High interest rates, high rents: how France is tackling the housing shortage

NAfter filling all the vacant ministerial positions last week, France’s new Prime Minister Gabriel Attal wants to succeed. “There will be no time off,” he told Le Parisien on Sunday, reaffirming his political priorities for the coming months. In the short term, this includes measures to create more (affordable) living space and encourage home buying.

As in Germany, the combination of soaring lending rates and high inflation has been affecting the French property market for months. In 2023, existing apartment transactions fell by about 20 percent. “That’s why he’s counting on the banks,” Attal said. They pledged to introduce a “screening system for unapproved property loans” to support households and limit cases of unjustified loan refusals.

From the point of view of many French, what is particularly worrying is not so much the difficult purchasing environment as the tense situation in the rental property market. “Apartment rentals in France are becoming increasingly rare,” real estate portal seloger.com wrote in its recent 2023 balance sheet. In two years, supply has fallen by no less than 36 percent—while demand is rising at the same time. time. The result is a housing shortage and rising rents.

“Significantly simplify standards”

The sharp decline in rental apartments is partly due to high interest rates on loans. They force many first-time homebuyers to abandon their purchasing project and stay in their old apartments. But the ban on new rentals of low-energy (G+) apartments, which came into force in France in 2023, and the upcoming Summer Olympics are also clearly leaving their mark on the rental housing market and limiting the available supply.

This is evidenced by figures from Paris, where the situation in the rental housing market is most critical. According to seloger.com, advertising volume there has fallen by 74 percent in three years. The portal suspects “phenomena specific to Paris.” More than a third of the French capital’s apartments are old buildings with very low energy efficiency. Additionally, the Summer Olympics increased seasonal rentals, meaning apartments were taken out of the regular rental market.

In his government statement to the National Assembly at the end of January, the French Prime Minister had already announced rapid responses to the housing crisis and, in collaboration with local elected officials, promised a “supply shock with several immediate solutions.”

“We will greatly simplify the regulations,” Attal said. Among other things, energy efficiency classes will be revised and access to state aid for energy repair work will be simplified. They also “will not hesitate to confiscate vacant buildings, especially office buildings.” Attal has been criticized in particular for his proposal to make social housing in cities more affordable for the middle class.

Environment Minister Christophe Bechoux took the first concrete action on Monday. He also told Le Parisien newspaper that the calculation of energy efficiency classes for very small apartments will change because their hot water consumption distorts the classification. The 140,000 apartments of less than 40 square meters should no longer be classified as “energy hogs” with F or G labels.