New rental restrictions and challenges for the Scellier 2011 and 2012 law in France

Since December 2010, we know the rental limits for all investment through the Loi scellier 2011.

Find below the limits fixed by the French government depending on the area you invest:
In Area A bis: 21.70 € / m2
In Area A: 16.10 € / m2
In Area B1: 13 € / m2
In Area B2: 10.60 € / m2
In Area C: 6.10 € / m2

By respecting these rental limits. You fill benefit of a 22% of the housing price into tax discount spread over 9 years.

You can add a 10% discount over 6 more years if your respect the following rental limits:
In Area A bis: 17.36 € / m2
In Area A: 12.88 € / m2
In Area B1: 10.40 € / m2
In Area B2: 8.48 € / m2
In Area C: 4.88 € / m2

These rental limits for the Loi Scellier 2011 are a direct consequence of the desire from the minister Benoist Apparu to reduce the rentals and avoid investors to expect a too high rental which could make their housing impossible to rent. The major risk for investors is to anticipate a too highly return on investment.

With these new rental limits, we can observe a decrease of 14% for housings in area B1 and B2 and of 26% for housings in area A.

Even if this government initiative is done to protect the investor, it looks it isn’t enough.

Indeed, in a recent study of the Immogroup Consulting group, the CEO Jean-Michel Ciuch explain that the new rental restrictions enabled limiting the risk in a majority of cities but only for small surfaces housings. He also explains that the logic of the 4 areas doesn’t take into consideration each neighborhood and city demographics. Difference of real rental between cities in the same area can be important. An investor can not only decide based on the theoretical rental limits fixed by the government but must integrate the reality of the rental market.

Even if this type of investment is interesting because of the tax reduction it grants the investor, it must be done as a normal property investment taking into consideration the location, the demographics and the potential future of the targeted area. Making a decision only based on theoretical figures and tax reduction benefit will immediately result into being too optimistic and increase the risk of facing latter difficulties with the housing.

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