France’s housing crisis: Critics slam Macron’s failed "supply shock"

As France heads into 2024 budget negotiations, industry and political leaders warn that the housing crisis is much worse than anticipated, pointing to French President Emmanuel Macron’s failure to deliver on his promise to ramp up construction of new buildings.

The budget bill, due to be presented in late September, has already had the opposition call for new work to make France’s real estate more affordable and boost the proportion of council housing, Euractiv reports. 

Constructions of new buildings slowed by 3.3 per cent in January 2023 compared to the same time the year before, while building authorisations fell by a stark 22 per cent, according to the Fédération française du bâtiment, a stakeholder group. It expects new construction to fall by an overall 9 per cent in 2023, year-on-year.

“We should have handled the issue before it became a full-fledged, long-term crisis,” Véronique Bédague, CEO of French real estate mogul Nexity, told Le Monde in an interview on September 7, adding that she tried to warn the government several times over, to no avail.

“It was a chronicle of a disaster foretold,” the economic and social realities of which will be “violent,” she deplored.

Globally, building costs and land prices have been on the rise since Russia launched its full-scale invasion of Ukraine in February 2022; meanwhile, the general disruption in global supply chains following the COVID-19 pandemic never fully recovered, making access to building materials more costly – a perfect storm of factors, economist Pierre Madec told Le Monde.

Investigate Europe, an investigative news outlet, further found that house prices had been on the up by 40 per cent across the EU since 2015 – while wages are stagnating.

On the buyers’ side, mortgage rates are increasing in line with the European Central Bank’s (ECB) interest rates rises, after a close to 10-year period of almost - 0 per cent rates.

“There has been a major mortgage restriction in the past year, with mortgage offers down 45 per cent,” said Bédague. “There will be fewer new builds, rarefaction of renting opportunities, and […] those most in need will be thrown out on the streets,” she warned.

Rental sector concerns

Meanwhile, the rental sector is also becoming increasingly expensive and inaccessible, with wide differences in prices across varying parts of the country.

Demand was down 39.1 per cent between the last quarter of 2021 and the second quarter of 2022 – the most recent period for which data is available, according to the Fédération des promoteurs immobiliers, a real-estate business association.

Expert website Bien’ici found that housing supply across France as a whole was down 6 per cent in the second quarter of 2023, compared to the previous year, while rents were up 2 per cent.

In some vicinities – particularly student towns – the figures are even sharper. Paris has seen a 26 per cent slump in housing supply, and a 10 per cent increase in rents to €1,495. Rennes, a famous student city in Brittany, has experienced a 34 per cent drop in housing supply, and a 6 per cent increase in rent.

No housing “supply shock”

Many point to Emmanuel Macron’s failure to deliver on his 2017 promise of a housing “supply shock” so as to “cut prices down”. In 2021, a policy note by Institut Montaigne, a liberal think tank, pointed to a general reduction in constructions from 2018 onwards, while a 2017 tax reform reduced overall funding for council housing.

French Economy Minister Bruno Le Maire vowed in late August that this year’s budget would enshrine a €5 billion cut to public spending. To this effect, he already announced the winding down of an existing tax break that applies to buy-to-let properties.

A delegation of French MPs, who met with newly-appointed public finances minister Thomas Cazenave on September 5 , further warned against the government’s intention to reduce access to zero-interest mortgages, made available to those most in need.

Local housing taxes are also exploding by a country-wide average of 7.1 per cent, topping 52 per cent in some parts of Paris, due to inflation and fiscal reform that has limited municipalities’ other sources of revenue – which in the eyes of those calling for more affordable housing, has ultimately thrown more fuel on the fire.

“The [housing] sector is in a dramatic situation for working-class households. There is not enough council housing, and energy prices are making the situation worse,” Eric Coquerel, a far-left La France Insoumise MP and president of the Parliament’s Finance Committee, told the press earlier this week.

“The government is deaf to warning signs that the housing crisis is worsening,” Green MEP Mounir Satouri posted on X (formerly Twitter).