As of late, and apropos of nothing, Curbed has been hearing from readers in far-flung corners of the world. Today, we present the first of our favorites, a report from France. It begins:
I am a regular reader of yours and just moved to Paris, France. There is a real estate brouhaha shaping up here with New York connections that I couldn't help but share with you. I really think you'll enjoy this.It's a conspiracy deep enough to make The Da Vinci Code blush. Full report apres le jump.
A Curbed reader emails:
Dear Curbed,Bubble pricing? Squeezed middle class? Nutty politicos? One must wonder, can Curbed Paris be far behind?
I am a regular reader of yours and just moved to Paris, France. There is a real estate brouhaha shaping up here with New York connections that I couldn't help but share with you. I really think you'll enjoy this.
As is the case in European cities, big banks, insurance companies, the Vatican and other nefarious organizations own blocks and blocks of residential apartment buildings. These companies have been around for so long that they just sort of accumulated real estate over the centuries like small change. The pope is rumored to own like half of the Champs Elysees.
Well since the 90's these companies have been slowly selling off their properties. But instead of selling a whole building they (no dummies) sell them apartment by apartment. The bank, insurance company (or the Pope?) calls up the renter and tells them they have the option to buy the apartment they live in. If they buy it, great. If they decline, out of there!
(The piecemeal mark up is understood to be 20 to 30 percent more than selling the buildings whole. And these are nice neighborhoods by the way.)
During the 90's this policy was seen as a benefit to the tenants. Real estate was reasonable and everyone (especially the bank lenders) knew prices were headed upward. Loans were easy to get. Middle class Parisians bought their apartments.
But the prices kept going up. And as the prices went up, the holding companies starting selling more and more. And in the last five years, and especially since the stock market crashed in 2000, the companies began relying on selling real estate to beef up their otherwise morose end of year figures.
So now they're selling like crazy, but the middle class renters can of course no longer buy their apartments. Lenders, more conservative then their American brethren, won't give them the loans to buy at these "bubble" prices.
So the renters have started to revolt and the left wing mayor has decided to listen and is planning a six month moratorium on holding companies dumping real estate. But in reality the mayor is just as guilty as the holding companies.
As it turns out, one of the biggest buyers of the the dumped real estate has been the Mayor's office. When the mayor ran for office, he promised X amount of low cost housing. There isn't the place to do that in Paris so the mayor, in an effort to keep his promise, was buying individual apartments from the companies all through the 90's and early 00's.
So yes, that's right, the city of Paris was bidding up the prices of Paris apartments over the heads of the middle class to provide housing for the poor! Ha! Take that to the New York Post editorial page!
But this the final kicker. Wary of the political trouble this is causing, the French insurance companies, banks, etc. are now beginning to sell their real estate holdings in bulk. And instead of individual buyers or the city of Paris, they're selling the whole buildings to none other than Wall Street
hedge funds, who, everyone surmises, will have no "crises de conscience" selling piecemeal, and throwing Monsieur and Madame Renter out on their little derrieres... One by one.