The unaffordability of real estate

How many years of your salary would it take to buy a home? If you’re living in Paris, the answer is roughly 14 to 15 years of median household income. In London, 12 to 13. Sydney, 13.3. Even Berlin, long considered affordable by European standards, has climbed from 5 years in 2010 to 8 to 10 today. According to the Demographia International Housing Affordability report, these numbers keep getting worse.

I find it remarkable that we’ve collectively normalized something that, by any historical standard, is extraordinary. In 1997, the UK’s national price-to-income ratio was 3.5 years. By 2023, it was 8.3. What happened in between isn’t a mystery, but the scale of the disconnect, and the inadequacy of every attempted fix, is what I want to explore.

The great divergence

Prices versus wages: France in numbers

Let me start with France, because the data tells a particularly clean story, and it’s a story I am very close to.

Between 1996 and 2024, French house prices roughly tripled in nominal terms (+200%), according to INSEE and Notaires de France. The steepest climb came between 2000 and 2007, when prices doubled in just seven years. A slight dip during the 2008 crisis, then a steady rise of 25 to 30% between 2015 and 2022, before a recent correction of -5 to -8% driven by rising interest rates.

Paris is the extreme case. Average price per square meter went from €2,500 in 2000 to €10,500 at its 2020 peak, a fourfold increase in twenty years. Even after a 10 to 12% correction, it sits around €9,200 today.

Now compare that to wages. The median net salary for full-time private-sector workers went from roughly €1,500 per month in 2000 to €2,100 in 2023. That’s +40% nominal over 23 years. In real, inflation-adjusted terms? Only +10 to 15% in actual purchasing power.

So property prices nationally grew about 3.5 times faster than wages. In Paris, they grew 7 times faster. In 2000, one square meter in Paris cost about 1.7 months of median salary. In 2024: 4.4 months. Jacques Friggit’s famous chart at IGEDD shows the price-to-income ratio breaking out of its historical “tunnel” after 2000 and simply never returning.

It’s not just Paris

What strikes me about the 2015 to 2022 period is that secondary cities outpaced Paris in price growth. Nantes surged by +55 to 65%. Bordeaux, boosted by the “TGV effect” after the high-speed line opened in 2017, climbed +50 to 60%. Rennes followed at +50 to 55%, Lyon at +45 to 55%. Even Marseille, long seen as an affordable outlier, rose +30 to 40% as a late catch-up city.

The result is a country where housing costs have spiraled in every major metropolitan area, not just the capital.

The rate shock that should have reset everything

Here’s the question I find most revealing: if borrowing capacity collapsed after 2022, why didn’t prices follow?

The numbers are stark. According to the Observatoire Crédit Logement, the average 20-year fixed mortgage rate in France went from 1.05% in January 2022 to 4.1% in January 2024. For a household earning €50,000 gross per year, under the HCSF’s 35% debt-to-income rules, that translates to borrowing capacity dropping from €295,000 to €195,000, a loss of €100,000, or 34%.

Housing loans granted in France plummeted from roughly 1.1 million in 2021 to 550,000 in 2023, the sharpest credit contraction since 2008.

With the same monthly payment of €1,000 over 20 years, a buyer could borrow about €214,000 at 1.20% but only €175,500 at 3.25%. That’s an 18% drop in purchasing power, purely from rates. Yet between late 2020 and late 2025, nominal prices actually went up by 8%. After accounting for 16% cumulative inflation, real prices fell about 7%, roughly half of what a pure purchasing-power model would predict.

So where did the other half go? The market found every mechanism it could to avoid repricing. Average loan durations stretched from 230 to 252 months. Nominal income growth of 3 to 4% per year partially offset rate increases. And most critically, volume collapsed instead of prices: transactions dropped from 1.2 million per year to 780,000. Sellers held their asking prices; buyers simply left the market.

The adjustment happened through liquidity, not valuation. The result is a market that’s technically cheaper in real terms but no more accessible to first-time buyers, because the monthly payment math hasn’t fundamentally changed.

The generational fracture

Ownership is diverging by age

This is perhaps the most troubling dimension. In France, 27% of 25 to 34 year-olds owned their home in 2020, down from 34% in 2002 and 33% in 1973. Over the same period, ownership among 55 to 64 year-olds rose from 56% to 72%, and among over-65s from 55% to 75%.

The UK tells an even more dramatic story. In 1990, 67% of 25 to 34 year-olds owned their home. By 2023: 29%.

Young people aren’t choosing to rent. They’re being priced out, and the gap is accelerating.

The Bank of Mum and Dad

When earned income can’t bridge the affordability gap, family wealth steps in. In France, roughly 40% of first-time buyers under 35 received financial help from their family in 2023, with average gifts of €30,000 to €50,000. In the UK, the “Bank of Mum and Dad” lends about £9.4 billion per year, which would make it the 10th largest mortgage lender if it were a bank, according to Legal & General. In Australia, 60% of first-time buyers under 35 received parental help.

