This is one of the real estate topics that is likely to revive debates in the National Assembly, once France finally has a new government. It concerns the taxation of rentals. Currently, renting out your furnished accommodation is more advantageous from a tax point of view than if it is empty. The same goes for short-term rentals compared to long-term rentals (furnished or empty). To encourage owners to return to long-term rentals and thus reassure students in particular who are struggling at the start of each school year, Renaissance MP Annaïg Le Meur and her socialist colleague Inaki Echaniz are campaigning for an alignment of tax regimes.
Their bill was adopted by the National Assembly and the Senate and is awaiting the green light from the Joint Committee (composed of deputies and senators). This decision is eagerly awaited by owners who believe that long-term rental is little or not profitable because of the rental income considered too low. An observation confirmed by Annaïg Le Meur who has just published a report on rental taxation, commissioned by former Prime Minister Élisabeth Borne.
Risk of greater housing shortage
The average profitability over 12 years (excluding capital gains) of a rental investment is two to three times lower for an unfurnished rental than for a short-term furnished rental, in the case of a marginal income tax rate of 30% (middle class). This is the observation made by Annaïg Le Meur who examined four cities (Annecy, La Rochelle, Montpellier and Paris 13th) where 40 m² apartments, sensitive to competition between the different types of rental, are over-represented.
Thus, in La Rochelle, where 80% of housing is rented furnished and 72% of rented properties are studios or 2-room apartments, the average profitability is only a little over 1% for an unfurnished rental (actual tax regime) and up to almost 3% for a short-term furnished rental (actual). In Annecy, which is one of the three cities – after Paris and Lyon – where rental tension is the highest, according to Thierry Vignal, an expert in rental investment, the profitability gap is just as high: 1.3% for an unfurnished rental (actual) and 3.6% for a short-term furnished rental (actual).
For very wealthy households (marginal income tax bracket at 45%), it is worse. The average profitability of an unfurnished rental (real cost regime) is downright zero or even slightly negative in the four cities analyzed by the parliamentary report. Where it ranges between 1.7% and 3% for a short-term furnished rental, depending on the tax regime adopted (real or micro-land). However, these households, most of whom are multi-owners, if they decide not to rent out their accommodation, will reduce the rental supply and accentuate the housing shortage. Enough to amplify the rise in rents in the process.
