Property Taxes on the Rise, But Still About One-Tenth of America’s

One of the things that always surprises our clients is how low property taxes are in France compared to the U.S. and even Canada. I find that generally, the taxes are one-tenth of what they are Stateside…yes, you read right, one-tenth!

There are two taxes on property: Taxe d’Habitation and Taxe Foncière

The property tax, Taxe Foncière, is always paid by the owner of the property. The housing tax, Taxe d’Habitation, is in fact due by the one who has the use of the accommodation on January 1st: the owner, the tenant or a free occupant. Surprisingly, too, the figures for each have tended to be about the same, even though their basis is different (see impots.gouv.fr).

Even though France’s Taxe d’Habitation is in the process of being phased out for most primary residents (80 percent), second-home owners will still be required to pay it. This year, lots of towns across France are voting to increase the tax on secondary residences. Towns with housing shortages are quick to turn up the heat by increasing the tax as much as 60 percent. Those include Marseille, Bordeaux, Lyon, Biarritz, Arles and Saint-Jean-de-Luz.

Tax Foncière is on the rise, too. According to the property owners’ group, Union nationale des propriétaires immobiliers (UNPI), Taxe Foncière bills have increased by 27.9 percent on average over the last 10 years. Some have seen as much as 136 percent! The calculation is a complicated formula (nothing is simple in France!) based partly on the value of your property and also on the rates set by the local authority. This tax is increasing to compensate for the loss of the Taxe d’Habitation. Duh! Why are we not surprised?

Even with the increases, the tax rates will still be a whole lot lower than they are in the U.S. They have a long way to go before reaching our level!

The housing shortage in France is serious with a calculated deficit of between 800,000 and one million dwellings. Location is a key factor—it is much easier to find somewhere to live in many provincial towns and cities than it is in Paris, on the Mediterranean coast, or close to the Swiss border around Geneva. These differences are linked to abundant supply and lesser demand in certain areas, resulting in lower property prices. The nature of the deficit is significantly localized and then characterized in terms of affordability.

The reason for the shortage is France’s own fault. Access to land is scarce thanks to the rules of urban planning. The rules of construction have made the costs rise as much as 50 percent in the last ten years. Rules controlling investment have reduced the number of investors buying new real estate. France has the highest taxation on new construction in all of Europe. Here we go again: rules, rules, rules! In their quest to protect, they end up cutting off their noses to spite their faces.

It’s so interesting to me how the French, who have traditionally been dual homeowners, which goes as far back as the aristocracy who had their châteaux in the countryside and their “hôtels particuliers” (townhouses) in the city, are being punished for investing in their own land and country. This falls into the category of why investors aren’t investing…particularly in new real estate.

The number of homeless is increasing as a result of the shortages. Shelter in France is not a privilege, but a right. The “DALO law” requires the state to provide a home to any citizen or foreign resident in need. Even so, about 300,000 people are living on the streets, a figure that has doubled since 2012 and tripled since 2001. While many blame rental platforms such as Airbnb, French authorities have spent years cutting back on public housing spending, leading to chronic shortages across key cities.

If you read my “rant” from last week, then you know that I am opposed to their blaming short-term rentals for their housing shortage, when they should or could be attacking these basic issues instead, or at least at the same time! Meanwhile, don’t be surprised when taxes go up!

A bientôt,

Adrian Leeds
The Adrian Leeds Group