When he was elected in 2007, French president Nicolas Sarkozy presented an ambitious programme to increase home ownership in France, raising the number of French households that are owner occupiers from 57% to 70%. But five years on, despite introducing tax breaks and interest-free loan schemes, the figure has inched to just 58%, a similar increase to the previous five-year presidential term.
A high rate of indebtedness, lower purchasing power and austerity measures have all combined to make home ownership a hazardous project for many, while property prices bar those on low incomes from even dreaming of an acquisition.
The sale price of property which is more than five years old has more than doubled over the last decade, progressing three times faster than the consumer price index, used to gauge inflation. Due to soaring property prices, the security and stability factors traditionally linked to homeownership have been reduced to nothing.
A fall in property purchasing power in major cities (between -6% to -8% in Lille, Paris and Rennes according to estate agents' website MeilleursAgents.com/Empruntis.com) is combined with an overall decline in purchasing power.
The latest major housing study by the French National Institute of Statistics and Economic Studies, INSEE, shows that in 2006, 565,000 homeowners either had problems paying the associated costs, such as maintenance and property taxes, or in making their loan payments. Among these, 70,000 found themselves in foreclosure.
Meanwhile, housing costs for households paying off a mortgage increased between 2005 and 2010 by 26% (excluding any housing benefits), noted INSEE. Reforms implemented since 2007 to favour access to property have not really helped, concluded INSEE. Acquisitions cost more than before, INSEE explained, because "the amount of the purchase represented, on average, four years of revenue for recent buyers between 2002 to 2006, while it represented three years for those buying between 1997 and 2001".
In its annual report published earlier this year, the Fondation Abbé Pierre, one of France’s leading charitable organisations dedicated to improving housing conditions for the poor, underlined that, after deducting housing costs, some 4.2 million French households are left with less than 500 euros per month to live on. While this figure includes renters in the private sector who are currently experiencing an uncontrolled increase in rents and associated expenses (+50% in ten years), home buyers are not spared either; their outlay ratio – which measures the ratio of expenses to housing – has continued to rise for the past 15 years. The ratio rose by +0.6 points in the ten years between 1996 to 2006, then another +0.8 points in the five years between 2008 to 2012, according to INSEE.
Housing is the largest item of household expenditure, ahead of food and transport, while purchasing power is forecast to shrink by 0.3% in the first half of 2012, according to another INSEE study.
Poorest European countries have highest home ownership
"Have you noticed, in the last three years, during the crisis period, an explosion of foreclosures linked to home-owning? Of people who could no longer pay," asked French Secretary of State for Housing, Benoist Apparu, in an interview with Mediapart. "The answer is 'no'. Although in the United States there were 4.5 million homes seized and people thrown out, in France, the rate of foreclosures didn’t rise during the crisis, while we were carrying out this policy of favouring home ownership," he says.
This optimistic view is not shared by Jean-Louis Kiehl, President of the French Federation of the Cresus Associations, a group of non-profit organisations that specialise in helping over-indebted people. "We are a long way from the US subprime crisis, because France was careful to cap indebtedness [for loans] at a rate of 33%," Kiehl said. "But what we forgot is that when you are paying off a home loan, there are subsidiary maintenance costs, taxes to add on, problems with transport. People take a consumer loan and soon go beyond the 33% indebtedness to reach 45%, 65%, even 90%. There are more and more such cases," he adds. According to a study by polling group CSA and Cresus published in October 2011, 72% of those who declared that they were overly indebted were also paying off a home loan.
“The homeownership rate has gone up, more or less, by two points during [President Nicholas Sarkozy's] five year term," commented Benoist Apparu. "That is 1.3 million people that were helped to become homeowners. In 2011 alone, we made 360,000 loans at zero per cent interest, under the new terms [1].”
"[...] When you look at opinion polls asking if people want to be homeowners once in their lives, 88% answer 'yes'," Apparu added. "We have set a much lower rate. I know that we must make people happy in spite of themselves, but when you have nearly 90% of the French wanting to be homeowners, your job is to make it happen. A rate of 70% is a balanced one, given the European average."
