Too Many Standards, Too Many Taxes

This coming November 17th, starting at 1:30 p.m. at the Esplanade des Invalides, the UNPI (Union Nationale de la Propriété Immobilière) will be taking a public stand against the latest rash of laws imposed on the real estate industry — namely the ALUR laws, claiming an abuse of power. Following the demonstration there will be a symposium from 3:30 to 6:00 p.m. — “Colloque UNPI — Le choc de simplification = un mythe!” (The Shock of Simplification = a Myth!) at Espace Cardin, 1, avenue Gabriel, in the 8th.

The slogan for the demonstrations: “Trop de Normes, Trop d’Impôts!” (Too Many Standards, Too Many Taxes).

Anyone who owns property in Paris for investment purposes is feeling the squeeze. Tenants, whether tourists in a vacation apartment or long-term renters (one month to one year or longer), may indirectly be affected by the relatively new “ALUR” laws that are designed to protect the tenant. The UNPI is complaining that inadvertently, these new regulations hurt everyone and this is why the landlords are taking a stand.

Myself, as a property owner, a landlord, a property consultant, property manager and sales agent, these laws have contributed to the toughest battles in order to maintain a balance so that the landlord-tenant relationship can be a win-win for everyone, rather than a lose-lose.

First the city of Paris outlawed the short-term rental of secondary properties (imposing restrictions to leases of no less than one year, or nine months to students). Primary residences are allowed short-term rentals of up to four months a year, but the investor and the foreign owner have been ‘cut off at the knees.’

You may ask: “So, how can so many thousands of apartments still be offered for short-term rental?” (Paris is the largest short-term rental market in the world!) The answer is: “The owners do it until they get caught!” Regardless of the regulations, there are still people who need the accommodations and still people who have the accommodations and need to generate revenue. The laws will never be able to prevent this natural environment of supply and demand.

And consider how the law basically takes away the right to have a residence in Paris for less than one year, regardless of the reason. One year is a seriously long time for someone here on a work or educational project, or even someone separating from their spouse and needing temporary housing…much less those who come as tourists. You are allowed to stay in the country 90 days without a visa, but you aren’t entitled to housing!

Then recently, rent controls were slapped on top of long-term rentals. As a result, both landlords and tenants are being squeezed out of their own properties. It’s like the old saying, “you’re damned if you do, and damned if you don’t.”

The “manif” is a good sign that the landlords aren’t going to stand for such  controls and high taxation. Rent controls were introduced with the idea that Paris needed to be a more affordable city. We’d all agree with that — no one wants to pay exorbitant rents and finding long-term rental apartments is near to impossible. Many major cities face the same issue and therefore the interest in rent controls has increased. However, economists disagree.

Forbes wrote this past April: “How Ironic: America’s Rent-Controlled Cities Are Its Least Affordable.” In a recent article in The Economist, “Do rent controls work?” (Aug 30th 2015), the evidence proves they don’t. “…a restrictive price ceiling reduces the supply of properties on the market. When prices are capped, people have less incentive to fix up and rent out their basement flat, or to build rental property. Slower supply growth actually exacerbates the price crunch. Those landlords who do rent out their properties might not bother to maintain it, since both supply and turnover in the market are limited by rent caps; landlords have little incentive to compete to attract willing tenants. Landlords may also become choosier, and tenants may stay in properties longer than makes sense.”

There is no shortage of arguments agains rent control: See steshaw.org/economics-in-one-lesson — “The pressure for rent control comes from those who consider only its imagined short-run benefits to one group in the population. But when we consider its long-ran effects on everybody, including the tenants themselves, we recognize that rent control is not only increasingly futile, but increasingly destructive the more severe it is, and the longer it remains in effect.” Yet the current administration paid no attention to other cities’ bad experiences or the words of wisdom of the experts.

As a result, I’m having nightmares. I can imagine what will happen to Paris and to my own building, my own neighborhood. Paris could become a slum before our very eyes, like it was pre-Haussmann. Baron Haussmann must be turning over in his grave at the thought of it…

NOTE: To learn more and to register for the Manif, download the PDF.

A la prochaine…

Adrian Leeds
The Adrian Leeds Group

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P.S. The Adrian Leeds Group® still and will continue to offer luxury short-term rental apartments in Paris. Visit Parler Paris Apartments for more information. To find long-term rental apartments, consult our search service at Long-term Rental Search.

P.P.S. Don’t miss the FREE American Expat Financial Seminar with special guests Tanya Uniacke and Carole Jaskarzec from Moneycorp, sponsored by Brian Dunhill, of Dunhill International Financial Planners and the Adrian Leeds Group® tomorrow night, October 8th from 6 p.m. Get all the details and register on our Events/Conferences page!