Real estate crisis: do we want the skin of social housing?

« AAfter a while, I got tired of it. » Isabelle Gautier, childcare assistant, has been seeking social housing for ten years. She only received one proposal from HLM, about five years ago. “A very poorly arranged apartment, there were broken cupboards…” She refused him. “I don’t want to live in something where I don’t feel good. »

Like her, there were, at the end of 2022, 2.42 million households waiting for HLM housing, according to data from the Social Union for Housing (USH), the main federation of HLM organizations. That is 162,000 more than in 2021. A historic record.

And the HLM segment is not the only one going through a difficult period. The entire housing sector is experiencing a crisis. At the origin of this, the rise in interest rates. It has reduced the ability of households to finance themselves. According to figures published on September 4 by the Banque de France, the total amount of real estate loans to individuals has fallen by 45% over one year. This level is the lowest since 2014.

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Construction authorizations down 14.3%

On the other hand, real estate developers are facing exploding production costs, between inflation which increases the price of materials, and the rise in land prices. “Between 2000 and 2018, real estate prices increased by 115% when land prices tripled,” notes Marianne Louis, general director of USH. The fault, among other things, is the zero net artificialization law which reduces the consumption of natural, agricultural and forestry spaces.

Developers have already reduced the production of new housing. Published a few days ago, figures from the Ministry of Ecological Transition show that 431,800 housing units were authorized for construction between May 2022 and April 2023. That is to say a drop of 14.3% compared to the previous twelve months, due to fact that developers have reduced their requests for building permits.

Real estate interest rates at 4%, there had already been some in the past without the market experiencing such a crisisMarianne Louis, general director of USH

If the rise in interest rates is the trigger for the current real estate crisis, everything was ready for the market to be severely shaken. “Real estate interest rates at 4%, there had already been some in the past without the market experiencing such a crisis,” notes Marianne Louis. First-time buyers were then rare, but construction did not experience such a decline.

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Indeed, in such situations, the real estate market can generally count on social landlords to play a countercyclical role. The latter reserve housing for real estate developers and, in doing so, stimulate the productive system. But as donor resources have been considerably reduced, there are no longer as many of them able to play this role.

Reducing solidarity rent costs social landlords 1.3 billion euros each year

“The culprit is the State which implemented very significant levies on social landlords in a period of small drop in rates,” says the general director of the USH. First of all, it was the implementation of the solidarity rent reduction (RLS) in 2018. This measure forced social landlords to lower tenants’ rents in order to compensate for the 5 euros per month reduction in APLs. Result: the State made a saving of 1.3 billion euros, but landlords saw their revenue decrease accordingly.

When the RLS came into force, the Livret A account had a rate of 0.75%. However, social landlords borrow at the Livret A rate. Each time this increases, their debt burden increases. In a year and a half, it has increased by 3.8 billion euros, according to the USH. “The State took advantage of the fact that the rate was exceptionally low to make enormous levies. The system has been wrung out and, now that the Livret A is at a rate of 3%, it is dry,” continues Marianne Louis. Then there was the increase in VAT on social housing. In 2018, it increased from 5.5 to 10% for completed new construction and for most work carried out in existing housing.

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As for the remaining financial resources, part will have to be invested in the years to come to green the existing housing stock. Whether through thermal renovation work or by changing the heating systems. “60% of social housing is heated with gas,” explains Anne-Sophie Graves, president of the board of directors of CDC Habitat, a subsidiary of the Caisse des Dépôts et Consignations. However, the national low carbon strategy plans to achieve neutrality in 2050. There is therefore urgency.

Regulate land prices

” There is no miracle solution. The top priority for everyone is carbon neutrality. We are not going to go back on environmental standards. We also cannot hope for a reduction in the Livret A in the current economic context,” confides Marianne Louis.

The USH instead pleads for a return to VAT at 5.5% and for the elimination of the RLS. She also defends regulation of land prices. “The goal is not to defraud the owners, we could very well consider blocking the prices at the amount at which the last sale of the land in question took place,” explains the general director.

There is no room for optimism: “When the housing crisis sets in, it takes a very long time to come out of it. It will take time to restart new production,” warns the manager.

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