World Economy

France to Trim Housing Allowances

Rents are too high and have been rising for 40 years.Rents are too high and have been rising for 40 years.

The French government aims to rein in its massive spending on housing allowances while softening the blow for beneficiaries with rent cuts, an official said in a newspaper interview published on Sunday.

Such allowances cost €19 billion ($23 billion) annually, making up the bulk of the €30 billion France spends on various housing support schemes, Reuters reported.

“The problem is not the allowances, it’s that rents are too high and have been rising for 40 years,” the State Secretary for Housing Julien Denormandie told Le Journal du Dimanche newspaper.

“We are therefore going to reform things fairly and justly: rents will come down at the same time as allowance amounts,” he said in the interview, outlining plans to be presented on Wednesday.

Along with transport and subsidized job schemes, public spending on housing is one of the three priority areas for President Emmanuel Macron’s plans to cut state spending next year by €10 billion.

Macron last Wednesday said that more cuts to popular housing benefits for households could be on the cards as part of a wider reform of France’s costly housing policy and a drive to cut public spending.

In order to lower rents, Denormandie said the semi-public bodies that manage social housing would be asked to reduce their rents, which they could absorb by borrowing over longer periods.

Budget Minister Gerald Darmanin told France 3 television that some landlords set rents based on how much a tenant received in housing allowances, leading to rent inflation.

While the government had means to lean on public housing, he said in the private sector housing landlords should feel compelled to “contribute to the struggle against the housing crisis”.

Any reduction in housing allowances, which are enjoyed by 6.5 million people, is likely to be a political hot potato for the government.

It faced a political storm in July when it decided to go ahead with a five-euro per month reduction in housing allowances, which had been budgeted by the previous government.

Despite its huge cost, the current housing support system has done little to ease a major housing shortage in many French cities.

Denormandie said that construction regulations would be eased to free up currently scarce building plots, a move long called for by developers.

He said that plans to base allowances on a person’s current revenues, rather than on what the person earned two years ago as is currently the case, could also save €1 billion.

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