France clamps down on tax breaks for owners of holiday lets

Luke James

Tax breaks for owners of tourist accommodation are to be cut as part of an ‘AirBnB law’ passed by the French parliament in response to a growing housing crisis.

The legislation was brought forward by MPs from Brittany and the Basque Country, two of the areas hit hardest by the four fold increase in holiday lets in France over less than a decade.

“In the middle of a housing crisis, and in the face of an explosion in the number of tourist accommodation, which have risen from 300,000 to 1,2 million in eight years, this law was much needed,” said Iñaki Echaniz, the Socialist party MP from the Basque Country who co-sponsored the law.

“Because, while the tourist economy is important, it’s development can’t come at the expense of the life of communities, public services, local businesses.”

Rental income

Currently most people renting out accommodation through Airbnb are eligible for a 50% on rental income of up to €77,700. That is being reduced to a 30% reduction of up to €15,000.

That brings it into line with the reduction for long term rentals, effectively abolishing the tax incentive to prioritise short-term lets.

Local mayors will also have more powers to regulate the sector, including the ability to reserve certain areas for the construction of permanent residences.

For the first time, all tourist accommodation will have to be registered and those who fail to do so could face a fine of up to €20,000.

Blocked

More ambitious changes were blocked by the French parliament’s upper house and a cross-party commission had to be brought together to find a compromise text.

More than two years after the proposed changes were first tabled, they were approved today by 168 votes to 54.

Support came from a wide coalition of MPs ranging from those in the Communist party to President Macron’s liberals.

Marine Le Pen’s far-right Rassemblement National was the only group to vote against the law.

Paul Molac, an independent MP in Brittany, said: “I can’t explain the opposition of the Rassemblement National against a law which aims to prioritise access to housing for the poorest and reducing the fiscal excess which benefits short-term lets.

“I would have liked to gone further to promote long-term over short-term accommodation, but we had to find a compromise for the law to be passed.”

In some parts of the Breton coast, almost one in ten properties are advertised on Airbnb, according to an analysis by AirDNA.

And, according to a new book called ‘Bretagne Secondaire’, there is more holiday accommodation than permanent residences [across 20% of the Breton coast].

In the Basque Country, there was a 130 per cent increase in tourist accommodation between 2016 and 2020.

The housing crisis in France’s largest cities has also been attributed to an increase in the number of short-term rentals through Airbnb.

A studio flat in Paris generates three times more income for landlords when rented out on a short-term basis, according to a report by Oxfam.