Does housing wealth contribute to wealth inequality?

par Guillaume Allègre and Xavier Timbeau

In a response to Capital in the twenty-first century, Odran Bonnet, Pierre-Henri Bono, Guillaume Chapelle and Etienne Wasmer (2014) attempt to show that the conclusion of the book in terms of the explosion of wealth inequality is not plausible. They point out what they see as an inconsistency in the thesis: according to the authors, the capital accumulation model used by Piketty is a model of accumulation of productive capital, which is inconsistent with the choice to use housing market prices to measure housing capital. To correctly measure housing capital, one should use rent and not housing prices. By doing this, the authors conclude that capital/income ratios have remained stable in France, Britain, the United States and Canada, which contradicts the thesis of Piketty. Continue reading “Does housing wealth contribute to wealth inequality?”

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Rental housing: the CAE wants to change the ALUR …

By Pierre Madec and Henri Sterdyniak

On October 24th, the French Economic Analysis Council (the CAE) published a paper proposing a new policy on rental housing in France. This paper calls into question a number of government measures in the ALUR bill currently under discussion in Parliament, such as rent control and the universal rent guarantee (the GUL) [1]. Are these criticisms justified? The authors acknowledge that the housing market is very specific, that it requires regulation, and that the state needs to build social housing and assist poor families with housing. Their differences with the policy that the current government intends to follow are thus intrinsically limited, and are more related to means than ends. The free market does not work in the area of housing. There is a need for public intervention that should aim, as we shall see, at contradictory objectives, programmes whose structure is by their very nature subject to discussion. Continue reading “Rental housing: the CAE wants to change the ALUR …”

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Rent control: will the ALUR law be sufficient?

By Sabine Le Bayon, Pierre Madec and Christine Rifflart

On 10 September 2013, Parliament began discussing the bill on “Access to housing and urban renovation [“Accès au Logement et un Urbanisme Rénové” – ALUR]. This legislation will result in stepped-up state intervention in the private rental market and complements the government decree that took effect in summer 2012 on rent control in high-pressure areas. This was an initial step in the government’s effort to curb the increase in housing costs being faced by renters. [1] Continue reading “Rent control: will the ALUR law be sufficient?”

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Livret A accounts – drowning in criticism

By Pierre Madec

As the Governor of the Bank of France and the Minister of the Economy and Finance announced a further (probable) reduction in the interest rate on Livret A accounts for August 1st, the rating agency Standard&Poor’s (S&P) released a study of the French banking system. The U.S. agency argues that Livret A accounts, and regulated savings more generally, “penalize French banks” and are at the root of “distortions in the banking market”. This debate, which is hardly new, has been the subject of a number of reports: Duquesne, 2012; Camdessus, 2007; Noyer-Nasse, 2003, and more. Some ardently defend the peculiar French approach represented by Livret A, while others advocate, on the contrary, a deep-going reform of a system they describe as “lose-lose”. Continue reading “Livret A accounts – drowning in criticism”

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Roofs or ceilings?

by Philippe Weil

The bill to promote access to housing and urban renovation provides for regulating rents “mainly in urban areas where there is a strong imbalance between housing supply and demand and where rents have experienced the steepest increase in recent years”. Rents that exceed the median rent, set by neighbourhood and housing type, by more than 20% “will be targeted for a reduction”. The purpose of the cap is of course laudable, as it is “designed to combat the housing crisis, which for many years has been characterized by a sharp increase in prices, housing shortages and a decline in consumer purchasing power”. The road to hell is, alas, paved with good intentions, as today’s ceilings often destroy tomorrow’s roofs Continue reading “Roofs or ceilings?”

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