[Opinion Column] Assessing the rent caps in Paris

The Opinion Column of Maud Velter, Associate Director of Lodgis
A Qualified Lawyer, Maud Velter specializes in the field furnished and temporary property rental. After working in the property department of a major Parisian law firm, she joined Lodgis in 2006 as Associate Director and General Counsel. Alongside with her position at Lodgis, she also regularly participates in conferences on legal and tax issues related to temporary furnished property rental. With her brother, Fabrice Petit (President of Lodgis), Maud Velter has also co-written the « Guide Pratique de la Location meublée et saisonnière » (Éditions Maxima).www.maudvelter.com

The rent caps in Paris: The essential facts

The rent caps on Parisian properties will soon be celebrating their first anniversary. Let's take stock: has this key measure of the loi ALUR delivered its promise? Initially supported by Cécile Duflot then by Silvia Pinel, and finally by the current Minister for Housing, Emmanuelle Cosse, the rent caps in the capital have not been easy to implement. Effective as of August 1st, 2015, this policy could be extended to other French cities... Before considering such an extension, it would undoubtedly be wise to address these measures and address the central economic and legal facts.

Extra charges, the best way to get a fair price

As a reminder, the loi ALUR means that, in densely populated areas, the price of a rental property cannot exceed a rent benchmark that's set by the Prefect based on statistics produced by local observatories for rent, with 20% added to this figure. However, if a property offers a superior location or level of comfort and amenities, the landlord can demand a higher rent by adding additional charges.
This last point has widespread reaction, with some angrier than others, arguing that this is simply a means of « cheating » or « bypassing » the law. But the right to apply additional charges was rightly implemented for certain properties, in which factors such as location and comfort that should affect the rent prices, would not have been taken into account by the rent benchmark. Enforcing extra charges, where justified, is therefore entirely legitimate.

From rent benchmarks to unrealistic criteria

Furthermore, the potential increase (+20%) to the rent benchmark has, on a number of occasions, been confused with « a permitted margin of error ». Once again, this measure, which is discussed in the legal document, shouldn't be the source of misunderstanding.
Remember that there are only four criteria for setting the rent benchmark (location, period of building, furnished or unfurnished, and number of rooms). The condition of the property is not taken into account: the rent benchmark remains the same, whether the property has just been refurbished or with bad paintwork and run-down bathrooms. Equally, the rent will be the same for an apartment on the 6th floor with or without an elevator and for a property with or without a parking space.

Nothing to complain about: Tenants are in tune with rental costs

The total cost of additional charges and their justification must be mentioned in the rental contract. The tenant, having explicitly accepted these additional charges in signing the contract, will still have a three month period in which to dispute them, firstly by complaining to the commision de consiliation compétente, and, if no agreement can be reached between the parties, the matter can be taken to court.

What we are seeing in practice, in terms of the extent to which extra charges are being properly justified and explained, is that tenants are generally honest and keep their word. Future occupants sign the leasehold agreement as they don't wish to do this after moving in. The 40 cases submitted to the commission de conciliation since August 2015 illustrate how rare rental disputes are in Paris. Some believe that this is due to the fact that tenant don't dare make their views known...perhaps it would be better to simply listen to the tenants themselves?

In furnished rentals, which constitute an entirely separate housing stock, generally offer a superior level of service, extra charges seem to be more well received because they are more tangible. An internet connection costing the landlord €37/month, which makes up extra charges of €40/month, will be more easily accepted by a tenant than an attractive view or a new bathroom, which can be seen as too abstract.

The fantasy of improving access to housing

The primary aim of the rental caps in Paris was to make housing more accessible by restricting price increases. However, the idea that everyone can simply live in Paris is nothing short of utopian: the housing stock in the capital hasn't increased, and the laws of the market dictate that it is the most desirable tenants with the « best » financial records who get the most sought-after housing. This is all the more so in the present context as landlords are more cautious with client records (the fear of unpaid rent is partly the cause of this phenomenon).

In addressing these economic realities, the rent caps don't appear to be actually improving access to housing for low-income households. The only solution is to put more accommodation on the market to solve the supply and demand crisis.