Property taxes on vacation homes in the French capital could rise to five times their current rate.
Owning a second home or vacant apartment in Paris may soon get a whole lot more expensive. If new rules agreed to by Paris City Council this week pass through France’s parliament, taxes on second homes in the city could rise to double that for primary residences, while taxes on permanently empty residential real estate would rise by four times.
The measures come as France’s capital goes all out to increase the volume of affordable housing available to local residents. A question mark still hangs over whether the proposal will pass into law—its ratification by parliament is not guaranteed and could take some time. The plan nonetheless reveals the city’s direction of travel. It wants to discourage the use of city center homes for secondary residences, and squeeze far more revenue out of the second homeowners who do hang on.
The proposed increases may seem drastic, but then the problem they seek to address is pretty sizable too. According to proponents of the new rules, Paris has 100,000 homes that are permanently empty (40,000 of them are no longer even connected to the electricity grid). The city also has an estimated 92,000 second homes, the majority of which, according to Paris Housing Commissioner Ian Brossat, are unoccupied for “three-quarters of the year.”
Having so many homes entirely or partly empty shrinks the pool of available rentals for permanent residents in the city. It also has other negative effects. When residents move to the suburbs because they can’t find affordable homes within the city, local businesses suffer as their customer base dwindles. Steadily, the vitality of many neighborhoods starts to wither. In places such as the expensive the Île Saint-Louis for example, the high volume of empty second homes means that the island’s long-standing calm is now almost sepulchral.
As of 2015, owners of second homes in neighborhoods with housing shortages have had to pay 20 percent extra on top of their regular property taxes, but even that surcharge is still relatively low. As Le Parisien explains, the average vacation homeowner on the Île Saint-Louis pays just €142 a year in property tax.
Leaving a home entirely vacant pushes up an owner’s tax bill further, but not by all that much. Currently, empty homes are taxed according to their “cadastral rental value,” a theoretical official estimate of how much rent a property could earn in a year. Preposterously, this rate is still lower for city center homes than it is for public housing, because it has been insufficiently reformed since in the 1960s. Currently, home owners must pay 12.5 percent of this cadastral rate in their property’s first year of vacancy, rising to 25 percent in the second year and onwards.
The new rules would be far less indulgent. Second homeowners would have to pay exactly the same rate of property tax as primary homeowners, a rise from 20 to 100 percent. Owners of entirely vacant property would pay 50 percent of the cadastral rate in their first year of vacancy and 100 percent in the following year.
The idea is to encourage more of these wealthy homeowners to sell, or at least rent their property to permanent tenants. If they don’t, City Hall can still score a win by boosting its tax revenues by as much as €100 million a year. Paris may be taking on a wealthy, powerful set of opponents with these measures, but there’s one good reason they can afford to take the risk. As the city has noticed, many of these owners are not registered to vote in local elections, because they don’t really live there.