Second homeowners in Paris will be hit next week with an increase in property taxes, as the city’s policymakers attempt to tackle its chronic housing shortage, but several experts believe the measure’s impact will be minimal.
Hot on the heels of other major cities, including Vancouver, that have made similar moves, Paris’s second homeowners, who currently pay an extra 20% tax in addition to regular property taxes, will see that jump to 60% on Monday.
More:Pablo Picasso’s Final Home Sold to Chairman of Wealthy Family Syndicate
This is part of Paris City Hall’s plan to reduce the number of vacation homes in the city, with the hope being that these measures will entice more well-off homeowners to either rent their properties to permanent tenants to recoup some of the costs, or sell them altogether.
According to The Atlantic’s CityLab, there are more than 100,000 second homes in Paris, accounting for almost 10% of the city’s housing stock, and the city is concerned that many of these will remain empty for large parts of the year.
However, several experts who spoke to Mansion Global are skeptical that the upcoming property tax increase will have the desired effect.
"It isn’t going to have the desired effect because if your second home is worth around €3 million and you have to pay an extra €1,000 a year in tax you’re not going to be that bothered," Mark Harvey, a partner at real estate consultancy Knight Frank, said. "This is just hot air."
Hugo Thistlethwayte, head of the international residential team at Savills, another real estate consultancy, added that while French taxes on property are already quite high (particularly the wealth tax), local taxes tend to be very low.
"It’s not a drop in the ocean, but it’s very manageable," he said. "I don’t think it in itself will have a huge effect."
Instead, Mr. Thistlethwayte believes that France’s presidential election this spring will have more of an impact on the second home market, as a right-wing government would be more likely to review the wealth tax. This, however, would encourage demand for second homes.
Laurent Lakatos, a director at Databiens, a Paris-based real estate data firm, also doesn’t believe that this new tax will encourage second homeowners to rent out their properties, as there is too much protection for tenants instead of landlords.
"These properties are not rented because the regulation on the tenancies are too high. There’s too much tenancy protection, which cuts off the fluidity of the market,"Mr. Lakatos said.
In Paris, tenants can insist that landlords continue to rent a property to them for up to three years following notice to terminate a contract, while rent is also capped in certain areas.
More:An Alpine Chalet in a Movie-Worthy French Locale
A spokesperson for the Mayor’s office in Paris did not respond immediately to request for comment.