France: Housing capital must stop being seen as the wrong kind of capital

It is often claimed in France and elsewhere that there are two kinds of capital: The “wrong ” kind of capital, which is capital in housing that provides its owners with rents and does not contribute to growth; The “right ” kind of capital, which is capital in companies. In France, the application of this theory has led to a reduction in assistance for renters and home buyers (housing benefits, zero-interest loans) and to the introduction of a discriminatory tax on wealth that applies to real estate but not financial wealth. This view of housing capital as the wrong kind of capital is spurious : capital in housing generates GDP ( the servicing of housing ) and well-being, which is important - especially in a country with a large shortfall of adequate housing, where real estate prices are abnormally high as a result and where this view of housing capital as the wrong kind of capital has led to a fall in construction. What is true is that housing assistance policies must lead to construction and renovation and not merely to increases in house prices. Efforts should therefore focus on measures that lead to the construction of new housing in areas where needed, and not purchases of existing housing. Macroprudential policies also have a role to play in combating rises in real estate prices.