However, there is no fatality in being among the worst students in comparable countries. No one is fooled by declarations of intent that tirelessly fizzle out. Solutions exist. But implementing them requires a paradigm shift. Are we ready to finally prefer priority to urgency?
The current reality: an unsuitable, unbalanced and unaffordable real estate market for the rising generations
In the space of two generations, i.e. 40 years, the price per m2 of residential real estate has multiplied by 10 in tense areas, while general price inflation has only been x 3,5 and that of the SMIC of x 4. For 40 years, the purchasing power of wages has therefore only slightly increased compared to inflation, while the return on capital has been very high: the value of shares, MSCI global index dividends reinvested, was multiplied by 33, or 10 times more than inflation. In France, in addition to pay-as-you-go pensions, savings have been overwhelmingly invested in housing rather than in business financing, contributing to the fact that more than 40% of CAC40 companies are now owned by foreign capital.
Inequalities related to housing have thus increased very sharply: social inequalities between tenants and owners, geographical inequalities between tense areas and others, generational, the younger generations being de facto the most affected by the rise in the cost of housing.
All in all, we understand that from the moment when real estate inflation is much higher than that of income (while the use is the same), the system, supported by the fall in interest rates, does not work. more.
A lack of anticipation and long-term vision
How did we get there ? Explanatory factors are to be found both in demography and the evolution of lifestyles and in the policies implemented for at least 40 years. He lacked a global vision over a long time horizon.
Of course, with hindsight, it is always easier to say that more needed to be built. However, there was indeed poor anticipation of the need for housing: when demography only increased by 0,8% per year, the need for housing increased by 1,1% under the effect of a triple phenomenon :
- Longer life expectancy, which results in firstly reducing the number of homes on the market, but then desynchronizing when children inherit and when they most need a capital contribution, generally when they themselves have children. Today, children often inherit at an age when their own children leave home.
- The continuous decline in the number of people per dwelling for 20 years following the evolution of lifestyles and in particular the phenomenon of living apart.
- The acceleration of metropolitanization (5 million inhabitants in the Parisian suburbs in 1960 against 10 million today) which took on a particular form in France with the watchword of the 1970s: "we don't have oil , we have ideas" which was translated territorially by the watchword particularly true in the capital region: "we don't have factories, we have offices".
Although we find similar phenomena in most countries, particularly in the West, it is clear that the responses – and the results – differ in their nature and their impact: France is thus one of the worst students with inequalities and housing shortages among the highest in developed countries.
A clear preference given to the office over housing
The main public policies have had the effect of excessively favoring the construction of offices over that of housing: the decentralization of real estate policies (PLU and PC) does not encourage municipalities to authorize the construction of housing; the source of tax revenue leads municipalities to consider housing and welcoming new residents as a cost (construction of housing, infrastructure, equipment and expenditure on public services); cyclical support policies or socialization of housing which are effective in the short term but in fact postpone the problem and only make it worse; an inflationary method of financing the acquisition during a period of falling interest rates which made it possible to extend the duration of the loan, with the same monthly repayment, the buyer being able to buy the same surface more expensively.
This involuntary Malthusianism of housing construction has resulted in an almost continuous rise in prices for 40 years, regardless of the terms of office, so that free housing is no longer affordable. Meanwhile, the price per m2 of office space in city centers is more than double that of housing - a unique situation in Europe but which, however, hardly even shocks anyone anymore.
From urgency to priority? Do(n't) look up
Paradoxically, it was when, in the mid-1990s with the Kyoto agreements, the States declared that the climate was a priority... that they also collectively decided that (for the countries of the European Union), the budget deficit should not exceed 3% of GDP and the public debt / GDP 60%... in other words, the States would be supplementary and would leave the private sector responsible for investing to save the planet... which it did not do .
As we well know, humanity has a natural preference for the present and its action, whether political or economic, is thus largely conditioned by urgency. In doing so, the priority takes second place... Besides, there are always a thousand good reasons to deny the facts: protecting interests, one's way of life, one's psychic balance, social order... Yet it happens that the priority becomes itself urgent, that is to say perceptible over a time horizon where we feel affected. This is the case today. For the first time in the history of humanity, climate change will be perceptible on the scale of a lifetime.
Bringing the COP home
For our cities, this very concretely means the need to carry out actions to adapt to climate change. In the next 30 years, Paris will have the climate of Marseille… but without the sea or the mistral, without the tiles but with the zinc and with mostly mineral public spaces. Without adaptation work, the scope of which is certainly considerable, cities will lose a major part of their attractiveness. Faced with this challenge, lack of preparation dominates. Of course, major investments in mitigation (the reduction of CO2 emissions) have been taking place over the past ten years. This is an essential step in the action plan. But it will still be hot: not forcing an owner to do the work if his DPE is not good will not make his home livable! And in total, the investments to be made are not within the means of a large number of owners. And unfortunately we did not make these investments when interest rates were almost at zero and inflation was zero...
The unsuitability of housing financing methods in the face of the climate challenge
In the years to come, Europe will probably have no choice but to massively increase its budget deficits to repair all the investment shortfalls of the previous decades, whether to deal with the consequences of climate change, for the health sector, for military spending, for those in training in order to regain productivity gains in an aging population... and to make this debt bearable, there will be inflation higher than the interest rate (interest rate). negative real interest) accompanied by financial support for the most vulnerable populations, inflation playing its role of euthanizing rentiers.
