Hollande Unveils New Housing Plan

Image:www.flickr.com/photos/jmayrault

Image:www.flickr.com/photos/jmayrault

In a weak economy, France utilizes housing measures to alleviate financial pains. During a recent trip to Val-de-Marne, French President Francois Hollande announced that, starting in January 2014, the value-added tax for new social housing construction would be cut to 5 percent from the current 7 percent.

This action is an effort to remedy the chronic shortage of affordable homes in France. It is expected to create 45,000 new jobs and an additional 22,500 subsidized homes per year. According to Hollande, the plan also aims to simplify the regulations concerning construction, as their complexity has proven to be an obstacle to new projects in the past.

However, the plan does not come without costs. In return for the tax break, companies that manage public housing must build a total of 150,000 homes per year. The plan also cuts into the French government budget, as the measures cost a hefty 660 million euros, or $855 million. This presents a difficulty for the Hollande administration, as it is already struggling to manage the current budget deficit.

Hollande, however, hopes these measures will bolster the housing market, which has been floundering with the financial crisis. When the economy falters, housing is the first thing to suffer – in fact, construction on new housing has fallen 20 percent since last January. Additionally, in the last decade alone, housing shortages have driven real estate prices up by 95 percent in Paris and 70 percent in France.

The president’s “emergency plan” seems to be yielding some positive short-term effects. In response to Hollande’s plan, property company Nexity has seen its shares go up – Nexity’s shares are up nearly 13 percent this year.

Hollande can only hope that the plan will have a similar effect on the housing market as a whole.  He hopes to create a total of 500,000 homes total this year, including the 150,000 subsidized homes that he has asked of social housing companies.

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