Paris cracks down on short-term apartment rentals

PARIS Thu Sep 22, 2011 8:30am EDT

The Eiffel tower and the river Seine are seen in an aerial view in Paris July 14, 2011. REUTERS/Charles Platiau

The Eiffel tower and the river Seine are seen in an aerial view in Paris July 14, 2011.

Credit: Reuters/Charles Platiau

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PARIS (Reuters) - Paris, one of the world's most-visited cities, is cracking down on short-term apartment rentals, dealing a blow to tourists looking for a bargain and entrepreneurial landlords hoping to recoup soaring property costs.

The allure of living in a Paris pied-à-terre for a week or month, and paying much less than for a hotel room, has created strong demand for short-term lodging, but its growing popularity has raised the ire of hotels and residential property owners.

"Residents complain about the noise, about the comings and goings, about the entrance of their building being turned into a hotel lobby," said Christian Nicol, head of the city's housing department.

A rush of buying by foreigners looking to profit from the short-term rental market is one of several factors that have driven up Paris property prices at breakneck speed in recent years to stand as some of the costliest real estate anywhere.

The metropolis is now home to an estimated 20,000 fully furnished apartments rented out to tourists, students and business travelers in breach, according to city hall, of a decades-old and long-overlooked law.

Nicol's office has begun sending out letters warning owners that renting out residential apartments for less than a year at a time -- or nine months if the occupant is a student -- violates the law and could lead to prosecution.

Some 200 rental owners have already been tracked down with the help of neighbors upset at finding their bourgeois buildings housing more tourists than ordinary Parisians, said Nicol. An information campaign is to be launched in the weeks ahead.

The temptation to rent is strong, given the flood of visitors to Paris and the prices they are willing to pay.

A studio in the trendy Marais district can go for 700 euros ($958) a week, while a one-bedroom in picturesque Montmartre can fetch 200 euros a night, rates double or triple those of similar rentals on a traditional one-year-lease.

But the rates look like a bargain compared with hotel prices -- a fact that has not gone unnoticed by the industry's lobby.

"It's an absolutely unfair competition," said Bertrand Lecourt, president of Paris' hotel syndicate, who noted the myriad of taxes and regulations to which hotels are subject.

With visitors choosing rentals over hotels, the city is losing out on new tax revenue and new jobs, he added.

RED TAPE

Legally, owners wanting to offer short-term Paris rentals must ask the city to reclassify their property as a commercial site, a tricky request that obliges them to buy, in return, a commercial property nearby and devote it to residential housing.

Although the law can be interpreted in varying ways, and estate agents argue that most landlords are not running commercial businesses, violators can be fined up to 25,000 euros. Continued violation can mean further fines of up to 1,000 euros per square meter per day.

"It's an archaic law that the Town Hall has dug up due to pressure from the hotel sector," said a real estate agent in the Maris, asking not to be named. "I'd say 99.9 percent of short-term rentals are in breach of this law. We've had several people come in worried because they've received letters about it."

The warnings usually suffice to convince landlords to take their rentals off the market, according to the town hall. One court case in favor of the city was even confirmed in appeal.

Yet fighting the trend will be a challenge given many foreign owners rent out apartments as a full-time business.

While the French government has vowed to tackle tax shelters to slim down the public deficit, the fiscal advantages of furnished rentals remain untouched: owners can deduct from their revenue all maintenance expenses and even depreciate their property, thus avoiding taxes for several years.

"Short-term rentals are so attractive financially, fiscally and legally that if we don't act, we'll end up in a city where nobody will want to rent out apartments the usual way, and we'll only have tourists or people visiting for the week," Nicol said.

Lodgis, one of Paris' top short-term housing agencies, says the government is overlooking the benefits of a practice that suits students and professionals in town for only a few months.

Others say getting properties off the short-term rental market will make them available to full-time apartment-seekers who struggle to find affordable living space in a city where rental prices have shot up 20 percent in the past year.

"What we're defending is the possibility for small landlords to continue to use their property however they wish, and to rent it for the duration they wish," said Jean-Marc Agnes, chairman of APLM, a group of professionals operating furnished rentals. ($1 = 0.730 Euros)

(Additional reporting by Catherine Bremer; Editing by Alexandria Sage and Paul Casciato)