The increase in funding has not led to the hoped-for housing creation, according to the Bank of France

The increase in real estate financing over the past 25 years has resulted in higher prices rather than an increase in the number of homes built, lamented the Governor of the Bank of France, as France and Europe experience a housing crisis.

"When you look at financing for the real estate sector, it has actually increased a lot over the last 25 years, and often on fairly favorable terms (...) Why has a mass of financing produced a surge in the prices of what already existed rather than an increase in volume?", asked François Villeroy de Galhau during a hearing on Wednesday before the Senate Finance Committee.

While the favorable monetary policy "also resulted in mortgage loans at unprecedented rates, 1% or 1,5%", and there "was a lot of financing on mortgage loans", France is now experiencing a housing crisis, he noted.

According to data from the General Inspectorate for the Environment and Sustainable Development (IGEDD), since 2000, the decline in interest rates has not been sufficient to offset the effect of rising prices on households' real estate purchasing power.

In addition to the construction crisis, a report by the Institut Montaigne published in August points to the number of second homes, which is growing "faster than that of primary residences" (1,7% against 0,9% from 2013 to 2018), and the number of vacant dwellings, which is increasing "about 2,3 times faster than the total number of dwellings between 2005 and 2023".

"I think this is a real subject for collective self-examination, everywhere, not just in France," insisted the governor, calling for "real economic reflection," in which "the Bank of France must play its part."

According to Mr. Villeroy de Galhau, the subject is not specific to France, but concerns "all of Europe, (...) North America, etc.".

The scale of this crisis has prompted the European Union to launch a plan for affordable housing at the end of 2025.

In France, the Senate on Tuesday examined a bill tabled by The Republicans to "revive the construction and production of housing", a text criticized by associations and unions but generally supported by the government.

Illustrative image of the article via Depositphotos.com.