In a move designed to lower the number of vacant homes in the city, Paris will increase the tax it levies on second homes, making it way more expensive to keep an additional pad in the city or buy an apartment as a property investment. With a jump from 20% to 60%, the levy will go from being a mere annoyance to a serious deterrent on property speculation.
The tax is applied to homes that remain vacant most of the time, and it’s applied to the rentable value of the property. The goal of raising the tax is to encourage people to sell these mostly unused properties, or to rent them out.
Across much of Europe, most people in cities rent their homes instead of buying. Currently, 107,000 homes–or 7.5% of Paris properties–sit unused, according to Le Monde. By raising the tax, Paris hopes to reduce this number and reduce the pressure on rented housing. But there is a way out of paying this hefty sum for second-property owners: If they fill their empty homes with Airbnb renters for enough of the year, they could avoid being taxed on a vacant property.
“In a city as dense as Paris, where it is very difficult to build, controlling the occupancy of housing is strategic,” Paris deputy mayor Ian Brossat told Le Monde. “Taxing second homes further will encourage their owners to sell or lease them year-round, which will increase the rental supply. Our objective is that these apartments benefit primarily the Parisians.”
A recent change in French law made it possible for areas under this kind of rental pressure to increase taxes up to 60%. Paris, all of which is denoted as a pressurized area, is the first municipality to reach the upper limit. The tax will bring a windfall for the city: Currently, Paris raises around $21.5 million a year from its empty-home tax. Increasing the rate will bring this to almost $68 million. That’s a good chunk of change, but–somewhat ironically–one that the city would rather not have: They’d rather just have the homes filled.