The property tax has increased by 35% in ten years, but why?

A salty bill for the owners? Between 2013 and 2018, the property taxes on the built properties assigned to them (an average amount of 495 euros per inhabitant in 2018, according to the General Directorate of Local Government), increased by 14.8% and since ten years, 34.7%, an increase 3.7 times faster than rents and 3.5 times faster than inflation, denounces the National Union of real estate owners (Unpi) in a study published on Monday.

What to consider that "the real estate rent is not on the side of the owners", insists this association, which will propose in the coming days a charter to the candidates in the municipal elections to "freeze the taxation of their commune and the intercommunality of which they will have the charge "in property tax. While the 2020 budget is being discussed in Parliament, the UNPI is calling on the government and communities to enter into a "tax pact" with homeowners to limit this increase.

What are the findings of the UNPI study?

UNPI, which has compiled the official data provided by the tax authorities, has calculated that the property tax levies levied by local authorities (municipalities, intercommunalities and departments) have increased on average in France by 34.7%.

Among the largest cities with the highest rates are Angers (56.42%), Nîmes (55.91%), Amiens (55.87%) and Grenoble (54.70%). This is much higher than the national average of 38.75%. Conversely, the cities with the lowest rates are Paris (14.15%), Boulogne-Billancourt (15.74%) and Nanterre (21.32%). However, it is impossible to draw comparisons on the basis of these figures alone, because the property tax assessments depend on two elements: the "rental value" of the property (or the base) and the tax rate. Nevertheless, the UNPI highlights certain territorial differences. Thus, "it is the equivalent of more than three months rent is taken in Angers, while a little less than a rent is punctured in Paris." Taking the example of two cities with comparable profiles, Metz and Angers, the UNPI thus finds, in terms of rates, that "the Angevin owners pay on average twice as much as the Messins".

Last but not least, even when tax rates do not go up or down, they can hide increases for homeowners. This is what happened to taxpayers in Isere, where "tens of thousands of homeowners have seen their tax rise by 13% on average without specific statements of taxpayers or control of the administration," denounces the UNPI. Similar evolutions have been observed in Indre-et-Loire. "If the rates seem to be stable in 2019, pre-election year, many owners have undergone operations of revaluation of large rental values," says the UNPI, which speaks overall of "opacity" and "tampering". In these departments, the tax services have re-evaluated the rental values ​​of the properties, in other words the "base" to which the tax applies.

Why are property tax revenues increasing?

As we have said, in calculating their withdrawals, communities rely on the "rental value" of the property, that is to say the amount at which the property can be theoretically rented. Admittedly, these are values ​​determined by the tax authorities from the prices recorded … in 1970. But each year, the base of the rental values ​​is increased by applying a fixed coefficient fixed at the national level which must take account of inflation. This is where the shoe pinches, according to the UNPI: "given a significant gap between expected inflation and real inflation, rental values ​​have been much too much appreciated in recent years".

But the increase of these values ​​also corresponds to the improvement of the habitat. The higher the quality of dwellings (works, comfort criteria …) and their environment (community facilities, urban planning operations, etc.), the higher their rental value increases. "Every year, the General Directorate of Public Finance (DGFIP) ascertains new buildings and significant changes in built properties (presence of a bathroom, swimming pool, etc.) and undeveloped. This results in an upward or downward update of the rental values ​​used as a basis for local direct tax calculations, "explained Bercy in early September. Thus, nearly 149,000 local people were reassessed in 2016 and 134,000 in 2017 as in 2018, according to the Ministry of Economy. In 2019,
it will be up for 130,000 tax households.

But to bring more clarity to the system, the government plans to revise the rental values ​​applied since the 1970s. Listed in the 2020 finance bill, the reform must come into force from 2026. It will apply "Progressive" as well as "constant levy", promises the government.

The other factor in the evolution of the property tax is the decisions of the communities in this area. With € 33.6 billion collected in 2018, the built land tax represents more than a third of the direct tax revenue of local authorities. It is the first source of income from local direct taxation, before the housing tax and the contribution on value-added (CVAE), details the General Directorate of Local Government. However, as the UNPI explains, communities have tended to increase their property tax rates. In France, the prize went to Bouqueval (Val-d'Oise), where it almost tripled (+197.5%) in ten years. Among major cities, in ten years, "it is by far in Paris that the property tax has increased the most (+ 80.9%)", before Argenteuil (+ 64%) and Nantes (+ 55%), highlights UNPI.

If, for the time being, this increase continues over ten years has tended to slow down, the Union fears that taxes will rise again after the municipal elections and thanks to the abolition of the housing tax, which disrupts the finances of local authorities. A strategy that the executive denies, putting forward compensation measures.

Does the evolution of the property tax have an influence on the real estate market?

As part of a real estate project, the amount of the housing tax is a purchasing parameter. The amount collected by local authorities under the built land tax is € 495 per capita on average in 2018, according to the DGCL. But the amounts can vary widely by neighborhood, city, and property characteristics.

For example, "150 euros per month on average on a loan is far from trivial," said Catherine Fumagalli, president of the Orpi network. The property tax can thus make the difference in purchasing decisions in rural areas or in cities where the tension of the real estate market is weaker.

However, in the rest of the cases, "it is not a major subject. In very tense areas, buyers do not ask the question. The offer is so rare that the property tax will not call into question their choice, "she continues. Another element that relativizes the amount of property tax: mortgage rates, which have never been so low.

On the other hand, the real estate network will keep an eye on the revision of rental values ​​planned for 2026. "It is not enough that the government sends another unfavorable signal. It is imperative that the donors continue to invest to maintain a rental offer, "warns Catherine Fumagalli.