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French housing markets after the subprime crisis: from exuberance to resilience

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Abstract

The main topic addressed in this paper is the special attributes of the French system as regards both the house price upsurge in the precrisis decade and the resilience of the housing system since 2007. Why was the housing market so buoyant before 2007, and why did it stabilize so rapidly after 2008? Apart from the nature of the credit system, which is of course of great importance—especially with respect to resilience—answering this question leads to questions concerning recent trends in tenure, urban structures, income distribution and housing policies. A number of similarities can be observed with Nordic countries, especially with Sweden, which can explain why those countries were exuberant without generating the kind of fragility observed in Anglo-Saxon, southern or eastern European countries.

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Notes

  1. In what follows, we shall use buoyancy or buoyant as an equivalent for the housing market of bullish for financial markets, meaning both very active and steadily rising.

  2. Market exuberance (or buoyancy)—i.e., a long-lasting and unusually strong upswing of prices—must be distinguished from market volatility, which would apply to short violent alternate ascending and descending movements. In this acceptance, volatility relies to a limited group of East European countries: Bulgaria, Estonia, Hungary, Latvia and Romania.

  3. A recent estimate (Jacquot 2012) by the French Ministry of Housing gives an estimation of 330,000–360,000 at the utmost.

  4. In Ile-de-France, the level of construction felt in recent years to less than 40,000 units a year, when the rather undebated estimate of new construction needs is about 70,000.

  5. At the beginning of twentieth century, the first belt of municipalities surrounding Paris inner city was a compound of working-class districts, generally managed by socialist councils. The red belt (ceinture rouge in French) refers to this entire group of municipalities.

  6. See also André (2010) for price-to-rent and price-to-income ratios in a comparative perspective.

  7. The rise in the labor price of housing is still more striking: One square meter of an average existing flat in Paris, which amounted to 350 h of minimal wage in 1984, and 590 in 1990, represented more than 850 h in September 2012.

  8. 1.5 % for new built units and 3 % of the existing stock.

  9. The proportion was exactly the opposite in the 1960s and 1970s.

  10. The existence of a positive correlation between prices and trading volumes has recently been assessed by Clayton et al. (2010) for 114 metropolitan statistical areas in the USA from 1990 to 2002. For the 1980s, see Katinka Hort (2000).

  11. This PTZ—Prêt à taux zéro (zero-interest loan)—replaced the former PAP (Prêt d’accession à la propriété) introduced in 1977, which became more and more costly for the state and risky for low-income households once the deflation process consolidated in the mid-1980s.

  12. Such as section 55 of SRU Act of December 2000, which enforces municipalities of more than 3,500 inhabitants to reach 20 % of social rental units in 2020 (now 25 % under the revision enacted in 2012). A recent report by the Chamber of public accounts (Cour des comptes (2012)) in charge of controlling public expanses and assessing the efficiency of public policies offers a critical assessment of the so-called politique de la ville.

  13. A total of 750 deprived neighborhoods were labelled as ZUS in 1996, on which the politique de la ville has been targeted, especially the Urban Renewal Program (PNRU) of 2004.

  14. Which excludes new supply by social landlords and self-construction (one-half of newly built dwellings).

  15. Which also partly explains the acceleration process after 2001 (see Assous et al. 2008).

  16. Les beaux quartiers is a novel by the French writer Louis Aragon.

  17. ADIL = Agences départementales d’information sur le logement.

  18. Of which a large proportion is directed towards the National Urban Renewal Program (PNRU).

  19. In this respect, the proportion of mortgagors is more important than the proportion of home owners: In Italy, for example, the latter is relatively high, but the former is relatively low.

  20. See also Van der Heijden et al. (2011) for a qualitative institutional analysis of housing market dynamics in Europe.

  21. For further comments and policy lessons, see Andrews et al. (2011). I.M.F. (2008) also insisted on the “changing housing cycles,” due to new trends in housing finance.

  22. This livret A is the most popular form of saving deposit. Deposits are guaranteed by the state, and interests paid are exempt from tax. The rate served on it determines the cost of long-run loans (30–50 years) for social landlords. The large volume of those off-market loans (representing 70–75 % of their construction costs) makes it possible for the state, who determines the number of loans allowed each year, to support social housing without disbursing direct subsidies. It also makes the social rental sector rather insensitive both to financial markets and to macroeconomic conditions, and thus countercyclical.

  23. HLM = Habitation à loyer modéré (moderate rent housing).

  24. Which is on the political agenda not only for the Ministry of housing, but for the Treasury as well (see Ministère de l’Economie et des Finances 2012).

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Authors and Affiliations

  1. Faculté de Sciences Economiques et Gestion, Université de Paris Est Créteil, 61 Avenue du Général de Gaulle, 94010, Créteil Cedex, France

    Christian Tutin

  2. ANIL/Agence nationale pour l’information sur le logement, Paris, France

    Bernard Vorms

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  1. Christian Tutin
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Correspondence to Christian Tutin.

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Tutin, C., Vorms, B. French housing markets after the subprime crisis: from exuberance to resilience. J Hous and the Built Environ 29, 277–298 (2014). https://doi.org/10.1007/s10901-013-9388-8

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