Various mechanisms have been put in place over time to protect tenants from excessive rent increases in the private rental market, especially in high-demand areas. Two types of mechanisms exist: those that cap rents themselves, and those that limit their increase. Landlords have limited opportunities to raise the price of their rental properties. Since 2008, landlords have the right to increase rent on the anniversary date of the lease, but the increase cannot exceed a rate communicated quarterly by the INSEE: the evolution of the reference index of rents (IRL). The IRL regulates rents in the private rental market, both furnished and unfurnished, all over France. However, the constraint is a bit heavier in tense areas.
In major cities where the supply of housing does not meet the demand, landlords cannot increase rent when changing tenants, except in certain cases – for example, if they have not applied the annual revaluation they were entitled to in the twelve months prior to the tenant change, and the property is not energy inefficient. In this case, the rent increase cannot exceed the evolution of the IRL. In addition, starting in 2018, another form of rent capping was introduced: the regulation of rent levels. This is an optional measure practiced only by cities or local authorities that have obtained government authorization to experiment with it. Once the decree is published, the prefect can set a maximum amount per square meter based on local median prices observed. For furnished rentals, the maximum rent is increased, for example by 12% in Paris and 6% in Lille.
Owners are only allowed to exceed this maximum if the property has particular advantages, such as an extraordinary view, a terrace, or a high level of equipment that sets it apart from other properties of the same type. The justification for this additional rent must be detailed in the lease. These measures aim to prevent excessive rent increases in the private rental market and protect tenants, especially in high-demand areas. The rent control mechanisms in place in France, both at the level of capping rent increases and setting maximum rent levels, provide a framework for a fair and balanced rental market, benefiting both landlords and tenants. The current government’s decision to cap rent increases at 3.5% is set to expire in July, and it remains to be seen how this will affect the rental market.
