Pinel’s law: these cities in the southwest where it is interesting to invest in 2024 thanks to the new zoning

What is Pinel’s Law?

Pinel’s law is a French tax system was founded in 2014 with the aim of promoting rental investment in the new real estate sector. Introduced by former housing minister Sylvia Pinel, who gave it its name, it aims to speed up the construction of new housing to meet very high demand for rental properties in certain areas.

In exchange for tax benefits, future owners commit to renting their property for a minimum of 6 years at a limited rent and to frugal tenants (subject to resource caps). They can then extend this commitment to 9 or 12 years in exchange for additional tax benefits.

Unlike other tax systems, the Pinel Act allows the rental of real estate to an ancestor (parent) or descendant (child) as long as they are not a member of the tax household.

But be careful, the system does not apply everywhere: it only applies in a limited number of municipalities in which the demand for housing is particularly strong. The zones are classified according to the level of real estate tension (zones A, A bis, B1, B2 and C) and the maximum rent varies depending on the zone.

Nor does it apply to all types of housing: eligible properties must be new housing or in a future state of completion (VEFA). It can also be old houses undergoing renovation and must in all cases meet specific energy standards.

Investors benefit from a tax reduction calculated on the amount of their initial investment, but must remain within the ceiling of €300,000, or €5,500 per m². The rate of reduction varies depending on the duration of the rental obligation and this rate has been revised several times since its inception.

Which areas are eligible for Pinel’s Law?

Real estate zoning, which divides territory according to the level of stress in the real estate market, largely predates the Pinel Act. The scheme was first introduced in 2003 as part of the new Robien Tax Exemption Act.

Five zones are defined: A, A bis and B1, which are considered “tight”, that is, with high demand, few properties for rent and very high rents. Zones B2 and C correspond to sectors where the voltage is lower.

Pinel’s tax exemption system only applies to the three most stressed areas of real estate.

Zone A brings together the main French metropolises with more than 250,000 inhabitants: Lille, Lyon, Montpellier, Marseille, Toulouse and Bordeaux, but also the larger suburbs of Île-de-France and some municipalities on the Côte d’Azur or in the Swiss border.

Zone A bis connects a large part of Ile de France: inner Paris, inner suburbs and several very popular communes in neighboring departments (Hauts-de-Seine, Yvelines, Seine-Saint-Denis, Val-de-Marne and Val-d’Oise) .

Zone B1 includes all areas of Île-de-France that are not classified as A or A bis, but also all other major cities in the country: Rennes, Nantes, Clermont-Ferrand, etc. Corsica and the overseas departments are also part of it.

Why has spatial planning changed recently?

On October 2, the law was amended by changing the zoning of 208 municipalities throughout France. Among these changes, 145 cities previously classified as B2 or C have now moved to B1, subject to Pinel’s law. 63 municipalities in zone B1 were integrated into zone A.

The reorganization of the zoning was motivated by the rapid increase in sales prices and rents in the affected municipalities due to the growing tension in the demand for housing in these areas. By increasing the potential profitability of real estate investments, the state tries to support the construction of new housing.

By changing the zone, the municipality will increase the maximum rents, because they are fixed by the zone. With higher rental income, real estate projects offered to potential investors can then turn out to be more profitable. As a reminder, this year the rent ceilings are set at 18.25 EUR/m² in zone A bis, 13.56 EUR/m² in zone A and 10.93 EUR/m² in zone B1.

Which municipalities in the region are affected?

Among the 208 municipalities affected by the so-called zoning adjustment in 202336 is located in the southwest.

In our region, 20 municipalities are moving to zone A.

– Aytré (17) – Châtelaillon-plage (17) – La Rochelle (17) – Andernos-les-Bains (33) – Arès (33) – Bordeaux (33) – Le Bouscat (33) – Cestas (33) – Gradignan (33) – Gujan-Mestras (33) – Lège-Cap-Ferret (33) – Mérignac (33) – Talence (33) – Seignosse (40) – Soorts-Hossegor (40) – Anglet (64) – Biarritz (64) ) ) ) – Bidart (64) – Ciboure (64) – Saint-Jean-de-Luz (64)

16 municipalities also fall into the Pinel system, in zone B1. It is :

– Les Mathes (17) – Rochefort (17) – Royan (17) – Saint-Georges-de-Didonne (17) – Saint-Georges-d’Oléron (17) – Saint-Palais-sur-Mer (17) – Saint-Pierre-d’Oléron (17) – La Tremblade (17) – Vaux-sur-Mer (17) – Lacanau (33) – Libourne (33) – Soulac-sur-Mer (33) – Dax (40) – Mimizan (40) – Saint-Paul-lès-Dax (40) – Soustons (40)

More authorized municipalities, but stricter conditions

Pinel’s law, which costs the state more than 2 billion euros a year, is one of the expenses Bercy wants to cut. Along with the expansion of the number of eligible municipalities, the criteria to be met in order to benefit from it have been tightened and the tax benefits have been reduced. In 2023, investors who used the Pinel system benefited from:

10.5% tax reduction for a 6-year lease (compared to 12% previously) 15% tax reduction for a 9-year lease (compared to 18% previously) 18% tax reduction for a 12-year lease (compared to 21% previously)

And in 2024, these rates will be reduced again:

9% for a 6-year lease 12% for a 9-year lease 14% for a 12-year lease

However, housing located in priority districtswhich have a level of energy and environmental performance above the applicable threshold or have undergone extensive renovation are exempt from this reduction in tax benefits.

Originally set to end in December 2022, the Pinel scheme has been extended by the state for two years, but is set to expire in December 2024. You need to hurry up to invest to take advantage of it.

How do you know that an investment will be profitable?

The first criterion for the profitability of the investment: make sure that the accommodation you are going to buy will be rented quickly. Its location is crucial for this. When comparing different Pinel Law eligible building programs, check the attractiveness of the municipalities, but also the neighborhoods, in which the proposed properties are located. Do not hesitate to go out into the field to take a pulse yourself, but also take a look at the local zoning plan available at the town hall to see what will be built around it.

In addition, the purchase price of your property must be in line with the market in the municipality: to avoid losing money in case of resale, experts generally advise not to invest in a property if its price exceeds the old one by more than 30%.

Also, be careful: Pinel’s law was designed for buyers who pay a lot of taxes. It will do you no good to have low taxes… because the government won’t pay you money you don’t pay! For example, if you buy a property worth €250,000, Pinel’s law is only profitable if you pay more than €5,000 a year in taxes. This tax gain also needs to be taken into account with the potential rental shortfall as this is limited, between 15 and 20% below average market rates. If the “loss” from the rent is not offset by the tax bonus, the Pinel investment may not be the solution.

Leave a Comment