Rent control is a hot topic at the heart of discussions about housing and is a priority for the City of Paris. With the housing crisis in Paris due to high demand and limited supply, limiting rents has become essential so that more people can find housing at an affordable price. Introduced for the first time in the capital in 2015, then strengthened in 2020 under the Elan Law, rent control aims to counter the excessive increase in rental amounts and ensure a certain equity between tenants and landlords.
Reference rents: the core of the system
The rent regulations implemented by the City of Paris rely on a precise system of capping, which aims to curb the relentless rise in housing prices in the capital. The central principle of this regulation is based on the establishment of reference rents. These serve not only to guide lease agreements and to set the rent amount but also to provide a degree of transparency in the market. To better understand how this mechanism works in practice, it is essential to examine several key aspects.
The role of the Rent Observatory
The rent control system in Paris is structured around the central concept of reference rents. These reference rents, established by the Rent Observatory of the Greater Paris Area (OLAP), form an essential basis for determining the maximum rent that landlords can charge. By setting these references, the goal is to introduce a harmonized scale that takes into account various factors such as the property's location, the building's construction period, and the type of housing involved, in order to ensure consistency in the rent amount applied. The Rent Observatory thus plays a key role in ensuring that the data used accurately reflects the reality of the Parisian market. The rent control system is designed to strictly regulate landlords' practices for setting initial rents while protecting tenants from excessively high increases.
Thus, the reference rents act as a barrier, limiting landlords' leeway and ensuring that the rent amount remains proportionate. This system aims to establish stability in the rental market by setting up a bulwark against price volatility and speculative practices while allowing a greater number of residents in Paris to benefit from a rent amount that fits their budget.
The three thresholds to know
The reduced reference rent
The reduced reference rent represents the lower threshold of the price range that a landlord can apply. If a rent is set below this threshold, the landlord has the option to request a rent reevaluation under certain conditions. This ensures that housing is not rented at prices significantly below the market, while providing some flexibility for lower-quality rentals.
The median reference rent
Often referred to as the theoretical base rent, the median reference rent plays a central role in rent regulation in Paris. It reflects the median rent of similar properties on the market and provides landlords and tenants with an objective benchmark to assess the fairness of a particular property's rent. Reference rents are thus essential for maintaining a balance between market demands and the protection of tenants.
The increased reference rent
The increased reference rent is the upper limit of the rent that a landlord can charge for a rental property. This "ceiling rent" is designed to protect tenants against abusive rents and is strictly enforced within Paris itself. If the requested rent exceeds this threshold, the tenant has the option to contest the amount before a conciliation commission, or even a court if necessary.
How to check the rent applicable to your apartment?
To check the applicable reference rents for your apartment, it is essential to refer to the tools set up by the Rent Observatory of the Greater Paris Area (OLAP) and the Paris city hall. Online, it is possible to access a simulator where the various criteria of the apartment (address, area, construction date, etc.) are entered to obtain the reduced, median, and increased reference rents. This tool allows for precise and transparent assessment of the applicable rent amount and to verify whether the rent amount stated in the lease complies with the reference rents and the current rent control regulations.
The Observatory of Rents regularly publishes this data in order to ensure its update and to allow for a reliable monitoring of the evolution of the Paris rental market.
Application of supervision according to the situations
The rent control does not apply uniformly to all real estate situations in Paris. Depending on specific circumstances such as the first rental of a property, the renewal of the lease, or even during a change of tenant, the rules for setting the rent may differ. It is crucial for both landlords and tenants to understand these nuances to ensure compliance with the current legislation.
First rental: what rules must be followed?
When a property is rented for the first time, the owner is obliged to align the proposed rent amount with the criteria of the median reference rent. However, there may be room for maneuver, particularly if the property has additional amenities or unique features that justify a higher rent amount. In some cases, such an increase may be accepted if the property has particular architectural or historical interest, provided that this is clearly justified and validated by the competent authorities in relation to the applicable reference rent.
Lease renewal: rent reassessment or decrease?