What concerns me about this isn’t the generosity. It’s the implication. If you need family wealth to buy property, then homeownership increasingly depends on who your parents are, not what you earn. As Thomas Piketty documented in Capital in the 21st Century, total annual inheritance and gift flows in France have risen to roughly 15% of national income, up from about 5% in the 1970s. We are drifting back toward a wealth structure that looks more 19th century than 20th.

The rental trap

Meanwhile, renting is no escape. In Paris, a young renter between 25 and 34 pays roughly 50 to 55% of income on a one-bedroom apartment. In London, it reaches 65 to 80%. In Dublin, 73%. The EU’s affordability threshold is housing costs below 30% of disposable income. According to Eurostat, roughly one in five market-rate tenants in the Euro Area spends more than 40% of income on housing, with Greece topping the chart at over 40%.

In France, roughly 60% of 25 to 34 year-olds are renters, with 33 to 38% of income going to rent in Ile-de-France even after housing benefits. Without APL? It would be 40 to 45%. The system that was supposed to be a stepping stone has become a treadmill.

Every fix creates a new problem

Policy attempts that fell short

France has tried a lot. The Pinel law (2014 to 2024) offered tax reductions for buying new-build rental properties. It cost roughly €2 billion per year and was riddled with what the Cour des Comptes called “significant deadweight effects”: many investors would have bought anyway, and construction concentrated in low-demand areas, producing vacant units. It wasn’t renewed.

The PTZ (Prêt à Taux Zéro), a zero-interest loan for first-time buyers active since 1995, peaked at 300,000 to 400,000 loans per year in 2010 to 2011 but collapsed to just 50,000 to 60,000 in 2023. Helpful for marginal buyers, but it doesn’t address the fundamental affordability gap, and can even inflate prices when not paired with supply measures.

Rent control in Paris, reinstated in 2019, reduced rent growth by an estimated 3 to 5% compared to uncontrolled cities. But 30 to 40% of new leases exceed the cap because enforcement is complaint-driven. Berlin tried something bolder with the Mietendeckel in 2020, freezing rents at 2019 levels. The result: rents on the controlled market fell 10%, but supply on listing platforms dropped 50%. The Federal Constitutional Court struck it down in 2021, and landlords retroactively collected back-rent.

The counter-example everyone cites is Vienna, where 60% of residents live in subsidized housing at €8 to 10 per square meter, roughly half the price of Munich or Amsterdam. But Vienna’s system rests on over a century of continuous political commitment and a dedicated housing tax of 1% of income. It works, but it’s nearly impossible to replicate from scratch.

Social housing: a lifeline with a ceiling

France has one of the largest social housing stocks in the EU: 5.2 million HLM units, about 16 to 17% of total housing. And yet, 2.42 million households sit on waiting lists. In Paris, the average wait is 7 to 10 years, with some categories waiting 15 or more. Only about 430,000 allocations happen each year, meaning roughly one in five or six applicants gets housed.

The loi SRU requires communes above a certain size to maintain 20 to 25% social housing. Around 650 to 700 remain below their target, and roughly 280 are declared “carencée” (willfully non-compliant), triggering penalties up to five times the standard rate. Some wealthy communes simply budget for the fine rather than build.

What I find particularly perverse is the cliff effect: social housing provides genuine relief for those who qualify, but people just above the income threshold face the full brunt of market prices, sometimes paying more in rent than what should have been if their was no HLMs. The system creates a gap in the middle that policy hasn’t addressed.

Remote work: redistribution, not resolution

The pandemic triggered what Americans call the “Zoom town” phenomenon. In France, cities like Angers, Tours, and La Rochelle saw price spikes of +20 to 30% in two years. The Bayonne/Biarritz area surged by +40% between 2019 and 2023. Ile-de-France lost 73,000 net inhabitants in 2021 alone.

Did remote work help affordability? For those who left Paris, initially yes: more space for less money. But for locals in destination towns, it created new affordability crises. The same pattern played out worldwide: Boise, Idaho surged +50%, Austin +45%, and Lisbon saw rents climb +30 to 40% in three years as remote workers and digital nomads arrived, sparking protests.

Remote work didn’t solve the housing crisis. It redistributed it, spreading the pressure from a few expensive cities to a much wider geography.

The Airbnb squeeze

In Paris, roughly 65,000 active Airbnb listings compete for the same housing stock, with about 55,000 being entire apartments. According to APUR, short-term rentals have removed an estimated 20,000 to 25,000 long-term rental units from the Parisian market. In central arrondissements, up to 20 to 30% of housing sits on short-term rental platforms.

The Loi Le Meur (November 2024) is the most serious regulatory response yet: reducing the nationwide cap from 120 to 90 days per year, extending registration requirements, and crucially eliminating the tax advantage that made furnished tourist rentals far more profitable than long-term leasing. Estimates suggest 50,000 to 100,000 listings could shift back to the long-term market over three to five years. It’s a step, but it took a decade of damage to get here.

