Elan Laws: A Vision of the Past or Future?

In August of this past year, the City of Paris was “proud” to announce that it had issued over €1.38 million in fines to approximately 111 homeowners for their illegal holiday rentals. The city’s increase comes as a result of reinforcing their inspections, heavy-handed judges, harsher punishments and their crack-down on the websites promoting them, such as Airbnb, VRBO and others.

I note “proud” because the city’s vision of the growing number of rentals, in my opinion, has always been ill-founded and poorly administrated. I don’t believe they should be proud, because if their goal is to make it easier for Parisians to find full-time housing, it has in fact, created just the opposite. Even if they’ve managed to put €1.38 million in their pocket while “criminalizing” property owners who are seeking a return on their investments, the ability to find housing is no easier, costs have gone up and property prices are increasing.

Just like rent control actually increases rent as a result (Google, or ask any city that has tried this, see “Yup, Rent Control Does More Harm Than Good“), this form of “exclusivity” of the market is making it so restrictive that the competitive edge that keeps prices down and maintains a fluid market is lost. While owners of secondary residences are no longer renting and therefore leaving their properties vacant, or renting clandestinely to avoid being caught or pay taxes on their earnings, or selling them out of frustration and lack of the ability to cover their expenses, tenants who need accommodations less than one year are struggling to find available properties at a reasonable rent.

I have long contended that the city’s narrow vision doesn’t include those who need accommodations for less than one year, in the case of those coming to the city for work or education, those whose primary property is under renovation and therefore uninhabitable or in the case of separation or divorce, or other circumstances that require housing for more than a week, but less than one year. For these people, there exists nothing at a reasonable cost as a result of their ill-conceived plans to wipe out property investors — my capitalistic mind doesn’t understand why they would want to discourage property investment. (Economists will agree that property investments beneficially affects everyone in the industry as well as the growth of local economy on every level!)

In spite of these facts, Mayor of Paris Anne Hidalgo announced last month that she will re-establish rent control by the end of the year. An administrative judge annulled her initial efforts to put a cap on rents, and now as part of the new Elan laws (Evolution of Housing, Development, and Digital), she has achieved a number of amendments to the laws which just passed. The Elan laws provide for even stricter control of furnished tourist accommodation. Landlords who exceed the 120-night per year maximum may be subject to penalties from €5,000 to €10,000 per accommodation (!) and rental Internet platforms that advertise a principal residence already rented more than 120 days a year are also subject to penalties of up to €50,000 per dwelling (!).

Re the Elan Laws, Source: unpi.org/

In its decision of November 15, 2018, the Constitutional Council validated most of the Elan act. However, about twenty articles were censored for having been adopted according to a procedure contrary to the Constitution. The original bill contained 66 articles. The voting text included 234. As a result of the constitutional review, there are 214 articles validated, which is considerable. The law covers urban planning, the HLM sector, rental reports and sales. On the occasion of an appeal by a company engaged in tourist rentals in Paris, without obtaining the necessary administrative authorization (Change of Use governed by article L 631-7 of the CCH), the Court of Cassation asked a question to the Court of Justice of the European Union to determine whether the Services Directive of 12 December 2006 was applicable to this matter. Pending the new hearing, set for December 2019, the fate of the legislation that controls the furnished tourist has been weakened (Cass. Civ. 3e, 15 November 2018).

Part of the Elan laws include what is called a “Bail mobilité” or “Mobility Lease” reserved for short-term furnished rentals. It’s not a perfect solution for secondary home owners, but it’s a start to offering options that don’t tie-up the property for one year and to providing longer-term accommodations for at least some.

Specifically, the mobility lease is a contract that will apply to furnished apartments, for a rental period of one to ten months. It is non-renewable, which could pose problems for someone requiring some flexibility in the term of the stay. The lease can be terminated at any time by the tenant with one month’s notice. The rent can be freely fixed, but not changed during the term of the lease. Other charges applied must also be fixed, such as utilities, etc. Fees earned by estate agents applied to these leases are capped. In addition, there is no security deposit, freeing the tenant from liability and creating a problem for the landlord. The regulations are riddled with issues the landlord must face, which continues to punish those who invest in property and will, in turn, pose new problems for the tenant as a result.

The lease is intended only for people in training, in higher education, internship, apprenticeship or a temporary professional mission, and their reasons must be justified for the lease to comply. It still does not address the needs of those needing accommodations in the case of separation or divorce, or other circumstances that require housing for more than a week, but less than one year. So, while it seems to favor the tenant, it’s not broad enough to provide housing for everyone.

It will be interesting to see how the new mobility lease will ease the housing tension, but I have doubts it will make enough of a difference. We are living in a global society. We no longer have the need of living in any one place and will become even more transient as technology becomes more sophisticated. Our needs for housing are changing, and changing rapidly. These new regulations recently passed are, in my opinion, already out-dated and lack vision for the future.

Do you think they/we will ever learn that we have embrace the changes, not strangle them?

Download the actual text of the law. 

A bientôt,

Adrian Leeds
Adrian Leeds Group

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