Upon lease renewal, the rent may be reassessed, but it must always comply with the ceilings established by the rent control. An increase can only be justified by the evolution of the Reference Rent Index (IRL). Conversely, if the previous rent was higher than the increased reference rent, a decrease in rent is mandatory to comply with the current rules. This decrease aims to restore balance between the landlord and tenant and to ensure that the contract complies with official scales. In practice, the decrease in rent can represent a significant financial burden for the owner, but it constitutes an essential legal guarantee for the tenant to avoid any overcharging situation.
Change of tenant: what limits apply?
In the event of a change of tenant, the general rule is that the rent of the new contract cannot exceed the rent charged for the previous tenant, unless substantial improvement work has been carried out, justifying an increase. This provision aims to prevent rent spikes between two successive rental contracts and ensure a certain stability in the rental market in Paris.
Mobility lease: an exception to the classic framework
The mobility lease represents a notable exception to traditional rent control. Aimed at temporary tenants, such as students or people on short-term professional assignments, this type of lease offers greater flexibility regarding control rules. If the accommodation does not constitute the tenant's main residence, the mobility lease escapes the limits governing the classic rent amount.
This allows property owners to freely set the rent amount, in compliance with legislation, thus facilitating access to temporary housing in a dynamic metropolis like Paris.
The rent supplement
In the context of rent control in Paris, the "complement de loyer" presents itself as an exception that allows landlords to demand an amount higher than the enhanced reference rent. This mechanism, while useful, is also subject to numerous conditions and can sometimes lead to disputes. To understand how and when this practice is applicable, it is essential to examine the legislative framework as well as the motivations behind these supplementary rents.
Definition and Conditions of Application
The "complement de loyer" is an additional amount that the landlord can request in addition to the base rent when a dwelling presents exceptional characteristics that distinguish it from comparable housing in the same area. These characteristics may include a breathtaking view, a terrace, a private garden, or high-quality amenities such as a kitchen equipped with high-end materials. It is crucial that these elements are not already taken into account in the enhanced reference rent for the supplement to be justified.
When a "complement de loyer" becomes abusive
A "complement de loyer" can be considered abusive when the characteristics cited by the landlord are not genuinely exceptional or distinctive compared to comparable housing in the neighborhood. It may also be deemed abusive if the amount of rent requested appears disproportionate in relation to the additional benefits highlighted. Furthermore, a supplement is not admissible when the cited elements are already included in the calculation of the enhanced reference rent (such as area, time of construction, or number of rooms) or when they correspond to recoverable charges attributable to the tenant, which would artificially inflate the amount of rent and thus make it contestable.
Since August 18, 2022, the regulation specifies that the "complement de loyer" is strictly prohibited if the dwelling exhibits at least one of the following characteristics:
Bathrooms on the landing
Presence of moisture on certain walls
Energy performance diagnosis (DPE) in class F or G
Windows that allow air to pass through abnormally (excluding ventilation grilles)
Overlooking within 10 meters
Infiltrations or floods coming from outside
Recurring water drainage problems over the last 3 months
Deteriorated electrical installation
Poor exposure of the main room
Finally, for it to be valid, the lease must explicitly specify the exact amount of the "complement de loyer" as well as the exceptional characteristics of the dwelling that justify it. In the absence of these elements, the supplement may be considered abusive and thus contested by the tenant.
The Specific Case of Energy-Consuming Dwellings
The energy performance of a dwelling has become a determining criterion in setting the rent and applying a supplement. Since the Climate and Resilience Law, dwellings classified as F or G in the Energy Performance Diagnosis (DPE) – often referred to as energy sieves – are strictly regulated.
Since August 2022, it is prohibited to apply a "complement de loyer" if the dwelling has an energy performance classified as F or G.
In the same year, a rent freeze was instituted: dwellings with low energy performance can no longer see their rent increased during a lease renewal, re-rental, or change of tenant.
Gradually, properties with poor energy performance (class G then F) will be prohibited for rental, according to a regulatory timeline already established.
In practice, a landlord cannot justify a "complement de loyer" with arguments of comfort or location if the energy performance of the dwelling is insufficient. This mechanism aims to encourage energy renovation and sustainably improve the energy performance of the Paris rental housing stock.
The Dispute Procedure for Tenants
When a tenant believes that the "complement de loyer" applied by their landlord is unjustified or excessive, they have a legal framework to contest it. This procedure takes place in several successive steps.
