What (Really) Causes France’s Housing Shortage?

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

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)!

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.

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.”

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.

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…