Real estate: “You have to reform social housing to delete France”

Free tribune

The transfer by the state of social housing would allow a significant decrease in the public debt of France, argues Alain Lemasson (Centrale – INSEAD, ex -vice president of CNH Capital), columnist for capital.

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The French model of social housing is based on the state by the state of a set of urban housing rented at low prices at low -resources households. Several hundred billion euros are immobilized, with a minimal return on investment. The transfer by the state of these assets would allow a significant decrease in France’s public debt. We could thus design to transfer to current tenants the ownership of social housing through specific credits. The State would no longer be the financier of social housing, but the simple guarantee of the credits made.

The value of the HLM housing fleet should not be established from market prices, under penalty of imposing on future owners of the higher periods of current rents. The calculation must be carried out in the opposite way, by seeking to what amount funded corresponds to a credit whose reimbursement monthly payment is equal to the current monthly rent.

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 dwellings, 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 hypothesis of banking credits lasting 25 years at the rate of 4%, a level all the more attractive as the banks would not support the risk of non-payment.

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A reduction in debt of this importance, and especially without conceivable political obstacle, certainly justifies the commitment of such a reform. But there is even better. If the conditions for granting credits by banks can be made attractive, it nevertheless arises for them the problem of refinancing. The immediate solution possible in this regard would be the use of the market. Placement vehicles would be built and offered to savers, allowing banks to keep a sufficient margin and above all without weighing down their balance sheet. These guaranteed financial products would benefit from the best rating of specialized agencies due to the government guarantee.

The subprime credits scheme

We recognize here the housing assistance mechanism launched in the United States in 1938, initially funded by the State, then relayed by the markets. This mechanism had taken a legal existence in 1977, the expression “subprime credits” being formalized a few years later. The new system was managed by the state agency Fannie Mae, and supported on a rigorous legal and state system. But 30 years later – from 2006-2007 – This system escaped control of its supervisory authority, the Ministry of Housing, with the consequences that we know.

Business banks and funds had mixed the subprime titles sold at all costs by Fannie MAE with various titles to create attractive obligations. The explicit but late announcement of the US non-winning state of subprime titles caused the 2008 shock by the immediate degradation of the rating of these obligations sold worldwide. You should know that the necessary corrections have been carried out, and that the social policy of housing resumed its course in the United States, the mode of operation and control of Fannie MAE – having notably been the subject of a deep reshuffle. It would be incidentally useful for teaching programs to seize a very rich educational subject, because the study of the “subprime credits chain” allows the situation of deemed opaque financial techniques, thus facilitating their assimilation.