The structural walls

We’re not building enough

All the demand-side interventions in the world can’t fix a supply problem. In 2023, France started roughly 287,000 housing units, the lowest since the 1990s. In 2024, it fell further to an estimated 260,000 to 270,000. The estimated need, according to both the FFB and Fondation Abbé Pierre, is 400,000 to 500,000 units per year. That’s a deficit of 150,000 to 200,000 units annually.

The causes compound: construction costs climbed +25 to 30% between 2020 and 2023. Higher interest rates make developer projects unviable. The ZAN law (Zéro Artificialisation Nette) restricts land conversion. NIMBYism and lengthy permitting processes, averaging 18 to 24 months for social housing, add further delays.

This isn’t uniquely French. Germany completed 295,000 units in 2022 against a target of 400,000. The UK managed 234,000 net additions versus a 300,000 target it has never reached. The Netherlands built 74,000 against a need of 100,000. Spain, which completed over 600,000 units in 2006, managed just 90,000 in 2023. Across Europe, the construction gap is structural and widening.

Transaction costs that freeze the market

Buying a home in France comes with 7 to 8% in “frais de notaire” on existing properties, among the highest in Europe. The bulk is transfer taxes (droits de mutation), not actual notary fees. In 2025, departments were even authorized to raise them further.

The Conseil d’Analyse Économique has estimated that these high transaction costs reduce residential mobility by 20 to 30% compared to UK-level costs. A household buying at €300,000 pays roughly €22,500 in unrecoverable fees, which discourages short-term moves and contributes to spatial mismatch between where housing is and where jobs are. The CAE proposed replacing transfer taxes with higher recurring property taxes, revenue-neutral but mobility-enhancing. It wasn’t implemented.

The energy renovation wall

France has roughly 5.2 million primary residences rated F or G on energy performance, about 17% of the housing stock. Under the Loi Climat et Résilience, these are being progressively banned from the rental market: G-rated homes since January 2025, F-rated by 2028, E-rated by 2034.

The intention is sound. The execution raises concerns. Renovating a dwelling from F/G to B/C costs €25,000 to €50,000 on average, and €40,000 to €70,000 for a standalone house. MaPrimeRénov’, the main subsidy program, has a budget of about €2.1 billion for 2025, but the vast majority of renovations funded have been single-measure interventions (just a heat pump, for instance), not the deep renovations that actually change an energy rating. The Cour des Comptes noted a massive gap between the 700,000 renovations per year target and the roughly 50,000 to 70,000 deep renovations actually completed.

The risk, as the Cour des Comptes warned, is mass withdrawal: landlords selling rather than renovating, further reducing rental supply in a market that’s already short. Early signs are visible, with poorly rated properties selling at 5 to 15% discounts. The ban creates urgency, but without matching the renovation subsidy scale to the renovation need, it may squeeze supply before improving quality.

The human cost

Behind all these numbers are people. The Fondation Abbé Pierre’s 29th annual report counts 4.15 million people who are “mal-logées” in France: roughly 330,000 homeless (nearly doubled from 143,000 in 2012, including 40,000 children), 100,000 in squats or informal settlements, 934,000 in forced cohabitation, and 2.6 million living in severely deficient dwellings. An additional 12.1 million are described as “fragilized” by the housing crisis through excessive rent burden, overcrowding, or degraded housing conditions. In total, roughly 16 million people are touched by the crisis in some form.

The 115 emergency line, France’s equivalent of a housing distress hotline, was unable to provide a solution for 68% of requests in 2023. Homelessness has roughly tripled since the early 1990s.

These aren’t statistics from a developing country. This is one of the wealthiest nations in the EU.

What strikes me

What I keep coming back to is that this crisis isn’t caused by one broken thing. It’s a system of interlocking failures that reinforce each other. Prices outrun wages, so buyers need family wealth, which deepens inequality. Interest rates rise, but the market adjusts through volume collapse rather than price correction. We don’t build enough, so demand-side subsidies inflate prices instead of expanding access. Rent control works on paper but starves supply. Remote work spreads the problem geographically. Energy regulations are necessary but risk removing rental stock before alternatives exist. Transaction costs discourage mobility. Social housing has decade-long waiting lists. And through all of it, the people who bear the greatest cost are the youngest, the poorest, and those without inherited wealth.

I don’t have a tidy solution, and I’m skeptical of anyone who claims to. Vienna’s model works but took a century. France’s policy toolkit is among the most extensive in Europe, and the crisis keeps deepening. What I do believe is that the current approach, heavily focused on demand-side interventions (subsidies, tax breaks, interest rate adjustments) while structurally underinvesting in supply, is not working. Building more housing, faster, in the places people actually want to live is the only lever that addresses the root cause rather than shuffling the consequences.

The irony isn’t lost on me that in a country with 3.1 million vacant homes and 2.4 million households on social housing waiting lists, the problem is framed as unsolvable. The homes exist. The people exist. What’s missing is the political architecture to connect them, and the willingness to accept that housing, like healthcare or education, might be too important to leave primarily to market forces.