APPLICATION OF ARTICLE 55

OF THE SOLIDARITY

AND URBAN RENEWAL

(SRU) LAW

Report requested by the Senate Finance Committee

February 2021

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Abstract

A policy of quotas implemented over more than twenty years and involving

2,000 municipalities

The law of 13 December 2000 on solidarity and urban renewal (SRU law) aimed in

particular to develop social and urban diversity in housing. As such, Article 55 of this law,

codified in Articles L. 302-5 et seq. of the Construction and Housing Code (CCH), obliges

certain municipalities to have a minimum proportion of social housing, according to criteria set

out in this Code. This proportion is currently set at 25% or 20% of the number of main

residences in the municipality, depending on the situation. The list of these municipalities is

determined according to their population and their inclusion in an agglomeration or an inter-

municipal authority for cooperation between local authorities (EPCI).

The municipalities concerned by this law but which fail to meet the criteria, known as

‘non

-

compliant municipalities’, must pay a levy on their revenue. This levy is both a sanction

and an incentive to comply insofar as amounts invested in developing social housing can be

deducted from the levy paid. These municipalities must also meet a three-year catch-up target,

and the law specifies that by 2025 all the municipalities concerned must have reached the 25%

or 20% provided for by law.

As at 1January 2019, 2,091 municipalities representing nearly 58% of the French

population were included in the scope of application of this law and were therefore required to

meet this obligation. The 1,100 municipalities that did not meet the required percentage of

social housing

were deemed ‘liable for the SRU levy’ and are required to make up for their lag.

An effective mechanism to boost the production of social housing, but

unequally applied across the country

In terms of its effectiveness, the quota mechanism provided for by Article 55 has

undoubtedly had a positive effect on the overall construction of social rental housing in the

municipalities concerned. According to the latest review carried out for the 2017-2019 period,

210,737 social housing units, i.e. more than half of the housing units built nationally, were built

in municipalities subject to the SRU law. At a national level, the three-year objective set for this

period was exceeded, with an overall achievement rate of 107%. The vast majority of people

interviewed by the Court, including elected officials, representatives of administrations, non-

profit organisations and landlords, welcome this positive effect on the construction of social

housing. While they sometimes call for adjustments to the provisions of Article 55, they do not

intend to question the principle behind it, which is widely accepted.

However, the overall construction of social housing in all the municipalities concerned

shows considerable disparities between regions and between municipalities within each

region. For example, in Provence-Alpes-Côte d'Azur, 79 out of a total of 158 municipalities

concerned did not reach the target set for the period. Of the 1,035 municipalities covered by

this three-year review for the whole of France1 for 2017-2019, only 485, or 47% of the total,

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The figure of 1,035 corresponds to the number of municipalities subject to the SRU law as of 2017 and which

were therefore covered by the 2017-2019 review. This review does not take into account municipalities that became

subject to the SRU law between 2017 and 2019. At 1

January 2019, 1,100 municipalities were subject to the SRU

law as indicated above.

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had reached their target. These results reflect the difficulties and problems encountered in

applying Article 55.

A complex system subject to different interpretations

Since the law was adopted in 2000, the conditions for building social housing have

changed significantly. The development of off-plan sales has lengthened the time taken to

complete transactions and made it more difficult for local government authorities to control

construction projects. In addition, the promotion of inter-municipal authorities and their

jurisdiction in terms of housing may contradict the responsibility for the construction of social

housing and the application of Article 55, which lies with municipalities and their mayors.

Tensions are noted between this quota system, which is defined at national level and

applied uniformly across the country, and the need to take into account local constraints and

specificities. To strike a better balance, lawmakers have introduced a number of adjustments

in successive amendments to the initial law. The inventory of housing types used for the

comparison with the total number of main residences has been significantly extended, well

beyond the traditional definition of social rental housing. As a result, for example,

accommodation structures, hostels and even rental land made available under departmental

plans for Travellers are included in the calculation.

The ratio between the number of requests for social housing and the number of moves

within social housing units each year, known as the ‘social housing pressure index’, is used to

set the percentages imposed on municipalities (25% or 20%) and is also one of the criteria

that can be used to exempt municipalities from applying Article 55. As well as this social

housing pressure index, the exemption criteria include poor access to public transport or the

fact that the majority of the urbanised portion of the municipality is not eligible for construction,

meaning they can be applied creatively and interpreted differently.

In addition, the search for a balance is often hard to achieve and even contradictory.

Other adjustments have been made to strengthen the application of the national law and

improve effectiveness. For example, the increase in the required percentage of social housing

in 2013 and the strengthening of the means of enforcement available to the central government

representative when a three-year review shows that a municipality concerned by the law has

not met its objectives and is subject to a prefectural ruling for its failure to act. In the last review

in 2017-

2019, 280 municipalities were deemed ‘non

-

compliant’.

While these adjustments are necessary and their intention is commendable, they have

made the application of Article 55 of the SRU law particularly complex.

This complexity, the technical nature of the applicable rules, and the political sensitivity

linked to the subject of social housing, require that government departments both centrally and

locally must have the necessary resources and means. This includes human resources but

also the means required to establish housing inventories, to measure social housing pressure

and to audit the use made of the levy on non-compliant municipalities, which must primarily be

devoted to the promotion of social housing.

