Rents for all French people could increase this year. It remains to be seen whether the increase will be more or less strong than in previous years.
Bad news hangs over all tenants in France: rents could increase during the year 2024. In question, the rent shield, put in place by the government to limit the increase in rents during periods of inflation , ended on March 31.
This mechanism capped the change in the rent reference index (IRL) at 3.5% over one year. However, this index, defined each quarter by INSEE according to changes in the inflation rate, serves as a basis for rent reviews. Clearly, an owner wishing to increase the rent of his tenants cannot demand an increase in monthly payments greater than the IRL. Thanks to the rent shield, the IRL was capped at 3.5% and therefore rents could not increase by more than 3.5% per year.
Initially planned to apply until the first quarter of 2023, the rent shield was finally extended until March 31, 2024 due to the increase in consumer prices still in force in the country. However, with the end of the rent shield, variations in the IRL will no longer be limited to 3.5%. Thus, owners will have plenty of time to increase rents beyond 3.5%, in the event that the IRL exceeds this value.
For example, in the second quarter of 2022, the rental benchmark index increased by 3.6%. Proof that without the rent shield a particularly strong increase is possible. Consequently, many tenants are worried that the end of the system will mean an explosion in their monthly payments in the months to come. Indeed, even if inflation is expected to slow down in 2024, it will still remain positive (around 2.6% over the year according to INSEE), which will result in an increase in the IRL and, consequently , rents.
However, since inflation is expected to be 2.6% this year and the IRL is indexed to the current inflation rate, then the IRL should not be higher than the old cap of 3.5% in 2024. Concretely, rents will certainly increase, but the increase will surely be less than 3.5%.
Despite this situation, tenant defense associations are calling on the government to put in place new measures to protect the purchasing power of households. They suggest in particular extending the rent shield until inflation returns to a level close to that before the crisis, or even setting up a compensation mechanism for the most modest tenants.
For their part, landlords argue that the rent shield represented a significant shortfall for them and that the end of this system will finally allow them to return to acceptable levels of profitability. They also emphasize that the cost of maintaining and renovating housing is constantly increasing and that it is normal for rents to follow this trend.
