Tax rises for property owners: French mayors say they have no choice

‘A commune cannot borrow to cover its running costs. We don’t have the right, unlike the central state’

Owners of property are facing most of the burden of local taxation
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French mayors and a homeowners’ federation say the end of the residential tax on main homes has forced them to put up the taxe foncière paid by property owners.

Other reasons given include electricity prices, and the need to complete ‘green’ renovations. The mayors say they do not get enough funding from central government.

The UNPI property owners’ federation says a trend in recent years for rates to rise overall (as opposed to staying the same or dropping) is continuing.

Examples include a 19% increase in council percentage rates in Nice (Alpes-Maritimes), 14.5% in Nancy (Meurthe-et-Moselle), 14% in Annecy (Haute-Savoie) and 10% in Villeurbanne (Rhône).

All councils have now voted for the rates which will apply to bills to be sent out this autumn to people who owned a property in France on January 1, 2024.

Read more: Taxe foncière French property owners’ tax – what rises on the way as councils vote 

These are on top of across-the-board rises of 3.9% to the tax due to the annual inflation-linked increase in each property’s theoretical annual rental value (VLC). Local council rates are then applied to this.

The co-president of the finance commission of the Association des mairies de France, Emmanuel Sallaberry, said it is true that we have been seing more communes increase their rates compared to previous mandates (ie. before the last elections in 202), he said.

Among France’s 36,000 communes, many raised them again this year – though he had not – but he said more in total left them stable than put them up, and in general those that raised them last year, have not done so again.

However, the president of homeowners’ federation UNPI, Sylvain Grataloup, whom we also interviewed, stated that he was aware of a number of councils which increased their rates last year and have done so again.

Mayors explain pressures facing French communes

Mr Sallaberry said: “For the last three or four years we’ve had really major increases in our expenses, notably due to salary increases, decided by the state, and electricity costs, as we’ve had almost no security net [against increases], unlike members of the public.

“The ‘golden rule’ is that a commune cannot borrow to cover its running costs. We don’t have the right, unlike the central state. So, if the budget isn’t balanced, we are obliged to increase the money coming in.”

Mr Sallaberry added: “The problem is that people are asking for more public services than ever before and we have high inflation so the communes, unfortunately, have no choice but to increase taxe foncière.

“And with abolition of taxe d’habitation [paid by no main-home owners since 2023] the burden is only on property owners, so we have a serious problem with the consent of the citizens to taxation, as one person in two, is paying no property tax.

“Among the owners, some have money, but others, for example, have inherited a property and are struggling to make ends meet.

“We’re raising the alert that it is important that citizens consent to tax and that citizens, in proportion to their means, participate in the life of their town. The fact that half the citizens aren’t paying, poses problems with balance in society.”

Mr Salaberry said the annual rise in VLCs cannot compensate alone. 

Electricity price alone has almost doubled in last few years

“If you look at electricity prices alone, we’re up 150-200% since the start of the war in Ukraine [2021].

“Salaries increased more than 3.9% over the last year, and many council workers also qualified for purchasing-power bonuses, so mayors are struggling to cope.

“And most mairies are wondering what it means for their investment in their local areas. We’re being told to make energy savings, we’re asked to install solar panels, sound insulation etc.”

“We hear people complain that mairies must be spending too much – I don’t say there aren’t good and bad mayors – but we refute the idea that mairies are all terrible spendthrifts.

“Since 2015, under François Hollande – it was called the stability pact – communes have contributed €80billion in savings because the state has reduced our running grants.”

Meanwhile, extra grant money meant to compensate the loss of taxe d’habitation has been calculated based on population sizes in 2017, he said.

“But populations haven’t stayed the same. If I welcome an extra 1,000 people in my commune, for example, I need more schools.”

Local tax system must be ‘rebuilt’

Mr Salaberry said there is a need to “rebuild” the system of local taxation over coming years.

“If we want to decentralise, and if we want to invest to properly join the 21st century, we’re going to have to think about it, and come back to a universal contribution, each citizen according to their means.”

The president of homeowners’ federation UNPI, Sylvain Grataloup, said one reason for new rises in taxe foncière is that some councils may feel this is the last chance to risk such “unpopular” measures before the local elections in 2026.

“Another reason is that the [central] state grants that were promised to compensate for the loss of the old taxe d’habitation income [on main homes] are in reality not increasing.

“So, the communes now have almost no lever to increase their resources, apart from taxe foncière.

“It’s true that if money coming in is less than their expenditure, the councils must find funds.

‘Unfair’ that local tax burden falls only on owners 

“But it’s quite unfair that the burden of compensating for the decision by the central state to make taxe d’habitation disappear should be borne only by one part of the population – property owners.

“Owner-occupiers must pay taxe foncière, as well as owners whose properties are occupied by tenants – in this case to finance local services that the owner doesn’t benefit from. And the tenant, who does, pays absolutely no tax.

“And it’s all accentuated by an increase in energy costs, plus inflation. But we homeowners are also concerned by these. At the same time, rents are not going up and are frozen by the IRL [indice de référence des loyers; it allowed a maximum 3.5% this year]. On top of that certain cities also have their own rent controls.

“All of that together means the owners and UNPI are very angry, and the majority of property owners, who are middle class, are getting considerably poorer.”

Mr Grataloup said it does not help that the VLCs are linked to inflation, not average increases in rents.

Energy renovations are expensive

“Our income from rental is going down, as it represents the difference between the rent we receive and our expenses, and the expenses are going up – whether it’s taxe foncière, income tax on property income which is also significant, and new costs linked to energy-efficiency renovations.

“The renovations are expensive and also mean properties can’t be rented out for a certain time, while we have the work done.

“In some cases landlords are making a loss, not a profit.”

Taxation of long-term rentals is ‘catastrophic’

He added: “France’s tax system as regards long-term rental is catastrophic, which has been encouraging some owners to move towards other options such as holiday rentals, understandably. 

“But, as we know, that tends to cause an imbalance in the property market in certain communes, and we can’t house people long-term because there are so many holiday rental properties.

“As a result, the government wants to tax holiday rentals more. But holiday rentals in themselves are not the problem.

“If, one day, they make long-term rental just as attractive as holiday rental, people won't make their choices based on taxation, but will make them depending on needs in the local area.

“In the meantime, French people are going to choose the model that seems to them the most interesting, especially in these difficult times, when they are becoming poorer and losing purchasing power.”

Typical property owner ‘is not rich’

He added: “I want to stress that the typical property owner is not rich, they are middle class, and it’s this middle class that can help our economic growth to get going again; rather than those who are in the greatest financial difficulties. 

“But at the moment, we’re pushing into poverty those who could help this return to growth.”

It comes as the owners also feel “under constant scrutiny”, via the new property usage declaration obligation, he said.

“All in all, you might think these are not very enjoyable times for property owners.

“But home-ownership remains something that allows families to have long-term security and to build up capital. It also frees up the state from expenses linked to having to build to accommodate citizens and allows older people to top-up meagre pensions.

“Owner-landlords have capital that helps them avoid having to ask for benefits, and they give work to building trades.

“We are also, inevitably, involved in the ecological transition – improving properties’ energy efficiency.

“So, we need to change the way property ownership, and owners, are seen in France.”