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Thursday
Nov012012

Desperate French Government Threatens To “Requisition” Vacant Buildings

Prime Minister Jean-Marc Ayrault made it official: the government would requisition vacant buildings regardless of who owned them, including office buildings. It would then convert them to apartments and make them available to the homeless and the “badly housed.”

As a first step, he asked for “an inventory of available buildings.” That list should be on his desk in “a few weeks,” he said. He was in a rush to identify these properties “so that we can undertake at least several operations in January and February 2013.” A desperate move to halt the collapse of his numbers. And another broadside at investors.

It’s getting tough for him and President François Hollande. As France sinks deeper into its economic mire, people are losing patience: those who still have confidence in Hollande plunged to 36%, the lowest level of any president six months after taking office (the data go back to 1981). He dropped to 31% among workers —a catastrophe for a Socialist—and to 21% among shop keepers, artisans, business owners, and CEOs [they’d already stirred up the pot: A Capitalist Revolt in Socialist France].

And Prime Minister Ayrault hit 34%. Among his predecessors, only Édith Cresson in 1991 and Alain Juppé in 1995 were lower. Both were sacked, Cresson 11 months into her term, and Juppé two years into his. Only 19% of the shop keepers, artisans, business owners, and CEOs had any confidence in him—despite his “gaffe” that he would be open to discussing the 35-hour workweek to bring down the cost of labor, which was followed by furious backpedaling from the entire Socialist power structure. Among workers, his confidence level dwindled to 29%. An untenable position. He should be polishing his resume.

Instead, he’d requisition buildings.

With his announcement, he backed Housing minister Cécile Duflot. She’d already pointed at the “seriousness of the situation” and declared—as the first major cold wave imposed additional risks on the homeless—that she’d study the possibility of requisitioning vacant buildings for the purpose of converting them into housing for the homeless and the “badly housed.”

To preempt the conservative opposition from having public conniptions, she dragged their former standard-bearer Jacques Chirac out of the closet. Back in 1995 when he was still mayor of Paris, he requisitioned, “as everyone remembers,” about 1,000 offices and apartments.

Requisitioning buildings and apartments is a tactic for all sides of the political spectrum. The law that authorized it was passed in 1945 to deal with the post-World War II housing crunch. And during the 1960s, over 100,000 requisition orders were issued.

Advocacy groups such as Jeudi Noir (Black Thursday) and Droit au Logement (Right to Housing) have been pressuring the government to do something about the “housing crisis.” To make a public point, they chose a famous symbol as backdrop for their press conference: 1a, Place des Vosges—a building of 1500 sq. meters (16,000 sq. ft.) that has been vacant since 1965.

I used to live not far from there and walked through the Place de Vosges a lot, always wondering why someone would allow such a valuable property to remain empty. At the time, it was visibly going to heck. Yet it’s in an awesome location, facing the garden in the middle of the square, with galleries and cafés on two sides, and no traffic—an immense luxury in Paris. Members of Jeudi Noir squatted that building for a year until they were removed in 2010, a highly mediatized affair.

Instead of doing his utmost to encourage private sector construction, Prime Minister Ayrault has jumped on the bandwagon of the squatters, sending shivers down the spines of those who invest in real estate development and construction. With perfect timing: just when France desperately needs that business to pick up speed—not only to create sorely needed housing units, but also to create jobs [Worse than the Infamous Lehman September: France’s Private Sector Gets Kicked off a Cliff].

Unemployment is over 10%, youth unemployment over 25%. In disadvantaged areas, such as a number of volatile suburbs, unemployment is far higher. For example, in Clichy-sous-Bois, an eastern suburb of Paris, unemployment is 22%, and youth unemployment is astronomical. The pressure in these areas is rising. They’ve blown up before. Jobs would relieve some of it. But requisitioning buildings and scaring investors won’t.

