Wednesday 10 February 2021
Rent controls are in place in Paris, but a new study suggests a 40% level of non-compliance with the regulations.
Since July 2019, as a result of the Loi Elan 2014, rents in Paris are controlled, in a measure called l'encadrement des loyers. The delay in implementing the measure was due to a legal challenge.
The rule applies on signing of a subsequent tenancy of the same property, when the landlord must respect a ceiling rent, called the loyer de référence.
Both furnished and unfurnished lettings are covered by the law, although short-term lettings for holiday or business (meublés de tourisme) are excluded.
In addition, on the letting of a new rental property the landlord is free to set what the market will bear.
Of particular concern to the authorities has been to protect the interests of tenants of smaller properties, where rent levels are often exorbitant.
The law stipulates that the rental of the property cannot be greater than 120% of the median value of rents for the type and size of property in the locality, excepting those where improvement works have been carried out or where the gap between the two lettings is greater than 18 months.
Where the property has some exceptional characteristics compared to other similar properties in the area, the rent can also be higher through a 'complément de loyer', eg parking.
There is no specific list of characteristics that give rise to this concession, but the law states: 'Le complément de loyer doit être justifié par un élément réellement exceptionnel par rapport au bien de la même zone ayant les mêmes caractéristiques de nombre de pièces, de date de construction ou de location meublée ou vide.'
The tenancy agreement must specify the previous rental and landlords who breach the rule can be heavily fined, although enforcement to date has been weak.
The government have put in place rental observatories to determine the reference rents that apply, which can be found at Encadrement de Loyers.
In a study recently carried out by the consumer group CCLV (Association nationale de défense des consommateurs et usagers) they found that 40% of the advertised rentals did not comply with the law.
The amount of the excess rent varied by type of property, but average €121 a month, around €1,500 a year.
However, there were also glaring examples of abuse, such as an advert for property proposed at €1,270 a month, that should have been capped at €990, leading to an excess rent of €4,400 a year.
On those websites run by professional landlords, the level of conformity varied between 27% (Paru Vendu) and to the best of 93% (Foncia).
The worst offenders where private landlords, where the level of compliance averaged 50%. The performance of estate agents was 75% compliance.
Nevertheless, one weakness of the study is that it would not have been possible to establish from the adverts whether improvements had been carried out to the property, which would then allow the landlord to charge a higher rent.
The encadrement de loyers can apply in other metropolitan areas, although it has yet to be introduced, excepting in Lille, where it has been in place since 2020. Other cities who have expressed interest include Bordeaux, Grenoble and Montpellier.
Outside of these areas, there are other rental controls in place in areas of housing stress*.
These controls mean that the rental on the new letting cannot be any higher than that of the previous letting, adjusted by the inflationary increase in the rental index - the Indice de Référence des Loyers (IRL).
There are exceptions to the rule, such as where major works have been undertaken, or where the previous rent was manifestly too low in comparison with other local rents.
Since January 2021, in 28 conurbations of housing stress*, a landlord is not permitted to increase the rent on a new tenancy (or renewal) if the thermal insulation value of the property is greater than 331 kWh per square metre per year, i.e. a F or G class dwelling.
Those areas of housing stress are:
Ajaccio, Annecy, Arles, Bastia, Bayonne, Beauvais, Bordeaux, Draguignan, Fréjus, Genève-Annemasse, Grenoble, La Rochelle, La Teste-de-Buch-Arcachon, Lille, Lyon, Marseille-Aix-en-Provence, Meaux, Menton-Monaco, Montpellier, Nantes, Nice, Paris, Saint-Nazaire, Sète, Strasbourg, Thonon-les-Bains, Toulon, Toulouse.