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