To counter ugly economic trends that started while Nicolas Sarkozy was still president, the government has re-unearthed the catchword “competitiveness”—entailing the cherished and untouchable 35-hour workweek, equally untouchable wages, and sky-high employer-paid payroll charges. An explosive mix. And it just blew up. Read.... Attack On France’s Sacred Cow.

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Reader Comments (7)

The poor quality of political leadership in Europe is getting quite worrisome.
November 1, 2012 | Unregistered CommenterKuldip Singh
Kuldip Singh - "worrisome" is a classic understatement.
November 1, 2012 | Registered CommenterWolf Richter
Basically what we see is the slow motion traincrash of the 'Continental European System' (aka Rheinlandisch, welfare state, social democratic and a few others).
Costs of entitlements is going up and considerably, while these are unfunded for and taxes should go down iso up to remain competitive. Add the necessary reversal of overborrowing in the government and private (consumer sector), effectively causing a considerable negative stimulus, you end up with a system that is simply completely unaffordable.

Starting from there. Europe's political classes still are of the opinion that the European people (or in fact people all ove the world) support massively 'solidarity' in general. This is simply completely wrong. They support mainly solidarity as it serves their purposes. They eg mainly like good free healthcare because it serves them and their families. That it serves also others is simply of secundary importance.
This is even worse as the financing of things has to be done from cutting somewhere else and not from growth like before. Europes lower and middle classes are simply scared for what the future will bring.

Effectively Europe now has to cut in solidarity the choice being: spread over the whole population or mainly over the people that have never really contributed to society. Main problem being how can a system based on solidarity work if you demand from especially the middle groups a huge contribution while the entitlements are meager at least. While at the same times taxes are that high that it is virtually impossible for 'normal' people to safe next to paying for all the (not really very) goodies. In an enviroment where there is basically no growth in real incomes. Impossible to do. (At the other side how you can keep people believing in the hogwash used to sell it when you kick certain people out). Made worse by the Eurocrisis (bad PR in general, bad PR for solidarity (as everybody will see it will cost alot of money) and simply will costs extra money (that isnot there, requiring cuts in local stuff).

Combined with a political system that brings people like Hollande (or Rutte in Holland) as CEO of a 1,2,3 Tn 'business'. They are simply highschool teachers (at least Barry would have been a prof at a top university) that never outgrow their original training/education.

Which gives us France. Much too late with measures and hardly any of the measures at this stage will work. All are based on the assumption that there is still more solidarity capacity left in their population. While there never was (otherwise they would not have to borrow heavily and stimulate the economy with that to 'hide' the failing of the system in the first place) and even less there is now.
Things most likely first have to go terribly wrong however to start moving into the right direction again.

Which brings us to French investments. The crap that is basically on their door now is clearly not priced in. prices are artificially high (by letting state or semi state institutions buy them at overinflated prices, local banks and pensionfunds for instance). But it is not buying time to solve things it it simply using it last resources to keep the living dead alive.

Which brings me to the point that as all sectors of the economy have become increasingly interconnected this way (keeping the turd nicely polished), a bang will be hard and affect all (there is simply too much rubbish under the surface that will come up in a long term structural crisis like this, if no proper measures are taken (and they are not)).
It really looks like a cliff they will be falling off. Hope they throw Hollande in when they are at the edge, but some way I doubt that (the system doesnot work that way). Hollande is probably the political equivalent of Schrodinger's cat. Directing his people on top of the cliff over the edge. While at the bottom of the cliff working hard to make the canyon even deeper.
November 2, 2012 | Unregistered CommenterRik
OK so you have "competitiveness" that drives down wages, coupled with "real estate development " that inflates housing values (why do it otherwise) and then you expect the homeless to be good little capitalists, work hard and buy a nice home. I see. That's got to work hasn't it?
I have another great idea. Get rid of the police and the judiciary. Save loads of dosh that way. Free individuals can then buy "Justice Insurance" (like health insurance). Essentially, if you are robbed or your wife is murdered you get a PRIVATE police force to apprehend the villain and a private judiciary to put him/her in a private slammer payed for by your Justice Insurance. Large areas of the country (Trenton NJ) are totally lawless of course with gibbets in the streets and corpses in the gutter, but, hey, it's a measure of our freedoms! If you want to go there you get a PRIVATE militia (Humvees, a tank, an armed detachment) on your "Justice Insurance". Tell Ron Paul, he's going to just love it.....Come to think of it Trenton is like that now, so you've got a head start
November 2, 2012 | Unregistered CommenterRoger Yates
Putting the people who you represent before corporate, financial interest is breath of fresh air.

