As from August 1st 2015, rentals Paris provides on its housing market, will see their prices capped. This most awaited decree of the housing law ALUR (Accès au logement et un urbanisme rénové), enacted in March 2014, will be implemented in 2 cities: Paris in August 1st and Lille (in 2016). This measure aims at regulating strained private rental markets and at providing more secure relations between tenants and property owners.

So how does this new measure work ? Does it spell good news or bad news for tenants ? Let’s find out.

Understanding rentals: Paris new rules

Before committing to any Paris rentals, here’s what you need to know.

For any new housing rental contract or contract renewal, the rental price will not exceed 20% of the rental price reference nor be inferior by 30% Click To Tweet (price reference is set by the prefect).

This rental price reference will be equal or close to the median benchmark rents calculated by the OLAP (Observatory of rents for the Paris area). These figures, available on the OLAP website are to be confirmed in the coming weeks. This OLAP has divided Paris into 14 zones with similar rent levels (different from districts) and specified rental price references according to rental type (Studio, 1 bedroom, 2 bedrooms, 3 bedrooms and more), the year of construction (prior to 1946, 1946-1970, 1971-1990 and after 1990) and the location.

These median benchmark rents capped by 20% cannot be exceeded unless the apartment presents certain qualities (in terms of location or comfort) compared to other dwellings of the same category and location. In this case a rent supplement (complément de loyer) can be requested. These qualities are yet to be defined by the decree.

A sneak preview of futur prices in Paris rentals

This rent control decree impacts small apartments as well as family apartments.

If we look at the OLAP’s latest information available on their site, we can see that :

  • Zone 1, corresponding to some neighborhoods of the 7th and 6th district, is the most expensive.

E.g.: 3P (2B) built before 1946: 26,4 € x 20% = capped price of 31,68€/sqm

E.g.: 4P (3BR) built before 1946: 27,3 € x 20% = capped price of 32,76€/sqm

  • Zone 2 corresponding to some neighborhoods of the 8th, 9th and center of Paris is also costly

E.g.: 3P (2B) built before 1946: 25,8 € x 20% = capped price of 30,96€/sqm

E.g.: 4P (3BR) built before 1946: 25,2 € x 20% = capped price of 30,24€/sqm

  • Zone 14 corresponding to the east side of Paris include the lowest capped rental prices

E.g.: 3P (2B) built 1946-1970: 18,1 € x 20% = capped price of 21,72€/sqm

E.g.: 4P (3BR) built after 1990: 19 € x 20% = capped price of 22,8€/sqm

The impact of the decree on the Paris rental market

The goal of this decree is limiting abuses rather than imposing lower rents on landlords since many apartments in the capital (mostly smaller surface areas built before 1946) are overcharged. According to the OLAP, one tenant out of 5 tenants in Paris should benefit from this new measure.

However, this decree has created great controversy as real estate professionals find inappropriate and overdue. They fear it will discourage new investors and find its late implementation ineffective when newly signed rental contracts in large cities have already started declining. Moreover this regulation applies only when a new contract is signed whereas tenants change homes only every 7 years…

Finally, if this rent control measure were to lead to a significant gap between rent levels and property sales prices in Paris, landlords will opt for the sale of their property. Consequently, this would both reduce the private rentals Paris could offer and contribute to their deeper deterioration, as it would hamper residential mobility. Will tenants benefit from this law then? The questions stands…

Your turn !

If you’re planning on renting an apartment in Paris from August 2015, make sure that your contract includes:

  • The rental price reference (…€/m2) for your apartment category+ the raised rental price (which should not exceed 20% of the rental price reference)
  • The amount of the rent supplement (if requested by the landlord) and characteristics of the apartment that justify this supplement
  • The rental price paid by previous tenant
  • The value (in euros) and description of works conducted in the rental

You’ll also receive an information notice (Notice d’informations) detailing the rights and obligations of tenants and property owners as well as ways of settling possible differences.

How do you feel about this new measure? Leave your comments or share this article with other friends moving to Paris !