Overtaxing Those Who Provide the Wealth of a Nation (Excuse My Sarcasm)

When I first moved to France, one of the things I heard was that the French owned more second homes than any other Europeans. In 2005, it was reported by the INSEE (French National Institute for Statistics and Economic Research) that second homes accounted for about 10% of the total housing stock in France. It was well known that the culture loved having their homes in the countryside and their apartments in Paris — just as the aristocrats in the 17th and 18th centuries when the royalty lived in their grand “châteaux,” but came to the city on business and stayed in their “hôtels particuliers” (townhouses), mostly in Le Marais.

Now that the Socialists are in power, and ‘royalty’ or anyone with any wealth is considered a ‘dirty scoundrel,’ they want to make it even more costly for anyone, including foreigners, to hold on to their secondary homes by adding another tax to these properties — to the tune of 20% effective January 1, 2015.

The tax hike is part of the “taxe d’habitation” — the residence tax normally paid by the person who resides in the property on January 1st. It will apply to 1,151 municipalities in 28 cities, over 50,000 inhabitants, including Lyon, Marseille, Bordeaux, the Mediterranean and Atlantic coasts and of course, Paris -– where it is estimated that one in six apartments is a second home — although the INSEE reports the capital had in 2011, 91,835 second homes and occasional housing of 6.8% of the total habitation (a conflict in reported figures). The measure is designed to exclude second homes for professional reasons or people of modest means in nursing homes. (Aren’t they generous?)

The tax would only apply to unoccupied homes, which have not been rented out. The government thinks this will encourage owners to rent out their properties rather than leave them empty, and Mayor of Paris Anne Hidalgo is in favor of the tax, in consideration of the 80,000 homes which remain vacant while there is such a huge housing shortage in the capital. But here lies the “Catch 22” in Paris where rental of property less than one year is illegal! Parisian second-home owners are caught between ‘a rock and a hard place’ — or in this case, between the State and the City Hall. Anne Hidalgo is also wanting to increase hotel taxes…just when we thought the hotel lobby is behind the ‘crack down’ on short-term rentals, it seems she’s out to make the tourists pay big time. Does she really want to reduce foreign spending in the capital?!

I also love how the government estimates it will bring in €150 million to those communes that apply it, without considering the natural ‘reaction’ to their ‘action.’ We know this means less foreign investment in France, less profits for owners, agencies, Notaires, etc. and ultimately a reduction of future tax assessments…the opposite of what they are trying to achieve, similar to the effect the hike in capital gains tax had!

It is reported that Jean Perrin, President of the National Union of Property Owners, said that real estate in France had become “a lamb to the slaughter.” “It’s a new craze of this government to tax property,” he said. “It is a mistake because it will increase the cost of real estate and punish owners who have worked hard to have a second home and make such an investment. Then they (the government) lie and say that this is to free up housing but that’s a fundamental error.” (thelocal.fr/)

Speculators discuss if owners of second homes will sell them off to avoid the taxes or wait for the next election when [it is sure that] a more rightist administration will step in. They further predict that the impact on the housing shortage is expected to be zero.

Government legislators must never have read the top ten effects of high taxation:

Inadequate incomes
Low wages
High prices
Shoddy products
Product unavailability and discontinuation
Lost jobs
Foreclosures, evictions, and homelessness
Poverty and high crime
Chronic recession
Low real tax revenues

Any economist knows that overtaxation has a negative affect. I imagine that the École nationale d’administration (ENA), the Grand Ecole that pumps out French politicians, somehow managed to eliminate teaching “Economics 101!” It’s no wonder those with any money left at all are fleeing for points beyond France and investing their hard-earned money in places like Florida (the French took the top spot as the biggest buyers of property this spring, according to Lanham and Associates, citing a report from the Miami Association of Realtors.

A bientôt ,

 Adrian Leeds

Adrian Leeds Group

Respond to Adrian: [email protected]

P.S. There will be no French Property Insider issue on Thanksgiving Day, November 27th…for the obvious reasons! (I will be eating turkey and hopefully, so will you!)

P.P.S. Did you know that many Parler Paris Apartments have been featured on House Hunters International? You can stay in one of the gorgeous apartments appearing in this popular show! Visit Parler Paris Apartments and look for the House Hunters International logo.