It is also necessary to make the means of enforcement made available to prefects

regarding municipalities that fail to act more effective. For example, by taking over the

management of the municipality’s rights of re

servation of social housing; increasing the non-

compliance levy; taking over pre-emptive rights to purchase housing or the granting of building

permits. Experience shows that these coercive instruments are both difficult to apply and vary

too much between departments.

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This raises another issue which also relates to the difficulty in striking a balance between

a national law and a good understanding of local situations. The application of Article 55 is

both centralised and decentralised, being shared between the guidelines and directives set by

central government and the significant powers of application entrusted to local offices of central

government. It is centralised insofar as the procedures, the terms of dialogue with local

government and the social housing construction objectives are determined at the national level

for the entire country, with limited possibilities of adaptation or adjustment. It is also

decentralised, because once these procedures have been established and the objectives set,

the département prefect must apply them in practical terms.

A fair balance must therefore be reached between, on the one hand, the overall

consistency of the system, with the law being interpreted and practices harmonised at the

national level and, on the other hand, the need for local representatives of central government

to have some leeway in their action. It would therefore be appropriate for central government

to specify certain policy details, for example regarding the exemption mechanism or how

government resources should be used in the event of failure to act, or to ensure the follow-up

of disputes and draw the necessary conclusions at the national level. In the same vein and in

view of the complexity and technicality of the applicable rules and the workload they imply for

decentralised local government offices, the role of regional government in providing expertise,

technical support and harmonisation could be reinforced for their benefit.

Finally, while Article 55 appears to have had an undeniable effect on the construction of

social housing, it is less clear whether it has significantly contributed to developing urban and

social diversity, which was the primary objective of the SRU law. The ‘SRU rate’, the ratio

between the number of social housing units and the total number of main residences, implicitly

defined as the social diversity ratio by the legislator, has increased only slightly - by around

five points between 2002 and 2016.

As some researchers point out, social diversity remains difficult to define and it depends

on multiple factors, with housing being just one example. It is also true in practice that there

may be a contradiction between two of the law’s objectives, namely the production of housing

and the achievement of social diversity, in cases where the goal of quickly reaching a

quantitative social housing objective leads to the concentration of social housing in certain

neighbourhoods or areas in which land remains cheaper and more easily available, thus

reinforcing segregation and “ghettoisation”.

The need to prepare for the 2025 deadline by correcting weaknesses in the

system

In light of the small increase in the percentage of social housing, it is now accepted by

all stakeholders that a significant number of municipalities will not have reached the objective

of 20% or 25% of social rental housing required by the law by 2025.

In its latest report drawn up in December 2020, the Ministry of Housing estimates that

more than half of the 1,100 municipalities subject to the SRU law have no chance of meeting

the requirement by this deadline. In a very recent report submitted to the Minister of Housing

in January 2021, the chairman of the SRU Committee shared this observation, considering

that less than one third of the municipalities concerned will reach the legal objective in 2025.

For the time being and in view of this deadline, the local offices of central government

have adopted a pragmatic approach. Above all, they are ensuring that the overall production

of social housing is maintained. Strict compliance with the percentage required in relation to

all main residences is no longer their main concern. As a result, they are sometimes obliged

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to approve local housing programmes or to sign contractual documents with local government

authorities setting objectives below the legal objective.

There is therefore a shift from the letter of the law, which raises the question of whether

the law itself will have to be adjusted, if it is confirmed that not all the objectives can be

achieved. To prepare for this 2025 deadline, central government must establish as of now a

detailed projection to identify and characterise the municipalities likely to be unable to fulfil their

obligations. Along the same lines, it is important to precisely measure the effect of legal

provisions on the promotion of social diversity linked to housing to better inform lawmakers’

choices. The sensitivity of this subject at the local and national level justifies postponing the

decision on whether or not to adjust Article 55 until after this review has been performed.

Possible adjustments include replacing the measurement in terms of social housing

stock - i.e. as a percentage - with a measurement of flows - i.e. the number of social housing

units created. However, this would amount to renouncing the very purpose of the SRU law, by

abandoning the objective of developing social diversity.

Another possibility would be to apply the law in such a way as to take better account of

the specificities of each municipality. This may involve admitting new categories of housing to

the social housing inventory or even extending cases not eligible for construction in order to

establish an exemption, at the risk of making the system more complex.

But beyond these provisions of a general nature, the application of the law could be

adjusted according to each municipality in a bid to strike a balance between national

consistency and the local context.

This would involve adjusting the consultation procedures with the government so that

local constraints and spe

cificities can be better taken into account. In this sense, the ‘social

diversity contracts’ created in 2015, which are signed between the prefect and the local

authority in order to “initiate a voluntary process to achieve (… /…) its legal obligations” wi

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regard to social housing, could be an appropriate tool, provided that the contracts are

sufficiently precise in defining the objectives set for the municipalities and in mobilising all

available solutions. A reflection on the right level of consultation would also be appropriate.

While the municipality remains the reference level for assessing the social housing ratio, very

little use has been made of provisions aimed at pooling housing production objectives at the

inter-municipal level. Greater involvement by inter-municipal authorities and use of the

contractual method would make it possible to differentiate the application of the law. Such

application could, at a minimum, adjust the time horizon for achieving a given social housing

ratio, which would remain uniform at the national level.