Housing market in France – How the government will undo the Duflot law

The government is expected to announce this week a plan to revive the housing market in France.

With the weakness of the construction is expected to cost French growth 0.4% this year, things have become serious. Of course, whilst these conditions are creating incredible opportunities for overseas buyers, the domestic housing market is a corner stone of the economy.

It is this week that the government will announce its action plan to boost new housing construction and as a result it will likely pass on many of the implications the Duflot law has passed onto French professionals over the last years.

While official sources refused to reveal the main measures of this plan, arguing that many arbitrations remain to be done, several possibilities have emerged. They relate mainly to tax changes, relaxations in building standards and ways to have more land for development.

Among the selected changes, there is to be a large scale revival of the rental investment sector, with a broad easing of the Duflot tax system, thus replacing the Scellier. So far, the housing built under the scheme must be rented to someone else; tomorrow it may be that a descendant or older family member can use the property. This was an idea condemned at the time by Cécile Duflot, who said that it “focuses on the housing rent for families who already have wealth.”

Taxation of capital gains

The government has already attempted to reform the taxation of capital gains to make the costs lighter for owners selling quickly. But the measure was refused by the Constitutional Council and must therefore be revised. The measure could get pushed through as a special deduction for sales occurring during the first three to five years, supported by the French Building Federation solution.

The government also intends to accelerate the impact of simplification across the rules of construction. “You have to be more flexible,” says Henry Buzy-Cazaux. Seismic tests and standards, for example currently have to be undertaken when providing two parking spaces per dwelling and the handicapped accessibility is another major additional cost.