France’s ‘temporary’ Rent Controls Are Proving Anything But Temporary

France’s “temporary” rent controls are proving remarkably permanent. As politicians debate extending them, the French experience offers an important lesson for Spain—and anyone interested in housing policy.

Most people have no idea where rent controls exist. Unless you happen to live there, it’s not the sort of policy that makes international headlines.

Most property owners in Spain don’t even realise that rent controls are already in force in Catalonia and a handful of other municipalities. Fewer realise that France has gone much further than Spain, with dozens of cities operating rent controls introduced as a supposedly temporary experiment. As is so often the case with government intervention, temporary measures have a habit of becoming permanent.

A recent article in the French daily Le Figaro offers an interesting snapshot of where the debate now stands.

A political battle over ending rent controls

The article reports that the newly elected president of the Lyon metropolitan authority wants to abolish rent controls in Lyon and neighbouring Villeurbanne, arguing they are counterproductive.

“The people who benefit are those already installed,” she argues. “Show me that rent controls house more people. Our priority should be restarting the construction of new homes.”

Supporters see rent controls as protection against rising rents in expensive cities and preventing ‘gentrification’. Critics argue they merely redistribute a shortage, helping incumbent tenants whilst making it harder for everyone else to find accommodation.

Once rent controls are introduced they become politically difficult to remove. Tenant groups quickly become dependent on them, politicians become reluctant to withdraw them, and what was sold as an emergency response gradually becomes part of the permanent regulatory landscape.

France’s experiment, introduced under the 2014 ALUR law, now covers 69 cities and the national government is considering extending or continuing it beyond its planned expiry.

The real problem isn’t rents

The argument made by Lyon’s new leadership is one SPI readers will recognise.

• High rents are not the underlying problem. They are the symptom.
• The real problem is that demand for housing exceeds supply.
• When that happens, rents are simply the price signal reflecting scarcity.

The obvious question is why housing has become so scarce across much of Western Europe.

One answer rarely acknowledged by politicians is that governments have spent decades steadily making residential property investment less attractive. Higher taxes, stricter regulations, tougher energy standards, greater legal risks, increasing tenant protections, longer eviction processes and lower expected returns all reduce the incentive to build, buy or let homes.

Like the proverbial frog in slowly heating water, each individual measure appears manageable. Taken together, they gradually squeeze private investment until fewer rental homes are built or remain in the market.

The mood in France

The comments beneath the Le Figaro article illustrate just how widespread this perception has become amongst many French readers.

One commenter argued that “if you freeze rents, you won’t have landlords left”, while another said they would “never again invest in rental property” because of political hostility towards landlords and a legal system that increasingly favours tenants.

Several pointed instead to taxation and regulation as the real drivers of rising housing costs, arguing that lower taxes and fewer barriers would encourage investment, increase supply and ultimately reduce rents through competition.

Of course, reader comments are not scientific evidence, but they do provide a useful window into the growing frustration of many property owners who feel they are being blamed for a housing crisis they believe has been created by decades of political decisions.

The same debate across Europe

France is hardly unique. Spain has introduced rent controls in Catalonia and other designated stressed markets. The UK has steadily increased regulation, taxation and restrictions on private landlords whilst debating further tenant protections.

Different countries, different political systems, but remarkably similar thinking.

The uncomfortable question for policymakers is whether continually making rental investment less attractive can ever increase the supply of rental housing. The answer is, of course not.

Rent controls undoubtedly benefit some sitting tenants, particularly those already established in desirable locations. But they do little for would-be tenants trying to enter the market for the first time. Without a significant increase in housing supply, rent controls simply ration scarcity rather than solving it.

And that’s why I keep an eye on France. It may offer a preview of where housing policy elsewhere in Europe is heading.