1. The Attempt at Amicable Resolution
The first step is to initiate a direct discussion with the landlord in order to find a solution without involving external authorities. The tenant can present their arguments, supported by evidence (rental contract, references of similar rents, written exchanges, etc.), to demonstrate that the "complement de loyer" is abusive.
2. Referral to the Departmental Conciliation Commission
If no amicable agreement is reached, the tenant can refer the case to the Departmental Conciliation Commission. This body offers a free mediation service, aimed at bringing both parties closer together and attempting to reach a consensual solution.
3. Recourse to the Local Court
In case of failure of the conciliation, the tenant can bring the matter before the local court. The judge will then examine the legitimacy of the "complement de loyer" and will render a decision that will be binding on both parties.
The Preparation of the File
Throughout the procedure, it is essential for the tenant to carefully prepare their file. This involves gathering relevant evidence: signed lease, letters or emails exchanged with the landlord, as well as any references for comparable rents. Solid documentation enhances the credibility of the challenge and increases the chances of success.
By rigorously following these steps, the tenant ensures that they effectively defend their rights against a rent increase deemed abusive.
Rights and obligations of landlords and tenants
As part of the regulation of rents in Paris, both landlords and tenants have specific rights and obligations. These rules aim to ensure a fair and respectful contractual relationship between the two parties, while maintaining a balanced rental market. Landlords must comply with the rent caps imposed by regulation, except for justified exceptions related to supplementary rent, whereas tenants have the right to contest these supplements if they seem excessive. Let’s take a closer look at the responsibilities and legal protections granted to each party.
For landlords: comply with the law and justify any increase
In Paris, landlords have a crucial role in ensuring transparency and balance in the rental market. Their primary responsibility is to comply with the applicable regulations, setting the rent in accordance with the reference rent increased published by prefectural order, which varies by district, date of construction, and type of housing.
A central point is the clear separation of amounts in the lease contract to avoid any confusion:
Rent excluding charges: XX €
Recoverable charges: XX €
Supplementary rent: XX €
Example of insertion in a lease:
The rent excluding charges for this accommodation is €980. The applied rent is €980 + a supplementary rent of €120 (justified by the presence of a private terrace of 20 m² with an unobstructed view of the Eiffel Tower). Recoverable charges amount to €70. The total rent excluding charges is therefore €1,100, to which €70 of charges are added, resulting in a monthly amount of €1,170.
This transparency is mandatory: as soon as a supplementary rent is applied, the landlord must provide a precise and objective justification based on exceptional characteristics of the accommodation that are not included in the calculation of the reference rent.
In the event of a dispute, it is always the rent excluding charges that serves as the comparison basis with the increased reference rent. Therefore, the landlord must ensure that the rent excluding charges set in the lease is compliant, otherwise they risk a reduction imposed by the Conciliation Commission or the court.
Setting the rent: ceilings not to be exceeded
Landlord must strictly comply with the increased reference rent when renting out a property for the first time or renewing an existing lease. This increased reference rent is determined based on various factors such as location, area, and the date of construction of the building.
Before renting out, the landlord must check the applicable reference rent for their property and ensure that they set the rent below or, if adding supplementary rent, in a justified manner. Failure to comply with this rule can lead to penalties, including a potential fine or adjustment imposed by the judiciary. Furthermore, during each lease renewal, the rent must also be adjusted to remain compliant with current legislation.
Supplementary rent: necessary evidence in case of dispute
In the context where a landlord wishes to request supplementary rent, it is essential that they can substantively justify their request. The reasons for which supplementary rent can be added must be exceptional and linked to the specific characteristics of the accommodation that are not reflected in the reference rent or in the ceiling rent set by regulation. The evidence to support this request must be meticulously prepared.
In such a case, it will be up to the owner to provide all relevant documentation to demonstrate the validity of their approach, failing which they will have to adjust the rent so that it remains in compliance with the ceiling rent and the regulatory caps in force.
So, is it still a good idea to invest in Paris even with the regulations?
Against all odds, yes Paris remains very attractive with a gross yield that varies between 3.5% and 5% per year, but especially with very high occupancy rates. We also observe a sharp increase in the price per square meter compared to other major French cities. Moreover, Paris has experienced almost no drop in real estate prices for a very long time, which makes your investment all the more secure!
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