A solution between private and social housing to support construction

There's a glaring housing shortage in France, and although property prices have fallen back slightly over the past two years, the shortfall is by no means disappearing. The relative fall in prices can be explained by ..:

• a persistently poor economic climate that is stifling income growth and dragging down unemployment;
• a Duflot scheme that is not convincing;
• and by a rise in borrowing rates since May 2013 after an all-time low.

More than a million additional housing units are needed in France to meet the population's needs, which in reality are concentrated in around 15 major conurbations. Faced with this social emergency, the government has demonstrated its determination by announcing the construction of 500,000 new homes a year for five years, including 150,000 low-cost housing units.

Unfortunately, the results have fallen far short of our targets: fewer than 330,000 housing units are expected to be built this year, including only 90,000 low-cost housing units. The gamble was certainly not a foregone conclusion.

Historically, housing starts have not exceeded 400,000 units per year, except in 2005, 2006 and 2007, which were very favorable economic years. The figures for 2013 are nonetheless disappointing, and it's hard to imagine that the official target will be reached during the presidential five-year term.

The housing situation in France calls for new economic mechanisms to support the construction of both private and social housing. All ideas are welcome.

In this respect, social rental usufruct (ULS) is an innovative solution that complements the usual financing methods used for social housing. Its simple principle is based on the temporary dissociation of the bare ownership of a property, purchased by a private investor, and its usufruct, acquired by a social landlord.

The ULS, which therefore straddles private and social housing, has helped finance 5,000 additional social housing units since 2005, including 2,000 in 2013 alone.

In practical terms, ULS enables a private investor to acquire a new, ideally-located , luxuryapartment for just 60% of its value. In return, the property is leased to a social landlord for a minimum of 15 years. The latter rents the property to a household eligible for low-income housing, collects the rent and is responsible for its upkeep and renovation. In this way, ULS enables low-income households to be housed in quality apartments in areas where professional opportunities are greatest.

This enhances the social mix of attractive neighborhoods. At the end of the project, investors regain full ownership of their property. They can then live in it, rent it out at market price or resell it.

ULS is a relevant solution, both as a retirement savings product and as a residential construction solution, especially as it requires no public subsidy! The government, which is currently looking for ideas to boost housing starts in both the social and private housing segments, would do well to take a closer look at ULS as a complementary solution.

Read this article on the Meilleurtaux.com website