June 15, 2018

Housing : a third resource remains available

By Meka Brunel, CEO.

As the first reading of the ELAN housing bill comes to an end in the French National Assembly, I would like to share with you this conviction: to give the middle classes a better chance of finding good, quality housing at a reasonable price in disadvantaged areas, France needs a third lung, alongside social housing and private ownership. This resource is that of institutional investors, and in particular residential property companies.

(Source : Anthony Delanoix, Unsplash)

To house the middle classes, France's major cities need residential land

Until the 1990s, this resource was being exploited. In France, there were about one million homes managed by institutional investors. An unreasonable balance of rights and duties between tenants and landlords, and a certain lack of interest on the part of public authorities, has reduced this figure to less than 100,000 today.

Yet in both the West and the East, I have seen grounds for hope. In my previous professional capacities at Ivanhoe Cambridge, I was able to observe the ability of major investors to rally around residential rental projects in the United States and the United Kingdom. In continental Europe, too, I have followed the success of Vonovia in Germany, which is – with 350,000 homes and a high level of productivity and services – a particularly successful example of a large residential property company. So, when I took over the general management of Gecina at the beginning of 2017, one of the first initiatives I launched was to reinstate a genuine strategy for our residential activity, which includes dedicated operational management. A business unit was thus created.

The Economy of Use: from the dream of "Desperate Housewives" to the dream of being centrally located

What are we seeing today? First, the rise of the economy of uses in the property sector: many households opt to rent for its flexibility, and for its freedom from the worries related to ownership. These households want to be mobile, and to be free to give several places a try according to their needs, as well as their age.

Of course, a tenant may become the owner of their main residence, but we also see owners, especially seniors, who sell their properties and become tenants again to get closer to city centres with their high-level services and transportation options.

Today's middle classes want a quality of life with services, leisure facilities and reasonable commuting times. They want to be centrally located. By the way, when it comes to the Grand Paris Express transport network, the aim is to respond to this demand for centrality (in a plural sense) among the middle classes, with a housing offer that is within 20 or 30 minutes by public transport of their work, leisure activities, shopping, etc.

The Smart Home: Balance between the well-being economy and platformisation

In the meantime, our homes are on the verge of a real revolution with the arrival of new services. Not gadgets. No, these are services that meet the needs of households: better housing, better food, better heating, more help and support in everyday life, forming neighbourhood communities for mutual help, sharing more with those in the same building, with the surrounding locality. These services will be delivered via technology, via applications and the use of our smartphones. Many start-ups in France are already developing solutions with real business models. In the future, they will need real space where they can expand and create economies of scale. They will need residential developments that are sufficiently large.

Energy Transition: A cost to be planned for

Finally, while many of us think it, few will say it: the energy transition will be both costly and technically complex. Residential property companies provide a technical and financial resource capacity that is by definition superior to private, co-owned properties, which will have great difficulty in implementing all the regulatory obligations related to the energy transition. Residential rental housing managed by housing companies can serve as both an example and can "lead the climb" in terms of implementation, to borrow a metaphor from the French President.

In a globalised world, growing urbanisation is an inevitable consequence of the race toward centrality. Centres attract talent, jobs and businesses. They are by their very nature difficult areas where housing is concerned.

So, let us pursue the government's reasoning to its logical conclusion: let us unleash supply, and of course facilitate it. Then, let us start once again to think, steadily but surely, about how French and foreign residential property companies might give our middle classes hope for the future. 


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