To find people of a money oriented, personal wealth centred, disposition (I assume that would be a large proportion of folks reading economics news and comment such as this) spinning and slurring it to the negative is hardly surprising.

Time and again history shows us that long term economic progress comes to those who narrow the gap between the rich and poor. But, hey, it's much easier for the self-centred individual to profit from large chasms in society and high economic volatility so we see a set of society pushing for that instead out of self interest.
November 2, 2012 | Unregistered Commenternat
On this issue, it has to be understood that as for almost all this government does, it is a double whammy:
1. on the political opinion side, it is a way to satisfy the extreme left by taking a symbolic measure. It will be boasted as a very political measure to punish the rich, or otherwise insufficiently "patriotic" people refusing to rent. One has to understand that the recent modifications of eviction laws making it very difficult to recoup one's property before a year or two in court proceedings, the fact we're entering the legal "non-eviction" winter period that lasts over 4 months, the added costs of renting due to new environment laws and regulations are but a few of the reasons to explain this phenomenon.
2. on the reality side, most of the surface concerned is in fact the property of major insurance and financial institutions. They do not rent the goods simply because they cannot at current prices. That it would incur high renovation and upgrading costs and the ability to get local government (cities) to accept the modification of the real estate good's actual destination. All of which are long, costly and unsure. So in pure socialist cronyism the state will requisition these, renovate and pay rent to these banks and insurers, with a level of financial security the owners could not have dreamed of...
But all this has to be understood in respect to what the French state has become: a socialist and statist place where the nomenkatura buys its way to power through clientelistic vote puchasing. The push by several parties (including those in power) to impose the voting rights of immigrants (non EU citizens) in local elections is the last example of this. Of course there are people favourable to total freedom of circulation and those who believe in a world without nations or borders. But this isn't the real issue. Immigration is favoured by this government (as by all its predecessors for the last 30 years) to the tune of roughly 300k a year (but this figure is probably more realistically of the order of 500k, which is about 0.8% of the population). The newcomers are neither required to have means of existence, diplomas or any other prerequisites to enter the country. As a matter of fact, when they are declared illegal aliens, they are very rarely expelled. But if they are not required much of, they are on the other hand entitled to just about everything, included housing. By law. This is the "right to housing law".
Now how does this work? Well several new laws have been passed that impose much tighter regulation on new homes, especially concerning energy efficiency. New constructions have to meet energy consumption standards designed to be less than 25% of present levels. On the other hand, every local government (city, municipality etc) has a legal obligation to have at least 25% of all new construction (by residents numbers) to be devoted to collective programs designed to be let to lower income people. Now who decides who lives there? Well, the local authorities have a choice of operators, largely linked to political interests, which boosts even more their local cronyism and vote clientelism, but a significant proportion (20%?) of the applications will be directly filled by state services. These will work in order to resolve the most dramatic cases, namely people left out on the streets. No, no. I'm not talking about French people here. French people on the street are mainly men (and to a lesser degree women) "living" alone, and better parked in temporary shelters (from which they flee, hence their sad presence on the streets). No, I'm talking whole families or women with children (French law favours "family regroupment" so often women with children come first in order to secure a dwelling and rights). And who is more devoid of any means of survival than fresh immigrants from very poor countries? Because of the urgency, they are first on a priority list, getting ahead as they arrive of people with very low wages who have been waiting sometimes for more than ten years.
And everything is done in the same way.
Three more examples of this type of management:
1. Yearly fines (for not building your 25% quota) are levied in accordance, at such a cost as to make it prohibitive to even very rich municipalities. These fines are of course transferred to the municipalities with lower income levels in order to build more low income housing. But a regular tax scheme also exists to transfer "richesses" from the richer districts to lower income ones for the same purpose.
