A view from the window onto Paris is expensive
As reported by "International French Radio", the "housing issue" has long been seriously poisoning the lives of Parisians and visitors to the French capital. Market prices for rental housing are called exorbitant: over the past 10 years they have grown by an average of 42%! The problem of excessively high rent also affects other large cities in France.
In his election platform, President François Hollande promised to limit rent in areas where it is "excessively inflated". He fulfilled his promise number 22 only partially. The restrictions came into effect on August 1 only in Paris – as an experiment. According to a June opinion poll, three-quarters of the French support the experimental scheme.
The capital was divided into 80 sectors, in each of which a "base" rent for each type of apartment is set. This price depends on the number of rooms, year of construction, and the presence or absence of furniture. The "base" rent is by no means an amount authoritatively set by the state. It is about the average market price of renting an apartment of a certain type in that sector.
Now, when concluding a contract with a new tenant or renewing a contract with an old tenant, the landlord must observe the "golden rule": the amount of rent cannot exceed the base rate by more than 20%.
According to Paris authorities, this restrictive measure should lead to a reduction in rent for at least every fifth new tenant. One third of tenants can expect a reduction of up to 50 euros, another third may benefit from the reform by 50-100 euros per month. The remaining – tenants of expensive apartments – can save more than 100 euros. For 10% of them, the savings could even exceed 240 euros – optimistically predicts the Observatoire des loyers de l'agglomération parisienne (Olap).
A lower limit has also been set for rents – the cost of renting cannot be lower than the base by more than 30%. However, the government decree also provides for exceptions: the landlord can set an additional surcharge to the "permitted" price if the apartment has some exceptional features that stand out from the general range in its area. The rent can be higher than the base by more than 20% if you are renting a property with a large balcony, a small garden, or, for example, a unique view from the window.
In Paris, authorities have posted an interactive map of the capital online, where anyone can check the base, as well as the maximum and minimum price of an apartment they intend to rent. If the owner demands a higher amount, you can simply refuse to sign the contract or, after signing, then contest the price. "If a dispute arises over the amount of rent, you have the option to contact a special 'conciliation commission' of the departmental housing relations office," explains Dominique Gadex, head of the Housing Information Agency in the capital department. "You can directly go to court to get a court decision in case of an irreconcilable conflict."
The period for contesting an inflated rent is set at 3 years. Only 3 months are allowed to challenge an "exceptional" surcharge for non-standard amenities.
Will the reform actually lead to a reduction in rental prices in Paris? Even the Housing Information Agency prefers to forecast the future with caution. At the very least, they hope for a halt in price growth to truly "stratospheric" levels. "It is very possible that prices will now not be higher than the base plus 20%," says Dominique Gadex. "Thus, the limits have been set that will prevent too much of a price increase."
The results of the reform are eagerly awaited both by tenants with modest incomes (including students) and the middle class, which in recent years has been forced to leave Paris, moving to the suburbs. Indeed, it is considered great luck to find a 10-square-meter room "in the attic" with shared facilities "on the floor" for 650 euros per month.
Against the socialists' reform to limit rent growth in Paris and other large cities, real estate market experts lined up on a united front. They fear a crisis in their market: price restrictions could scare off investors, for whom investments in the capital's housing stock will cease to be attractive due to reduced profits. It is no secret that most real estate transactions in Paris are currently made not by private individuals who have decided to acquire an apartment, but by investors.
The scheme itself proposed by the authorities to curb prices is extremely complex and cumbersome. The Observatoire des loyers de l'agglomération parisienne (Olap) needed two years of work to collect complete statistics on market rental prices. Only by having such reliable statistics can the "base" prices be calculated.
The lack of such statistics in other French cities greatly adjusted the government's initial plans. Initially, by a law of March 24, 2014, restrictive measures were proposed to be introduced in 28 urban agglomerations in France. This was insisted upon by the then Minister of Housing Cécile Duflot, a representative of the Green Party. In the end, she left the government, and Prime Minister Manuel Valls "clipped the law's wings": it was decided to carry out the reform only in Paris – as an experiment.
The Lille city hall, led by Martine Aubry, former head of the Socialist Party, is determined to adopt the capital's experience. The authorities are trying to collect price statistics but have not been very successful so far. Local real estate agencies are in no hurry to provide rent data, sabotaging work under any pretext, complains the local Housing Information Agency. La Rochelle and Grenoble have also officially announced plans to introduce restrictive measures. Grenoble Mayor Eric Piolle, from the Green Party, recently expressed indignation: the French are forced to pay an average of 50% more for housing than Germans. Grenoble plans to introduce measures to limit rent increases at the end of 2016.
Special monitoring commissions, which are supposed to track market housing prices, exist in 15 major French cities, but they are working half-heartedly. Local authorities lack the political will and desire to regulate the real estate market, note experts surveyed by Agence France-Presse.
Additionally, since August 1, 2015, France has introduced a new standard rental contract. The new rules are supposed to make the document more informative. From now on, the contract must include the amount of rent paid by the previous tenant. The owner is also required to describe in detail the repairs made before signing the contract and indicate their cost. The contract must specify the procedure for collecting utility payments, as well as the amount of commission paid to the intermediary, the real estate agency.
On August 1, another government decree on the rules for calculating rent for tenants came into force. This decree has been updated annually since 2012. Its goal is to limit excessive increases in rental prices when signing a contract with a new tenant or renewing a contract with an existing one. According to the decree, the new price cannot be arbitrary. It can differ from the previous one only by the amount of a specially established index – quite small. This index, in particular, determines the ceiling for rent increases during the term of the lease (the owner has the right to increase rent annually, but the maximum percentage of increase is set by the government).