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Did you know that short-lets were forbidden in Paris?
You own a flat in Paris, but most of the year it remains empty? Renting it out for a month, a week or even a day seems to be a reasonable option. Not only are you still able to enjoy your apartment in Paris whenever you feel like it, but it also makes a profitable investment. Although very common, this practice is nevertheless illegal.
A landlord was fined £13,000
A landlord received a £13,000 fine for renting out his flat short-term, and he is not the only one. Last year, the Paris City Council fined 19 landlords for renting out their flats for a day, a week or few months. The mayor's office based its decision on the French Construction Code, especially on Article L. 632-1 and L. 631-7. But the majority of landlords do not know (or pretend they don't know) these laws.
Only commercial premises can be rented short-term
According to Article L. 632-1 of the French Construction Code, furnished flats have to be rented out for at least a year (or 9 months in the case of student tenants). Below this limit, the rents fall into the “commercial premises” category. To rent out your flat short-term, you have to change its status, that is to say you have to change its usage from housing to commercial premises.
Changing the flat’s status is a complicated process
To change the status of a flat, a landlord has to ask for the City Council’s authorisation (Article L. 631-7 of the French Construction Code) and pay a “tax” called "commerciality".
Legally, France strongly protects housing, so when a landlord wants to use his flat commercially, he has to compensate for this loss of housing space. Called “commerciality”, this compensation is the equivalent of a tax indexed on the flat’s size and the price of a square metre in the area. Depending on how big the flat is, the landlord will be required to buy a number of virtual square metres which will be based both on the area and the price per metre within this area.
For example if you own a 25 m2 studio flat in a central area, you will need to pay compensation worth the equivalent of 50 m2 in the same area. Only once this has been completed and asked for the City Council’s authorisation, your flat status will be changed to become commercial. You will then be allowed to rent it out short-term.
This law applies to Paris and to cities with more than 200,000 inhabitants, but it seems that Paris is the only city that really implements this law. Indeed, the Paris's Mayor, Bertrand Delanoë and his cabinet want to limit short lets to make Paris more affordable for Parisians. This tax makes it practically impossible for landlords to change the status of their flats.
Stopping Paris from becoming an outdoor museum
The high prices of short-term rents have been identified as one of the contributors to the global inflation in housing prices in Paris. Today more and more Parisians cannot afford to live in the French capital and move to the suburbs, transforming the city into an outdoor museum.
Over the years, this phenomenon has become worse but then this is also true of many other major cities around the world. Paris City Council estimate that approx. 20,000 flats have come out of the long-term market pool to feed the short term one. The reason is simple, it is far more profitable to rent out a flat to tourists for the night than renting it out to Parisians.
“Prices have become so crazy in Paris that we need to be reasonable and civic. I ask all the landlords to stop being so venal and to rent out their flats long-term, because Paris is becoming an outdoor museum. Soon it will have no soul and be filled with tourists.” commented a property agent on LeFigaro.fr, the main right wing newspaper in France.
By forbidding short-term rent the Mayor hopes to convert short-term lets into long-term ones thus increasing the number of properties available for long-lets.
A counterproductrive law
Finding a flat in Paris requires a lot of patience and money, but banning short-term rentals will not lower Paris’s housing prices. In reality, this kind of rental represents 1.5% of the whole housing market (20 000 out of 1 250 000), therefore it is unlikely to have a dramatic effect on the market.
Far worse, banning short-term lets, contrary to what may be expected, could limit the number of furnished flats available in Paris. If these flats were no longer rented out to tourists, they may in most cases remain empty for long periods of time. Most of the owners want to be able to come back to their flat whenever they feel like it. Owners also claim that there are a number of reasons why they would not put their flats up for long-term lets: first of all, they view long-term tenants as far too protected. It is for instance very difficult to evict a tenant who does not pay his rent. They also claim that more damage is made to their apartments and that they cannot really claim back.
As it stands, there are already 116,000 empty flats in Paris, and their number is likely to increase if this law is rigorously applied, which could take as many as 20 000 additional flats out of the market altogether.
Can we deal with the housing shortage by limiting property rights?
By stopping owners from doing what they wish with their property in terms of rental contravenes property rights as defined in the French Civil Code. The law allows individuals to benefit from and use their property assets absolutely and exclusively. The owner of a flat should be able to leave it empty, to rent it at the price and for the amount of time he desires, without the government's permission.
Nevertheless, Article 17 of the French Declaration of the Rights of Man and Citizens includes limits to property rights: “Property being an inviolable and sacred right, no one can be deprived of it, unless demanded by public necessity, legally constituted, explicitly demands it, and under the condition of a just and prior indemnity.”
Public necessity can thus limit private property if required. If we consider that the housing shortage in Paris is a public necessity, Paris City Council is within its rights to ban short-term rentals. But where does public necessity stop? In the name of housing shortage, could the Government requisition all unoccupied flats?
Not only is the frontier between public necessity and public appropriation blurred, but this law is not best suited to resolve the matter. It may even reduce available housing stock.