France to Cut Costly Housing Support

The French government on Wednesday announced cuts to a housing allowance scheme enjoyed by 10% of the population and promised to free up social housing for the most needy as it seeks to rein in public spending.

In the latest and increasingly unpopular reform from President Emmanuel Macron, the government unveiled measures to reduce the €40 billion ($48 billion) it spends on housing support annually but which have failed to fix a housing shortage. It promised rent cuts to soften the blow, Reuters reported.

Government ministers say the housing allowance known as APL, which cost the treasury  €18 billion last year, has inflated rents because many landlords set rent based on the housing allowance.

“The problem today isn’t the APL, it’s the high level of rents,” Julien Denormandie, the junior minister in charge of housing, told a news briefing. “If you reduce rents you automatically reduce APL allowances.”

Denormandie confirmed the government would trim housing allowances by  €5 a month from Oct. 1 but stopped short of announcing future cuts, which French media have reported will be in the region of  €50-60 a month.

APL contributions will now be calculated based on a household’s actual income, not its income two years previous—a measure the government hopes will save  €1 billion a year.

The French have long enjoyed generous housing benefits. Under the existing rules, one in 10 of France’s 65 million people is entitled to housing allowance.

Further reductions are likely to deepen public anger towards Macron, whose popularity has plunged in his first few months in office, primarily due to modernization efforts.

These include the overhaul of the labor code and the proposed revamp of the employment insurance and pension systems.