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Household savings – a force for a renewed and ‘solidaire’ Europe of housing opportunity

How savings can be channelled into something positive?

3 February 2021 | Social, Economy, The future of the EU & Housing

Housing Europe's Research Coordinator, Dara Turnbull explains how household savings can be used to ensure that social housing is indeed central to the economic recovery, drawing on the example of France.

The OECD stated recently: “Investments in social housing construction and renovation can be a central part of a more sustainable, inclusive economic recovery as countries chart the path towards economic recovery in the wake of COVID-19”[1]

Not surprisingly, the requirement for us to stay at home and controls on which businesses can open, not to mention increased caution about the future (e.g. saving for a rainy day), will have seen household saving in Europe skyrocket last year.

Indeed, according to Eurostat: "In the second quarter of 2020, the EU household saving rate recorded its highest year-over-year increase since the time series began at +10.8 percentage points (pp).” Indeed, versus the end of 2019, EU households net savings position vis-à-vis the banking sector increased by around €287bn in the first half of 2020!

There is now significant evidence that economic shocks lead to higher savings rates over the long-term (for example), in part due to households becoming intrinsically more cautious. This creates a number of headaches for governments, not least of which being the impact on employment, consumer spending and the multiplier, but also lost VAT and excise revenues. All of which has the potential to put a squeeze on public finances and, thus, capital spending, such as investment in social and affordable housing.

However, France shows us that excess household saving can be channelled into something positive.

In France, almost all people have either a ‘Livret A’ or ‘Livret de développement durable et solidaire’ (LDDS) state-backed savings account (the author of this blog being one of them!). It is a tax-free way of saving money, up to a maximum of €22,950, which is available through any bank and offers savers a more attractive interest rate than their usual current account.[2] The latest figures show that there are currently €411bn in savings in these savings schemes. Savings are managed by a special state investment vehicle called the ‘Caisse des dépôts et consignations’ (CDC).

The French livre A model ensures that French social housing providers are there for people in the good but also the difficult times. The system has proven to be very resilient during these times when certain groups of the population have higher rates of savings.  The ongoing global health pandemic has dropped the rate of construction of social housing in France from 100,000 to 80,000 units just when the demand is set to grow and the new French Social Housing Alliance -  a new partnership with the CDC, the European Investment Bank and the Council of Europe Development Bank - has the potential to cover this gap. The initiative is also a good base to build upon for the absorption of additional EU funds to boost investment in social housing and improve people’s lives.

Coming back to the CDC, we must say that it provides long-term financing at very favourable terms to a number of different types of borrowers; linked by their common goal of improving social outcomes and development in France.

By far the main benefactor of the money channelled to the CDC by ordinary French households is the social housing sector. Indeed, the CDC is the number one source of funding for social housing in France (about 70-75% of the capital needed for typical housing development).

Housing Europe President, Bent Madsen

‘Ensuring long term sustainable finance is crucial for a strong social housing system. The OECD has been clear in its recommendations that Investments in social housing construction and renovation can be a central part of a more sustainable, inclusive economic recovery as countries chart the path towards economic recovery in the wake of COVID-19. Housing Europe is working with the UNECE HLM and UN Habitat to promote tried and tested policy tools that work in delivering affordable housing. When it comes to financing I can definitely say that the French livre A financing model is also one which can inspire others’

One of the strongest features of the CDC model is that it is not ‘pro-cyclical’ in its investment pattern. This means that even as an economy enters a period of economic decline or recession, as has been the case because of the pandemic, the CDC can maintain or even increase its investments.

Indeed, savings by French households into their CDC linked accounts actually increased in 2020. This means that, recession or not, money can be made available to support jobs in the construction sector and, thus, the wider economy. It also means that those who have lost their own job or seen a fall in their income can be helped to find suitable housing that meets their needs more quickly.

Evidence of this is that the annual production of new social housing units in France actually increased after the global financial crisis of 2007-08, supported by increased household saving into CDC-linked schemes. If we compare the French model to a country in which social housing production follows a ‘pro-cyclical’ tax revenue-driven model of state funding support, then we can immediately see the latter’s comparative shortcomings.

We can add to this the fact that pro-cyclical investment can represent poor value for money for the public purse, as the cost of new housing delivery can be higher at times of economic prosperity, due to higher land and labour prices.[3]

The CDC provided around €10bn in new financing for the development or acquisition of new social housing units in 2019 – which will help to add 78,740 dwellings to the social stock. It also provided €1.9bn to help finance the renovation of existing social housing units. For 2020-2022, the objective of the CBC is to provide financing to support the delivery of 110,000 new social housing units and the renovation of a further 125,000 social dwellings. The CDC is also positioning itself as one of the main sources of funding for social projects aimed at re-starting the French economy after the COVID related declines.

Overall then, what this article shows is that a lack of ‘traditional’ capital funding sources (i.e. government tax revenues) ought not to be an impediment to following the OECD’s guidance on putting the delivery of new social housing at the heart of national recovery plans. The French CDC model shows us that the increased household savings we are currently seeing in Europe can be channelled towards this objective.

Indeed, as the old saying goes – where there is a will, there is a way.


[1] OECD (2020). Housing and Inclusive Growth. Paris: The Organisation for Economic Cooperation and Development.

[2] This interest rate is calculated as the average between the French inflation rate and the market rate (Euribor and Eonia).

[3] See for example: Murphy, A. (2018). A dynamic model of housing supply. American economic journal: economic policy10(4), pp. 243-67. for some analysis of the pro-cyclical nature of costs. 


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