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What (Really) Causes France’s Housing Shortage?

Screenshot of the search page for AirBnB in France

When Airbnb first came onto the market, we rental agencies got upset because the competition was clearly serious. Our company was managing about 35 short-term rental properties at the time, but it no longer provides this service—not because of Airbnb, but because of the city’s rental laws that followed suit.

Airbnb became so popular as a way of connecting the tenant with the landlord directly, eliminating the middle man (us), that the term “Airbnb” quickly became generic for all short-term rentals, just as “Kleenex” is the term used for tissue. As a result of its popularity, too, most people don’t understand that Airbnb is nothing more than a well-designed online platform that makes this direct connection, saving time and money…but note that there are downsides for both parties by not using a professional management agency (that’s another conversation for another time!).

An Airbnb offering in Bretagne

An Airbnb offering in Bretagne

Meanwhile, Airbnb gets a bad rep for providing something the market needed and wanted—hence its popularity. As we (collectively) have become more global, as we have discovered that we can work from anywhere and that travel is easy and still relatively inexpensive, we no longer want to live permanently in one place. We can have our cake and eat it, too, as long as we have a portable device and a suitcase or backpack. So, if it weren’t Airbnb, it would be something else, and a “rose by any other name would smell as sweet.”

Just this past week, Nice Presse published an article claiming that Airbnb rentals are driving up real estate prices.

And we question: Is that a bad thing? And why or how are they blaming Airbnb (aka short-term rentals)?

The article says that by cross-referencing the figures for some fifty cities in France, some medium-sized towns have as many or even more online ads for “Airbnb” rentals as Paris (which is the worst example of this)!

Graphic showing the statistics for Airbnb in France

Okay, so we see its popularity is increasing. But we are not surprised, are we?

The author of the article believes that the immediate consequence is an explosion in property prices; that this has been true for years, and that the situation is getting worse: housing has never been so hard to come by, for middle-class households and even for executives.

So, they are making a direct connection between Airbnb’s popularity and their housing shortages. Again, I question if this is the truth or if they are just looking for an easy scapegoat.

Screenshot of Airbnb listings

According to the Economic Policy Institute, the economic costs Airbnb imposes likely outweigh the benefits. And it admits that “evidence suggests that the presence of Airbnb raises local housing costs.”

On the other hand, “the key potential benefit is that property owners can diversify the potential streams of revenue they generate from owning homes.” And further on, the article claims that “Airbnb is the extra economic activity that might result if the rise of Airbnb spurs an increase in visitors to a city or town.”

So, in other words, there are two sides to this equation, yet only one side is being considered. And while we’ve become more global, our thinking is becoming more tribal (narrow).

The real reason there’s a housing shortage in France doesn’t have anything to do with short-term rentals and everything to do with the slowdown in building new homes. According to a recent article by The Local, home-building in France has plummeted to its lowest levels since 2010, contributing to what industry experts are now referring to as the “housing crisis.” Prospective buyers are also grappling with exorbitantly expensive mortgages, further exacerbating the situation. Several French publications, including Franceinfo and Les Echos, have already labeled it a “real estate crisis.”

Graph showing the rising costs of housing in France

So, why isn’t the press blaming this? Again, it’s a question of who is the scapegoat. It’s easier for the government to point fingers at their citizens, rather than accept responsibility themselves.

The article goes on to explain that the slowdown in new home construction can be attributed to three primary factors: Firstly, there has been a decrease of 11.5 percent in the issuance of new building permits over the past year. The article explains why that is, including why some mayors argue that the decreasing link between tax revenues and the arrival of new residents, who generate new expenses for the municipality, has reduced the incentive for building. Additionally, tougher environmental regulations have impacted construction. As of May 16th, reservations for new building projects with real estate developers in France have dropped below 20,000, marking the lowest level since 2010, according to France’s Ministry of Ecological Transition.

And then there are rising costs. Inflation has affected various aspects of life, including building materials, which have been significantly impacted. The supply chain for building materials experienced disruptions during the pandemic, and the Russian invasion of Ukraine further affected the cost of certain raw materials. Consequently, many individuals across France are choosing to postpone their building projects, while developers face greater challenges due to soaring costs. For example, the cost of building a house in Talmont-Saint-Hilaire, Vendée, increased from €135,000 in January 2022 to €165,000 in January 2023, based on an equivalent surface area. The cost of installing toilets rose by 25 percent over the past two years, and floor and wall tiles increased by at least 25 percent.

