in 2024, as well as a deep legislative reform to change the organization of powers among the various participants in housing policy, including local authorities and the state.

You proposed several measures to change the situation less than a month ago. What are their results?

Since I joined the government, I have not stopped taking action. Two months after my appointment, we signed an agreement with the social housing sector to continue the production of social housing while simultaneously renovating thermal non-degrading facilities, thanks to a fund of 1.2 billion euros over 3 years and improving the loans issued by the Deposit Fund. This is reflected in the regional agreements: a month after their initiation, over 40 territorial communities have already shown interest, and we signed the first agreements in Dijon and Dunkirk.

In addition, Prime Minister Élisabeth Borne presented the government's action plan during her visit to Dunkirk on November 16: we intend to ease access to housing for the middle class, civil servants, and key workers through so-called "intermediate" housing, whose rent will be 15-20% lower than the market rate. To this end, starting from October 2, we are allowing 153 cities to build such housing. We have also opened up the possibility for private investment funds to invest in this type of housing, relying on individual savings, and we will allow owners of non-residential properties to sell their properties and convert them into affordable housing. The Prime Minister also appointed a rental tax mission, which is being carried out by two parliamentary deputies, who will present their findings in a few months.

Finally, regarding access to housing, I am working with Bruno Le Maire, the head of the Bank of France, and banks to facilitate access for the French to loans for purchasing or renovating their homes. We are contributing to this policy by improving the "Zero Interest Housing" (PTZ) program, the amount and income limits of which will be increased by 2024.

And, of course, the land plot has been mobilized: we implemented Deputy Mathieu's proposal to increase land supply through tax incentives for owners who sell their plots within two years, and at the request of the President of the Republic and the Prime Minister, we launched the "territories aimed at housing" program, which is expected to create around 30,000 housing units in the twenty most stressed areas.

How are your discussions with the head of the Bank of France progressing regarding changes to prudential standards and the easing of mortgage lending conditions?

I discussed this with him recently. We share the opinion about the significant decrease in mortgage lending and the concern, not about the current level, but about the trend. We agree on the need to maximize the banks' margins, which can deviate from the existing rules of 20% of loans and are currently using only 14.7%, which likely requires adjustments from all participants.

I share the head of the Bank's opinion on the impossibility of overburdening French families with debt. The solution cannot lie in extending the term or increasing the level of debt, but primarily in reducing land prices. Nevertheless, we have also considered other possible adjustments to technical mechanisms with banking staff, and I will continue to involve them in this matter. I expect banks to clearly prioritize their activities in providing mortgage loans, which for some of them have clearly lagged in recent months.

Should the energy reconstruction schedule be revised?

No, on the contrary! The schedule for the energy renovation of housing, in particular, should be maintained.

The schedule has been known for a long time, as the law was passed in the summer of 2021. I want us to stay within the framework of actions to carry out this work. We are helping all landlords rent out their properties, using all available means: never before has assistance been as great as it will be in 2024.

Finally, everything should be put into perspective: we are talking about approximately 650,000 residential units that will gradually become illegal starting in 2025, as lease agreements are updated; about 40% of them are co-owned, with the majority represented by private houses or apartment buildings in private ownership. We can significantly accelerate progress using the existing tools and substantial improvements by 2024.

I want a general mobilization on this issue to better inform and guide interested landlords and help them get started on their projects. Territorial collectives that implement the France Rénov’ program close to the French people, as well as professionals in property management - about 50% of the entire real estate market - play a key role, and we are working with them on this.

Will we be able to achieve our set goals in the context of the crisis of a shortage of certified RGE (Reconnu Garant de l'Environnement) organizations?

The number of certified RGE organizations is not a fatality. However, on the other hand, the development of offerings and the ability of organizations to respond to demand is also not declared from the office in Paris.

We have very ambitious goals for reconstruction, which are aimed, in particular, at fulfilling our climate commitments and improving the quality of life for our citizens. These goals are well-known and have been reiterated, including in the context of environmental planning efforts. To achieve these objectives, we are deploying historic funding, with an increase of 1.6 billion euros in commitments from the state and its operators starting in 2024.

The ability of the proposal to respond to increased demand is a shared responsibility. First and foremost, it is the responsibility of our businesses and craftsmen, in whom I believe will seize these opportunities, develop and modernize their offerings, particularly moving towards larger reconstruction efforts. It is the responsibility of our industrialists, especially to propose innovations; I will mention the development of internal reconstructions or the creation of technical solutions such as thin insulation coatings. It is the responsibility of the state: we are working to make RGE certification more attractive and strengthening opportunities to combat fraud in order to maintain citizens' trust in our businesses. And finally, it is the responsibility of regional collectives, specifically regarding the competent structuring of economic sectors and the professional training of regional authorities. We are setting the direction, financial conditions are met for acceleration, and the mobilization of all links in the chain will lead to the achievement of the set goals.

The construction of new houses has been halted due to a lack of land and rising material costs. How is your project to create 15-20 exceptional areas that can be freed from various restrictions progressing?

This program is underway: it involves identifying "housing-targeted territories" with the prefects and local communities, where there is a consensus to accelerate housing production. Major urban development and construction operations will receive enhanced support to produce 30,000 new housing units over the next three years. These will be based, in particular, on areas of interest for national operations or large urban planning projects and may be formalized as partnership projects for urban development. Depending on the identified needs, legislative changes in urban planning may be proposed in the coming weeks to expedite these operations if deemed necessary.

How to convince selected officials in tense areas who resist housing construction to soften their Local Urban Planning (LUP) plans?

Territorial differentiation is fundamental for a more responsible and supportive structuring of elected local officials. This is the essence of decentralization, which I am working on at the request of the president and the prime minister. Elected officials must understand the importance of maintaining new housing construction to meet needs and avoid exacerbating the housing crisis. This requires everyone to take responsibility for the act of building. Without waiting for this structural reform, I want to help elected officials build housing. This is the purpose of the contracts signed for the production and reconstruction of social housing, which have already attracted interest from nearly 40 local collectives following the first signings in recent days in Dijon and Dunkirk.

Here is the meaning of the program "territories focused on housing." This also relates to the application of the SRU law, which the prefects strive to comply with at my request in cases where the production of social housing is not being realized. The SRU law has been the main producer of social housing in France since its inception, as it accounts for almost half of such housing! Finally, I want to provide elected officials with more tools: we have allowed an additional 2500 community tax on secondary housing. We are working on new land tools, and decentralization will allow us to delve deeper into these issues.