France to cut red tape, extend easy loans to fight housing crisis

Wed Jun 25, 2014 11:36am EDT

* Govt to revive interest-free loan scheme for first-time buyers

* Fifty construction regulations to be eased

* Construction slump weighing on GDP growth

By Leigh Thomas

PARIS, June 25 (Reuters) - The French government promised on Wednesday to slash red tape holding back housing investment and to ease conditions for interest-free loans to halt a home building slump that is choking growth in the euro zone's second-biggest economy.

Despite a chronic housing shortage, new home construction has fallen to lows not seen in more than 15 years, with bureaucracy putting off developers and high prices discouraging would-be buyers.

Prime Minister Manuel Valls said the government planned 50 measures to simplify building regulations, offer tax breaks for landlords who accept rent limits and ease conditions for obtaining zero-interest loans.

"The market is depressed. There were 330,000 housing starts in 2013 when 500,000 were needed," Valls told Le Parisien newspaper. "We need to act, and act quickly."

The top priority is to continue offering interest-free loan plans for first-time buyers with low incomes, which are currently due to be halted at the end of the year.

The government aims to increase the number of buyers with access to such loans, which are provided by banks in parallel to traditional mortgages, from 45,000 currently to 70,000-80,000.

Access would be widened by increasing the eligible income limit for borrowers. Terms would be extended starting as soon as October for some loans, Housing Minister Sylvie Pinel told journalists.

Requirements for new apartment buildings to have bike storage and parking spaces will also be eased. Property developers say such amenities push up the prices of apartments, making them unaffordable for many buyers.

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Housing investment graphic: link.reuters.com/jah69v

House price graphic: link.reuters.com/tyx36t

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HOUSING CRISIS

Pinel said the Socialist government would also pursue plans for rent limits in particularly tight local markets under a new law that some say may deter investors from putting money into housing.

The French property developers federation welcomed plans to extend tax breaks for landlords who cap rent rises, its president Francois Payelle said, describing the package as broadly a step in the right direction.

"There are some concrete things here," he told Reuters. But he said more needed be done to free up potential building plots in the private sector in addition to government plans to sell off more public land.

Analysts at Societe Generale said the new measures could affect business for property developers like Kaufman & Broad , Maisons France Confort and Nexity.

The home construction slump has become a major headache not only for a growing number of inadequately housed voters but also for President Francois Hollande, haunted by a campaign promise to build 500,000 new homes per year.

The situation has only worsened since he came to office in May 2012. Housing starts fell in May to the lowest level since 1998 while confidence in the construction sector has reached lows not seen since 1997, according to official figures.

The slump is increasingly becoming a drag on France's overall economic activity and could prevent growth from attaining the government's target of 1.0 percent this year.

Weighing on overall growth, household investment is set to slump 6.7 percent this year, the sharpest drop since the dark days of the global financial crisis in 2009, the statistics agency INSEE forecast on Tuesday. (Editing by Hugh Lawson)

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