Graph showing the rise of short-term housing

Environmental rules have made an impact, as well. Some members of the construction sector have pointed out that stricter environmental regulations, such as the “RE 2020” introduced at the beginning of 2022, have also contributed to higher construction costs. The RE 2020 introduced new limits on CO2 emissions and energy consumption, taking into account the building’s lifetime from construction onward. According to a French government study, the application of the RE 2020 alone would increase construction costs by 3.4 percent for single-family homes. However, these new regulations would enhance energy efficiency and lead to annual savings of up to €200, as the real estate site Bati-Web stated.

Add to all of it that obtaining a mortgage has become increasingly challenging due to soaring interest rates and what you have is a serious slowdown in new builds and purchases.

I’m sick and tired of the administrations’ constant harping on short-term rental owners as the evil money-grubbing population, while they can’t take responsibility for their own shortcomings. We can’t stop the rise in popularity of Airbnb just like we can’t stop the need for transient housing.

Sure, the cities should get their fair share of the taxes—no one can argue that point, but I’d much prefer to see the profits in the hands of the citizen homeowners rather than the big hotel chains and other developers who are creating “Apart Hotels” (doesn’t that eat up housing, too?). As long as they blame Airbnb, that’s exactly what the authorities are doing—taking the profits away from the individual investors and putting them in the pockets of the big corporations. For some reason, they aren’t grasping this reality.

I have solutions to this growing problem…but they don’t consult me!

A la prochaine…

Adrian Leeds on an episode of house hunters internationalAdrian Leeds
The Adrian Leeds Group®

Meme for the Adrian Leeds Group long-term rental search servicesP.S. We are no longer in the business of short-term rentals, but we are very active in finding long-term rentals for those who wish to be in France as much time as they would like. Keep in mind that every one-year furnished apartment rental in France guarantees a cancellation policy of one month, so in reality, one month is your only real commitment. For more information about out service, visit our website.

P.P.S. Louise Prichard of Loulabelle’s FrancoFiles podcasts has just released our wonderful chat from a couple of weeks ago. Here’s the direct link to listen to it. The post on her website can be found here.

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2 Comments

  1. Deb Meunier on June 7, 2023 at 9:03 am

    Adrian, thank you for a clear headed and more thorough view of the current housing situation in France. Of course, there are similarities with the market in the U.S. and other countries I am sure. As someone who relies on real estate investments to generate income (I am an artist so…) I am tired of being blamed for rising costs. I came very close to buying a property in France last year but was scared away by the possibility that I might not be able to rent it out when I was back in the U.S. I am following the RE market closely and hope that government officials in France and elsewhere take a holistic approach to increasing the availability of housing including aiding supply chain issues, providing incentives or price breaks for those complying with new environmental standards, etc. as inducements to take the pressure off tight housing markets and then loosening of credit and reduction of interest rates. The pandemic may be something that most people are anxious to leave behind but its continued effect on the economy can’t be ignored or blamed on one small part of the sector.

  2. Mary Barone on June 7, 2023 at 9:20 am

    The original AirBnB concept was a great one – connect homeowners with folks who want to use the house or a room in the house for a relatively short period of time. But as we all know, that’s not how it played out – there are neighborhoods in Houston where
    investors extensively purchase properties for the exclusive purpose of short-term rentals and, too often, these rentals are not to families trying to mitigate the cost of travel, but to weekend party-goers whose over-the-top behavior damages the area’s general quality of life. There are articles, as well, about owners evicting all the residents in apartment buildings to convert them to more lucrative short-term rentals. These are terrible trends made worse by the fact that these owners largely elude safety regulations and taxes. (A friend once rented a glorified tent in someone’s back yard, powered by an extension cord.) And for the residents in apt buildings where other apts are being rented short-term, it’s problematic – unvetted folks wandering through the building, often noisy, ignorant of local customs, not contributing to the daily lives of those of us who are living there. The owners are nowhere to be seen, and the residents bear the brunt. The idea is certainly popular among enough people that it appears we are all on board, but I’m not sure that’s the case. Your point that there are multiple factors in rising prices is a sound one, but short-term rentals are certainly one of the reasons. Inflation is out of the control of local authorities and environmental priorities in developing in land are essential. Genuine AirBnB still has a place, in my view. Less so, corporate buyouts of residential properties to rent short-term for maximum profit.

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