Emmanuelle Cosse of Green party Europe Ecologie-Les Verts (EELV) is vice-president of the Ile de France [Greater Paris] regional council and is responsible for housing issues for EELV presidential election candidate, Eva Joly. Cosse has a different view of the European average. "This yearning and this model are false. In Europe, the countries where there are the most homeowners are Romania, Lithuania, Slovakia. Being a homeowner is more a sign of poverty. The highly competitive countries, from an economic perspective, and which also enjoy high mobility are those countries in which there are very few homeowners. In Germany, in the Netherlands or other Nordic countries, owning land and property is not a field for enrichment," she said.
The mobility issue is closely linked to the housing problem because in order to become homeowners many households choose to settle far from the city centres and from their work places – often without taking into consideration all the financial consequences of such a commitment.
In 2007, two moderate-income households out of three acquired housing in rural or semi-rural areas where the prices are the lowest. "For these moderate-income households, this is a source of strain because the budget devoted to daily travel is generally not taken into account or is underestimated," reports the latest study by the Abbé Pierre Fondation.
Committed to increasingly onerous long-term housing loans, those still paying off their credit are victims of a ‘purchasing power effect’, says the Research Centre for the Study and Observation of Living Conditions (Credoc) in a study published in December 2011. Mining data from a 2006 INSEE Family Budgets Study, the Credoc notes that, between 1980 and 2010, the sense of hardship "is much stronger in families with high housing costs". Thus, 81% of those whose say they have high housing costs, also say they regularly subject themselves to budgetary restrictions.
-------------------------
1: The zero-interest loan is available to first-time homeowners who are buying in new housing or existing, moderately-priced, government housing.
Julien Damon is professor of urban planning at the Paris Institute for Political Studies (Science Po) and recently published a study called The Middle Classes and Housing (published in French by Fondapol in December 2011). In it he notes that "the middle classes [...] have converged towards the disadvantaged categories."
"Their required expenses – also called non-negotiable, previously incurred – weigh heavily on their budgets. Past increases in rates, and in some cases – notably energy – those yet to come, related to housing costs (rents, loan reimbursements, water, gas, electricity but also insurance and tax payments) are one of the principal causes of pressure felt and experienced by middle class households," the study concluded.
Along with a steady fall in the proportion of moderate-income households among homebuyers over the past 15 years, a large number among the middle classes have, for their part, become financially insecure.
"When the profile of homebuyers is studied, one notes that the lower income brackets have more trouble acquiring property than before,” admitted Secretary of State for Housing, Benoist Apparu. “This is a real problem. But there is a kind of contradiction. On the one hand we are told 'acquiring property is not a good thing because you are sending people into a brick wall and you are causing them problems' and, on the other hand, we hear 'it's scandalous, the lowest incomes cannot acquire property'. There comes a time when you just have to choose a side. You have to say 'Yes, we want the lowest incomes to acquire property, it's taking a risk but we will help them'.”
For Christophe Robert, deputy director-general of the Fondation Abbé Pierre, the stakes could change, if new housing policies were implemented. "When we plead for intervention on prices [rent control], it is also to give more flexibility to purchasing power," he explained.
That view is shared by Emmanuelle Cosse of EELV. She argues that, rather than providing moderate-priced housing, the government's measures benefit the wealthy by pushing up rents and encouraging speculation. "We are always told that it is a question of money, but that is not true. When you see facilities like the Sellier law [1] with a tax break of 60,000 euros that didn’t meet the demand for properties on the market, one notes that a lot of money was invested in housing issues. The problem is that it was committed to the benefit of an ambiguous and ambivalent model that will lead to quite serious social problems," she warned.
-------------------------
1: Introduced in January 2009, the Sellier law provides considerable tax rebates – 22% or 13.5% depending on the type of investment – to those investing in rental housing. The law is set to expire at the end of 2012 due to budget constraints.
English version: Patricia Brett
(Editing by Graham Tearse)