The French model of social housing is based on state ownership of a set of urban housing units rented at low prices to low-income households. Several hundred billion euros are thus tied up, with a minimal return on investment. The sale by the State of these assets would allow a significant reduction in France's public debt. We could therefore conceive of transferring ownership of social housing to current tenants through specific credits. The State would no longer be the financier of social housing, but the simple guarantor of the credits granted.
The value of the HLM housing stock must not be established based on market prices, otherwise future owners will be subject to monthly payments higher than current rents. The calculation must be carried out in the opposite way, by looking for the financed amount corresponding to a credit whose monthly repayment payment is equal to the current monthly rent.
Social housing: soon a new priority criterion for obtaining HLM?
The State could recover more than 460 billion euros with social housing
According to figures from the federations concerned, the average HLM rent is 450 euros. Considering the current volume of 5.4 million housing units, a simple actuarial calculation shows that the amount likely to be recovered by the State would be greater than 460 billion. This amount is based on the assumption of bank loans with a duration of 25 years at a rate of 4%, a level all the more attractive as the banks would not bear the risk of non-payment.
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A debt reduction of this magnitude, and above all without any conceivable political obstacle, certainly justifies undertaking such a reform. But there's even better. If the conditions for granting credit by banks can be made attractive, the problem of refinancing nevertheless arises for them. The immediate possible solution in this regard would be recourse to the market. Investment vehicles would be built and offered to savers, allowing banks to keep a sufficient margin and, above all, without increasing their balance sheet. These guaranteed financial products would benefit from the best rating from specialized agencies due to the government guarantee.
Social housing: employees who go to work on foot or by bike will soon be given priority for obtaining HLM?
The subprime credit scheme
We recognize here the housing assistance mechanism launched in the United States in 1938, initially financed by the State, then relayed by the markets. This mechanism took legal existence in 1977, the expression “subprime loans” being formalized a few years later. The new system was managed by the state agency Fannie Mae, and supported by a rigorous legal and state system. But 30 years later – from 2006-2007 – this system escaped the control of its supervisory authority, the Ministry of Housing, with the consequences that we know.
Investment banks and funds had mixed the subprime securities sold wildly by Fannie Mae with other securities to create attractive bonds. The explicit but late announcement of the non-guarantee by the American State of subprime securities caused the shock of 2008 by the immediate downgrading of the rating of these bonds sold throughout the world. You should know that the necessary corrections have been made, and that social housing policy has resumed its course in the United States, the mode of operation and control of Fannie Mae – having notably been the subject of a profound overhaul. It would incidentally be useful for teaching programs to tackle a very rich subject on an educational level, because the study of the “subprime credit chain” allows financial techniques deemed to be opaque to be put into practice, thus facilitating their assimilation.
