The other night, I went down a Parisian real estate rabbit hole on Twitter. And one of the things that kept coming up was this half joke: The biggest developer in Paris today is the mayor. The reason for this is that the city is targeting 40% of all homes to be public housing by 2035 (of which 30% will be social housing and 10% will be moderately affordable).
Supposedly this is to stem the steady outflow of people from the capital as a result of housing being too expensive. But it means that a lot of new public housing will need to be created. As of January 1, 2021, the official estimate was 260,563 "logements sociaux" in the capital, which translates into 22.4% of all principal residences.
To hit this 40% goal, the city is going to need to create somewhere around 140,000 new public housing dwellings between now and 2035. So how does it plan to do this? By being a developer, of course. A big part of the strategy seems to be to convert existing buildings (d'adapter l’existant). And to execute on this, the city is leveraging something known as "le droit de préemption."
The way it works is like a right of first refusal clause (ROFR), except that it's not something that was contractually negotiated between market participants, it's just the law. What it means is that if a property owner goes to sell their building and they receive an offer, the city has an automatic ROFR and can choose to buy the building at whatever that third party was willing to pay.
Over the last two years, the city has elected to do this 84 times and has spent over €1.1 billion, according to Business Immo. And since the beginning of this year, they've done it 9 times, spending about €67 million on the following properties:
For those of you who are visual learners like me, here's the first property on the list:
It's certainly ambitious.
But, for the most part, it does not create a lot of net new housing, even though the city is also aiming to buy office buildings, parking garages, and other non-residential buildings. APUR previously estimated that for every 1 unit of new public housing, 0.6 existing units are being demolished. So the most accurate way to think about this initiative is that it represents the socialization of Paris' housing stock into public hands.
This runs in contrast to what we've been talking about recently with cities like Minneapolis and Austin, who have instead added a lot of new market-rate housing in order to temper rents and increase affordability. Paris is reducing its stock of market-rate housing.
At the same time, the city also enacted new policy prohibiting homes that consume more than 450 kWh/m2 from being rented. This is intended to force landlords to renovate, but it will certainly have a further impact on supply, at least in the short term.
It's also worth noting that all of this is happening at a time when Paris' housing market is in broad decline (less transactions, higher days on market, lower prices, and so on). Like Toronto, it started around the middle of 2022. And it's something that Paris hadn't seen since the 2008 financial crisis.
Chart by CoStar via Business Immo; cover photo by Salomé Watel on Unsplash
Rental housing in France is both heavily regulated and supported through dedicated public funds. Here's a high-level overview of what that means (via this 2021 Brookings case study by Arthur Acolin):
Homeownership rates in France went from 35% in 1954 to 56% in 2001
As of 2018, 58% of French households own, 40% rent, and the remaining 2% supposedly get free housing from either their employer or a family member
Not surprisingly, younger households are most likely to rent (the figure is > 60% for people aged 18-29)
Household size seems to play a major factor in how likely people are to live in public housing
We have spoken before about how the average wait time for public housing in Hong Kong is now over 6 years. This is a problem for the quarter million people who are on this list, and so the city has decided to start building modular housing as a kind of stopgap:
The city has embarked on a $3.3 billion plan to build about 30,000 temporary apartments over the next five years, which Housing Secretary Winnie Ho has said is a “very important social project.” The aim of the program is to give people an option to move out of cramped quarters while waiting for public housing. Critics say it only shows the government’s inability to deliver enough permanent homes.
I think many would agree that "light public housing", which is what this is being called, is probably better than no public housing. But is this really the most effective move? According to some sources, this light varietal may actually cost more to build than their typical public housing.
So why even bother? Is it just speed? I'm not sure.
Also, it is interesting to note that even in a city as dense, built out, and in need of housing as Hong Kong, finding support for new development can be a challenge:
“We understand that Hong Kong needs land to build public housing for people in need, so we never objected until this time,” said Andy Ng, an accountant who bought an apartment in the Upper RiverBank project early last year. The government is squeezing thousands of people on a single plot of land without planning or consultation, he added. “The district simply can’t stomach so many people.”
The other night, I went down a Parisian real estate rabbit hole on Twitter. And one of the things that kept coming up was this half joke: The biggest developer in Paris today is the mayor. The reason for this is that the city is targeting 40% of all homes to be public housing by 2035 (of which 30% will be social housing and 10% will be moderately affordable).
Supposedly this is to stem the steady outflow of people from the capital as a result of housing being too expensive. But it means that a lot of new public housing will need to be created. As of January 1, 2021, the official estimate was 260,563 "logements sociaux" in the capital, which translates into 22.4% of all principal residences.