In this context, the issue of housing, its production and financing, is therefore central. Until today, the French response has largely relied on tax incentive measures to relaunch construction and social assistance (Aide à la Pierre - construction of social housing - and personal assistance - APL), our system of fixed-rate loans over longer and longer periods providing solvency for a good part of private buyers… as long as the rates fell. But this dual system has clearly widened the gaps and France is thus at the top of the list of countries where the acquisition of housing expressed in number of years of income is by far the first... and where the number of social housing is among the most importants. Furthermore, we have not been able, or collectively wanted, to involve all the stakeholders in the reflection on the impacts of socio-demographic changes on housing, thereby depriving us of the debate necessary to bring out more solutions.
It is therefore now time to rethink in depth both the production and the financing of housing. Inflation, rising interest rates and work to adapt to global warming cannot be achieved or financed by our current modes of financing and thinking.
To go to war against ourselves. Solutions exist, others can be invented
No longer lending only to the person by indebting the buildings in the very long term, partially handing over one's accommodation in advance, dismembering the property, reconciling the civilization of use and that of property… there are answers to the current impasse. To be implemented, however, they require an in-depth rethinking of the relationships between the stakeholders, as some international examples show:
1. The Partially Perpetual Loan in Sweden and Holland
In the 1990s, to make housing affordable, Sweden and Holland set up a Partially Perpetual Loan system, the borrower paying all the interest on the loan and repaying only half of the capital on a period of 20 years. The non-reimbursed capital is attached to the property; it is only repaid when the property is sold, with the interest on this fraction obviously continuing to be paid by the borrower. After repaying half of his loan, the Swede pays interest on half of the initial capital all his life (which amounts to the equivalent of a very very small rent) and, not only has he been able to acquire his home, but the credit repayment savings that he realizes are invested in his pension fund which thus serves as additional income when he retires.
2. The advance transfer loan in Canada
The Canadian, to facilitate early transmission of the property to his children, finance his adaptation and renovation work or quite simply supplement his retirement, takes out a Loan Advance Mutation (mortgage life loan) for an obviously limited fraction of the value of the good. The interest is paid by the borrower and the repayment of the borrowed capital is made during the transfer. In France, if it is relatively easy to get into debt when you are old by pledging your financial assets (Lombard credit), it is impossible to do so on your property even though the law authorizes it and the wealth of households in real estate represents 2/3 of household wealth, ie nearly 8 billion euros which are sterilized in the economy.
3. The transformation of offices into housing in England
How to manage obsolescence (3% of stock per year) and the uselessness of millions of m2 of empty offices due to teleworking? The combination of the ZAN, which limits the expansion of buildings horizontally, the reduction of carbon emissions and the strong need for housing makes the transformation of offices into housing particularly interesting: a new construction in fact emits on average 2,5 times more than a rehabilitation. How can this transformation be facilitated? In England, post-Brexit, this does not require, for a limited period, a building permit but a simple work permit...
4. The free temporary provision of housing in cities in the former East Germany
While they suffered the shock of Reunification, deindustrialisation, the massive loss of their population and had to invest massively to renovate the housing stock, certain towns in the Eastern Länder did not hesitate to invest , to retain or attract young people, and temporarily provide housing free of charge (which we accept in tertiary real estate, ie support measures). The bet that is made is that the household savings thus achieved will be largely spent in local businesses and will contribute to enhancing attractiveness.
5. The dismemberment of property in Switzerland
In Switzerland, as in other countries, making housing affordable in the free sector involves the dismemberment of ownership (temporary usufruct/bare ownership or land/building) or co-investment between a buyer occupying the property and an investor. . Selling a use, not just a property The way these examples show us is to adapt to housing what is now common practice in the automobile or telephony industry, namely a civilization mixing use and property . Who knows the list price of their car or the real price of their phone? These manufacturers have managed to make their products affordable and to take on board the costs of new technologies via appropriate financing methods (even though the goods have zero residual value).
When was the last financial innovation in housing finance (in the free sector)? From the 1950s even when housing generates considerable fructus (rent and resilient residual value). Unlike the automobile or telephony sectors, the real estate sector is in fact very fragmented and this type of approach can only be done by involving third-party players - third-party institutional investors and banks - who must change their mindset (without for all that giving up profitability).
Conclusion: restoring housing to its place of economic efficiency, a real revolution for all stakeholders
Housing is one of the major challenges of the coming decades for living together and adapting to global warming. Its current high cost may paradoxically be an asset in meeting the generational challenges and the considerable investments that will have to be made. This requires considering housing and real estate as an intrinsically attractive asset and partly dissociating it from the person who owns or uses it.
There is no miracle solution and we must associate all the players in the political, economic and production worlds of the city, draw inspiration from the best existing practices in the world, both in terms of increasing supply and its modes of financing, without renouncing our model of solidarity which unfortunately cannot solve the multiple problems of housing … which are much more global.
Tribune by Xavier Lépine, President of the Institut de l'Epargne Immobilière et Foncière and of Paris-Île-de-France Economic Capital (LinkedIn).