2. You may ask rightfully: but wait, after a while, all housing is low income housing, no? Well.. no. Because there is no law to kick out of these the people who no longer meet the initial selection criteria. And because there was such an abuse in some places of the buildings themselves, and such dereliction that the local managing companies could not repare or maintain properly the properties. So what did they do? Did they go after the people who destroyed these "common goods"? Of course not. They decided to sell at very very low prices the concerned properties to those living in them. Of course, by measure of equity, this was generalized to all low income properties or close to it. After all, it wasn't like the politicians or their dedicated electorate actually paid for this themselves. There were others to do so: the "rich", which often included low income people, but what the heck! Now this of course doesn't take into consideration the fact that it has been proven that large concentrations of these dwellings were not the best way to generate proper social integration (officially in terms of revenue, but in reality in terms of population). So governments also began building houses and 2 or 3 units buildings. And more and more (25% is a large percentage and after all it is government that give or not, the building permits) it has occurred that building a low income rent house for a specific family was just as efficient. It also became clear that integration was better achieved if the people concerned felt more... well integrated. So it became mandatory by law to ascertain that the new constructions (the 25%) should be as close as possible to city center and services, such as schools, banks and post offices.
3. By the way, this is of course a total fiasco. When arriving in France, most immigrants will have to live in shabby hotels, until they are no longer without status and are able to "enter the system". The fact that these hotels operate well below security, health and other hazards is well known, but the political operators do want to do anything lest the put these people on the street. So they pay for the rent (yes the state pays for this, or local governments) and at prohibitive prices of course, enableling "the system" to go on. And of course the people living in them do not want to be kicked out, since being there entitles them to be on the priority list of the state programms...
So to make a long story short, the most practical locations, a very low rent (actually zero for a good part, with the state housing aid program for the poor), the lowest energy bill, and the possibility to purchase it from the state at sometimes as low as 40 or 50% of the price. And meanwhile, French workers and engineers, shopowners and retirees see all this and pay for it and are labelled racists at the first hint of disagreement, on what is a social engineering nightmare.
Ah! Last but not least: illegal aliens who are granted free medical care, regardless of the nature of the procedure, are also entitled to non generic medication. In the meanwhile, law abiding tax paying French are not. Generic medication is mandatory under the regular social security status. Aside from state and local employees of course who have a special and more favorable status. Or railroad employees who even have their own medical doctors and programs, or electric and gas companies (utilities) who have their own derogatory system... And also, by the way, neither of which pay for their retirement themselves, but through the generosity of the state. The utilities even have a special tax levied directly on user bills to pay for the unfunded deficit of their retirement compensation plan...

So in fact, the real question is this: how much longer can this last?
November 2, 2012 | Unregistered Commentersimple citoyen
There is very little free space to build in Paris and it is already being built (the city's mayor is a socialist after all, and has been there since 2001, with little hope of the conservatives winning it back in 2014). When a property is put on the market the city often buys it to convert it to affordable housing. Rich foreign bankers and sheiks buying property drive prices through the roof, so that the middle class just cannot live in the city anymore. Something has to be done about it, and what this increase in requisitions means is that owners will get an incentive to rent instead of sitting on properties valued more and more each year. The conservatives were in power in France for the last 10 years, they didn't lose the election for nothing, you know.

An uncle of mine, who retired after a life of public service, low level administrative work (he has no diploma), had been able to buy a flat near the center of Paris (Bastille) in his 20's, like everyone with a job could at the time. Now it's worth a million euros ! The average salary being 1500€ a month, only someone with a far better job than he had can now buy it.
November 4, 2012 | Unregistered CommenterRonan

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