To hit this 40% goal, the city is going to need to create somewhere around 140,000 new public housing dwellings between now and 2035. So how does it plan to do this? By being a developer, of course. A big part of the strategy seems to be to convert existing buildings (d'adapter l’existant). And to execute on this, the city is leveraging something known as "le droit de préemption."
The way it works is like a right of first refusal clause (ROFR), except that it's not something that was contractually negotiated between market participants, it's just the law. What it means is that if a property owner goes to sell their building and they receive an offer, the city has an automatic ROFR and can choose to buy the building at whatever that third party was willing to pay.
Over the last two years, the city has elected to do this 84 times and has spent over €1.1 billion, according to Business Immo. And since the beginning of this year, they've done it 9 times, spending about €67 million on the following properties:
For those of you who are visual learners like me, here's the first property on the list:
It's certainly ambitious.
But, for the most part, it does not create a lot of net new housing, even though the city is also aiming to buy office buildings, parking garages, and other non-residential buildings. APUR previously estimated that for every 1 unit of new public housing, 0.6 existing units are being demolished. So the most accurate way to think about this initiative is that it represents the socialization of Paris' housing stock into public hands.
This runs in contrast to what we've been talking about recently with cities like Minneapolis and Austin, who have instead added a lot of new market-rate housing in order to temper rents and increase affordability. Paris is reducing its stock of market-rate housing.
At the same time, the city also enacted new policy prohibiting homes that consume more than 450 kWh/m2 from being rented. This is intended to force landlords to renovate, but it will certainly have a further impact on supply, at least in the short term.
It's also worth noting that all of this is happening at a time when Paris' housing market is in broad decline (less transactions, higher days on market, lower prices, and so on). Like Toronto, it started around the middle of 2022. And it's something that Paris hadn't seen since the 2008 financial crisis.
Chart by CoStar via Business Immo; cover photo by Salomé Watel on Unsplash
Rental housing in France is both heavily regulated and supported through dedicated public funds. Here's a high-level overview of what that means (via this 2021 Brookings case study by Arthur Acolin):
Homeownership rates in France went from 35% in 1954 to 56% in 2001
As of 2018, 58% of French households own, 40% rent, and the remaining 2% supposedly get free housing from either their employer or a family member
Not surprisingly, younger households are most likely to rent (the figure is > 60% for people aged 18-29)
Household size seems to play a major factor in how likely people are to live in public housing
We have spoken before about how the average wait time for public housing in Hong Kong is now over 6 years. This is a problem for the quarter million people who are on this list, and so the city has decided to start building modular housing as a kind of stopgap:
The city has embarked on a $3.3 billion plan to build about 30,000 temporary apartments over the next five years, which Housing Secretary Winnie Ho has said is a “very important social project.” The aim of the program is to give people an option to move out of cramped quarters while waiting for public housing. Critics say it only shows the government’s inability to deliver enough permanent homes.
I think many would agree that "light public housing", which is what this is being called, is probably better than no public housing. But is this really the most effective move? According to some sources, this light varietal may actually cost more to build than their typical public housing.
So why even bother? Is it just speed? I'm not sure.
Also, it is interesting to note that even in a city as dense, built out, and in need of housing as Hong Kong, finding support for new development can be a challenge:
“We understand that Hong Kong needs land to build public housing for people in need, so we never objected until this time,” said Andy Ng, an accountant who bought an apartment in the Upper RiverBank project early last year. The government is squeezing thousands of people on a single plot of land without planning or consultation, he added. “The district simply can’t stomach so many people.”
France has some 4.5 million public housing units and 17% of all households live in them (which represents about 43% of all renter households)
Within the unsubsidized rental market, 93.5% of households live in homes owned by individual investors (this is as of 2013) and only about 3.5% live in homes owned by institutional investors
This is pretty typical of Europe, where multi-family isn't an established real estate asset class like it is in North America; so for those of you who like to hate on individual condo investors, check out France
In the decade between 2010 and 2020, 28 metro regions in France adopted some form of rent control and, in a few markets, like Paris and Lille, there are also maximum rents that can be charged for specific housing types
If you're interested in rental housing, Brookings also has articles covering the US, Germany, Spain, Japan, and the UK. They can be found here.
France has some 4.5 million public housing units and 17% of all households live in them (which represents about 43% of all renter households)
Within the unsubsidized rental market, 93.5% of households live in homes owned by individual investors (this is as of 2013) and only about 3.5% live in homes owned by institutional investors
This is pretty typical of Europe, where multi-family isn't an established real estate asset class like it is in North America; so for those of you who like to hate on individual condo investors, check out France
In the decade between 2010 and 2020, 28 metro regions in France adopted some form of rent control and, in a few markets, like Paris and Lille, there are also maximum rents that can be charged for specific housing types
If you're interested in rental housing, Brookings also has articles covering the US, Germany, Spain, Japan, and the UK. They can be found here.
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