In recent years, France has been actively revising its real estate legislation to address pressing challenges such as rising property prices, housing shortages, and the imbalance between short-term and long-term rentals. These changes affect property owners and tenants alike, touching on tax benefits, rental rules, and investment incentives. Below is an overview of the key updates in this area. New Rules for Short-Term Rentals In November 2024, the French National Assembly adopted a series of measures tightening regulations on short-term rentals. These changes aim to reduce the impact of tourist rentals on the long-term housing market. Increased Local Authority Powers Previously, short-term rental regulation was largely governed by nationwide rules. Now, local authorities have gained more autonomy. They can set quotas on the number of properties available for tourist rentals and impose restrictions in specific areas. For instance, certain cities may require owners to register their properties or limit short-term rentals in historic districts to balance the needs of permanent residents and visitors. Reduction in Tax Benefits for Tourist Rentals Legislation has also tightened tax conditions for owners renting to tourists. Previously, they could benefit from substantial tax discounts of up to 71% if their rental income did not exceed €188,700 annually. Now, this threshold has been lowered to 50%, with a maximum income of €77,700. For non-classified properties, the tax discount was reduced from 50% to 30%, with an income cap of €15,000 annually. This shift aims to encourage property owners to move toward long-term rentals, thereby increasing the availability of housing. Changes in Tax Legislation One of the primary goals of these reforms is to level the playing field in tax conditions for short-term and long-term rentals. Reducing tax preferences for tourist housing aligns these conditions with those for long-term rentals, which is expected to boost interest in the latter. This creates a more stable rental market and expands housing options for permanent tenants. “Pinel Law” and Construction Incentives To address the housing shortage, France has actively promoted the “Pinel Law” program. This is one of the most popular initiatives to attract investment in new housing construction, offering significant tax incentives. How Does the Program Work? The essence of the program lies in providing investors with tax reductions when purchasing property and renting it out for 6 to 12 years. Depending on the rental period, the tax discount can reach up to €63,000. However, strict requirements apply: the property must be located in regions with high housing demand and comply with modern energy efficiency and environmental standards. Benefits and Goals of the Law The “Pinel Law” stimulates investments in areas with housing shortages. It also promotes the development of energy-efficient buildings, aligning with France’s global goals of reducing its carbon footprint. For investors, this offers a profitable way to allocate funds, as tax incentives significantly reduce costs. New Immigration Legislation Immigration plays a crucial role in shaping housing demand in France. At the end of 2023, a law was passed introducing changes to social benefit eligibility and access to government housing subsidies. Restrictions on Social Benefits for Immigrants Under the new rules, only foreigners who have lived in France for a specified period will be eligible for government assistance. This period is set at 30 months for employed individuals and five years for the unemployed. The changes aim to reduce the burden on the country’s social system but may lower demand for rental housing among migrants, especially in major cities. Tightened Residency Permit Rules Stricter requirements for obtaining residency permits have also been introduced. These changes will affect foreign nationals renting housing, particularly in the long term. Tackling Empty Properties France has a significant number of vacant properties that remain unused for housing purposes. Legislators aim to address this issue by introducing penalties for owners who do not rent out or utilize their properties. For example, in some cities, additional taxes are imposed on properties left vacant for over a year. This is intended to encourage owners to either rent out or sell their properties, thereby increasing housing availability. Energy Renovation of Older Housing France is actively promoting programs to renovate older housing to improve energy efficiency. These measures include requiring owners to upgrade their properties to meet modern standards. From 2025, properties failing to meet minimum energy efficiency requirements may be excluded from the rental market. This pushes owners to invest in repairs and modernization. Impact of the Changes on the Market These changes have had a substantial impact on France’s real estate market:
- Reduction in Short-Term Rental Properties: Stricter short-term rental rules have already started to yield results, with many owners shifting to long-term rentals to avoid additional taxes and penalties.
- Increased Investment in New Housing: Programs like the “Pinel Law” make purchasing new properties more attractive for investors, fostering growth in the construction market.
- Shift in Tenant Demand: New immigration rules and measures to address vacant properties may alter demand for rental housing, particularly in major cities.
- Improved Housing Quality: Energy efficiency reforms are helping modernize the older housing stock, making it more comfortable for tenants.
Conclusion France is on the path to creating a more balanced and sustainable real estate market. Stricter regulations for short-term rentals, tax reforms, and construction incentives are aimed at increasing housing availability for permanent residents. At the same time, the government continues to work on improving housing quality, including energy efficiency upgrades. These reforms address the key challenges facing the French real estate market: housing shortages, high property prices, and growing demand for long-term rentals. While some measures may appear stringent, their ultimate goal is to strike a balance between the interests of property owners, tenants, and the state.
