What’s New on the Streets of Nice and Paris
Volume XXI, Issue 15
NICE LANDLORDS, BEWARE OF FUTURE RENTAL REGULATIONS
The housing shortage on the Côte d’Azur is causing the authorities to take a serious look at solutions. While the shortage is more and more palpable in this area of France compared to Paris, for example, the government is evaluating the tax benefits of tourist rentals against the shortage.
For owners who have advertised their property for rental on Airbnb or other platforms, a change in the law could concern them directly, and not necessarily in the right direction (for them).
A report published in March, publicly available, suggests an upheaval concerning the tax advantages of tourist rentals. It was commissioned by three ministries: Finance, Housing and Territorial Cohesion.
According to the officials’ conclusions, and this is nothing new, especially on the Côte d’Azur, the prices of apartments and houses on the coast “are high and rising faster than elsewhere, with tensions in accessing housing both in the social and private sector.” For the reporters of such studies, this is mainly due to “the development of second homes and the explosion of short-term tourist rentals.”
This tension can be seen in several cities in the PACA regions, including Nice, which has already tightened the regulations on seasonal rentals that do not respect them. Airbnb, for example, also made some special arrangements with the authorities in February 2022. But, the authors of the report now recommend going even further by making tourist rentals less financially attractive for landlords located in certain areas, including several municipalities in the Alpes-Maritimes (Nice, Villefranche-sur-Mer, Cannes, Antibes and even Menton).
The main objective is to determine the tax advantages linked to this activity, which are “unjustified,” insist the writers of the report. The first proposal mentioned would concern the tensest cities: zones A, A bis and B1. Note that the exact division would need to be redefined.
It is thus envisaged to align the maximum taxable income in traditional furnished rentals, i.e. 72,600€ annually with those of tourist rentals. This would allow landlords to benefit from the advantageous Micro-BIC tax regime.
As part of this same process, the following measure would aim to limit the allowance granted to landlords of furnished tourist rentals to 50% of the income received, compared to 71% currently, at the same level as long-term rentals. An even more radical idea is to equalize the tax regime of furnished rentals over unfurnished ones. The objective of the authors of the report with this recommendation is to limit the possibilities of permitted tax deductions.
This would put a spoke in the wheel of owners of furnished tourist properties, who would no longer have the option of deducting loan interest from their rental income. In parallel with this survey, the government launched a national committee beginning November 2022. It is made up of elected representatives from the territories, associations of elected representatives, parliamentarians and real estate professionals.
During this study, “73 proposals and contributions” on the subject were submitted by the participants. They were added to the 13 included in the text published in March. These initiatives will soon be studied by the executive committee, which will then compile a summary by the summer of 2023, following which, a bill could be born.
What is the “street code” that Paris is considering adopting, and which Nice has had in place since 2009?
The French capital is facing challenges in its public spaces and is exploring the implementation of regulations for “better living together.” This code, which aims to promote good conduct among users of public space, is currently being developed through consultation with various stakeholders, with a text expected to be published by June 2023.
Although the municipality does not have authority over road safety, the code aims to encourage better cohabitation, safety, and cleanliness in public spaces. Nice has had a similar “street code” since 2009, which includes 10 points such as not littering and properly disposing of trash, with some measures subject to fines for non-compliance. The town hall of Nice has also launched a Brigade for the Fight against Attacks on the Living Environment (LAC) in 2014 to address environmental incivilities.
Download the Paris bike lane map here.
And here’s a guide to the VéloBleu in Nice.
It’s not the usual time of year for the property market to flourish, as sellers and agents, as well as buyers, are on vacation in the summer, leaving minimal activity in real estate. A new report from Banque de France predicts a stagnant property market in France during the summer of 2023 (not surprised), but with property prices remaining the same as in the pandemic year of 2020 and interest rates on French mortgages rising, this may actually be good news for certain types of buyers.
Those who are cash buyers or have already secured financing may find that there are bargains to be had due to falling property prices in large cities such as Paris, Lyon, Toulouse, Marseille, and Bordeaux. While prices outside of the cities have tended to plateau, buyers may still be able to negotiate a reduced price, especially for properties with low energy efficiency ratings.
So, while it may not be great news for those looking to sell, some buyers may find this summer a particularly good time to purchase their dream house in France.
The Adrian Leeds Group®
P.S. We have developed relationships with a number of financial and tax experts to assist our clients. For more information, please visit our Global Money Services page today.
There is perhaps an even more important proposed recommendations for the changes in taxation to short-term rental properties. It appears they are also moving to disallow taking depreciation on short-term furnished rentals (but keeping it for long term furnished rentals). Depreciation is an even larger potential deduction than rental rates for many, due to the very low French mortgage rates (and not all owners have mortgages). However, if I interpret it correctly, American non-residents should still benefit from the terms of the US-France tax treaty, and receive a full credit for taxes paid. It would be good to confirm.
Always best to ask your tax advisor!