Tuesday, July 06, 2004
The reasons for the housing deficit are complex. First, about which I have already written, the French mayors can determine land use. They tend to prefer construction of commercial buildings rather than housing because the former brings in taxes rather than demands services. The cost of land for residences has increased, driving up the cost of construction. Some cities are tearing down apartment blocs that are considered eyesores, but the pace of demolition is much faster than construction.
Second, there has been an acceleration in the purchase of apartments that is out of step with the economic conditions in France. For the first four years of the period in question, France experienced some robust growth that fueled home purchases. In the last two, the economy has not performed as well, but housing purchases have become more numerous. One reason has to do with couples who are nearing retirement. Fearing they will be shut out of the cities, older couples have been buying up property. Since the start of 2004, the velocity of purchases has accelerated.
Third, social programs for housing are being depleted by the rise in costs. Rather than using the money to build new apartments, the French housing authority (HLM) wastes its budget supplementing the incomes of workers, who spend 40% of their income on rent.
Over the last several years, the cost of housing in French cities has risen at an alarming rate. In 2003, the cost of purchasing an apartment increased by 14.2%, a house 10.6%. Over six years the costs of both increased by more than fifty percent. More workers must find affordable housing outside of the city, even in villages that cannot stand the pressure of non-integrated population growth.
The problem can be more acute in certain areas of France. Paris is obviously a popular place to live and work, and costs are always high. But border areas of France are also experiencing booms in population from foreigners. Germans from Baden-Wurtemberg settle in Alsatian cities and commute across the river. The same thing is happening in the Alpine regions: Swiss citizens choose to live in the small cities and towns of Savoy but continue to work in Lausanne. The costs of homes in Savoy have increased faster than those in Paris.
In these border cases, the Germans and Swiss take advantage of housing prices that are much lower in France than they are in their native countries. In Savoy, the Swiss citizens come across the border with salaries that are much higher than what Frenchmen earn in the region. They also take advantage of the strength of the Swiss Franc vis-a-vis the Euro. New construction around the Alps is limited due to geological limitations and environmental law. Even without limitations, the small cities and towns of Savoy don’t have sufficient resources (spatial and financial) to construct new housing. The increase in housing costs have priced out average Frenchmen, leaving the Swiss as the only people who can afford to buy homes.
The government is attempting to deal with the problem by putting more financing into construction of “social accommodations” (called the Plan Borloo). They hope to build 120,000 apartments each year over five years, and to provide money to create emergency housing for the short-term. What is not yet clear is how the Plan Borloo will play in the cities: mayors have resisted building housing by their own efforts, why would they allow the central government to take over this area?