As the first reading of the ELAN housing bill comes to an end in the French National Assembly, it is clear that France needs a third pillar to give the middle classes a better chance of finding good, quality housing at a reasonable price in disadvantaged areas. Standing alongside social housing and individual private ownership, this pillar is institutional investment and, in particular, residential property companies.
To house the middle classes, France's major cities need residential companies
This 'third pillar' was being used up until the 1990s. In France, about 1m homes were managed by institutional investors until that time. Unfortunately this figure has been reduced to less than 100,000 today as a result of an unreasonable rejigging of rights and duties between tenants and landlords, and a distinct lack of interest on the part of public authorities.
Yet I have seen grounds for hope in both the West and the East. 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 therefore created to do just that.
I made this decision for three reasons: the emergence of the new economy of usage, the residential platform and because of environmental considerations.
From the dream of Desperate Housewives to that of central location
What are we seeing today in the property sector? First, the rise of the economy of different kinds of use: many households opt to rent in order to have flexibility, and for freedom from the worries related to ownership. These households want to be mobile and to be free to give several locations a try according to their needs as well as their age. They do not wish to be locked into a single residential choice forever.
Of course a tenant may choose to become the owner of their principal residence over time. But we also see owners, especially seniors, who sell their properties and become tenants again in order to get closer to city centres with their high-level services and transportation options.
The need for centrality thus gives rental property a value that it had perhaps lost a little when the Desperate Housewives dream was shared by a whole generation: a house in the suburbs, a beautiful car, at least one hour of commuting in each direction.
Today's middle classes want quality of life - with services, leisure facilities and reasonable commuting times. They want to live in central locations. And by the way, in Paris, the objective of the Grand Paris Express transport network is to respond to this demand for centrality among the middle classes, with a housing supply located within 20 or 30 minutes by public transport of their work, leisure activities, shopping, etc.
The smart home: a balance between well-being and platformisation
In the meantime, with the arrival of new services, our homes are now on the verge of a real revolution. These are not gadgets, these are services that meet the needs of households: better quality housing, better food, better heating, the advantage of access to more help in everyday life, formation of neighbourhood communities for mutual assistance, more sharing with those in the same building, and with the surrounding locality. These services will be delivered via technology, via apps and with the use of our smartphones. Many start-ups in France are already developing solutions with real business models, and in the future they will need real space where they can expand and create economies of scale. They will need housing stocks that are sufficiently large to allow their services to be installed economically.
Residential property companies can serve as such an accelerator because their corporate governance model allows them to do so: they have hands-on management for the housing they own.
Energy transition: A cost to be planned for
And finally, while many of us think about it, few talk about it: the energy transition that will inevitably face our society will be both costly and technically complex. For this challenge, housing property companies provide a technical and financial resource capacity that is by definition superior to private co-owned properties which will have great difficulty implementing all the regulatory obligations that will be needed for our energy transition. Residential rental housing managed by housing firms can serve as both an example and can "lead the charge" in terms of implementation, to borrow a metaphor from the President of the Republic.
Let us free up housing supply, and let's simplify it
In a globalised world, urbanisation is an inevitable consequence of the race toward centrality. Centres attract talent, jobs and business. 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 free up housing supply, and let's of course simplify it. Let us start once again to imagine, steadily but surely, how residential property companies, both French and foreign, might be given a chance in our nation to provide our middle classes with hope for the future.