Housing crises and the real estate crisis

How the housing crisis and the real estate crisis

Author: Jean-Claude Drian

As February 1 approaches, the Abbé Pierre Foundation prepares to highlight the persistent issue of housing shortages in France. Once again, the Prime Minister demonstrates a misdiagnosis underlying the state-level housing policy. In his speech regarding the overall policy on January 30, 2024, he expressed his intention to change the calculation of municipal obligations in the area of social housing, proposing to "add a portion of intermediate housing available to the middle class into the calculation of the 25%."

At first glance, this sounds like a concession to disobedient mayors, but it mainly demonstrates the authorities' ignorance of the fact that today's income limits for true social housing cover more than two-thirds of families living in France. Therefore, by definition, social housing is largely "affordable for the middle class." The problem lies elsewhere. It is a lack of supply that focuses allocations on the most priority candidates and shuts the door on others. Introducing a new real estate product, more expensive and selective, into the definition of social housing could, on the contrary, only exacerbate the problem. We are far from addressing what all sectors are calling a housing crisis at the beginning of 2024, which justifies the attempt to outline its contours and clarify the reasons behind it.

The use of the term "housing crisis"

The use of the term "housing crisis" seems to be widespread in French political vocabulary at least since the post-war period.

Return of inflation since the end of 2021

The return of inflation since the end of 2021 has, however, renewed the relevance of the topic, creating for the first time in a long while a consensus that unites all direct and indirect participants in the sector, from the MEDEF to the Abbé Pierre Foundation, from developers to social landlords, and from architects to craftsmen and entrepreneurs in construction.

Crises are becoming expensive. The main explanation for this development is the almost continuous rise in real estate prices since the late 1990s. This division allows us to highlight two periods. The first, before the financial crisis of 2008, shows that prices more than doubled nationwide since 2000, while during the same period the consumer price index only increased by 16%. The second period, after a slight shock from the crisis, shows a sharp rise in prices in Paris, where they have tripled over 25 years, and a flatter national curve that hides very strong differences between metropolitan areas like Lyon, Bordeaux, or Nantes, where the upward trend quickly resumed, and many less attractive cities, where prices have remained at the same level.