French Property Owners Faced Significant Property Tax Hikes in 2024, Boosting Local Government Coffers

A large majority of French property owners experienced an increase in their property tax bills in 2024. A new report from the General Directorate of Public Finances (DGFIP) reveals the extent of these increases and their impact on local government finances. In 2024, revenues from this local tax on built and unbuilt properties reached 55.3 billion euros, including management fees, compared to 53.3 billion euros in 2023. The report emphasizes that property taxes increased in "almost all local authorities" across France.

The primary driver of this increase was the indexation of the tax to inflation. The property tax system in France is designed to increase automatically with inflation. Since 2018, the rules dictate that the rental bases, which are used to calculate the tax variation at the national level, follow the inflation rate recorded from November to November of the previous year. In 2024, this translated to a 3.9% increase on property owners’ bills.

Looking ahead to 2025, the report projects that the revaluation will be limited to 1.7% due to the easing of inflationary pressures. The DGFIP experts state that "the evolution of the bases, in volume and value, explains 83% of the increase in property tax revenue on built properties in 2024. The remaining 0.7 percentage points of the increase in amounts paid are due to the increase in tax rates."

Local increases, decided by the local governments, particularly municipalities, were observed last year, typically occurring towards the end of an electoral cycle as municipal elections approach. It is anticipated that these local increases will remain moderate this year for similar reasons.

Individual property owners bore the brunt of the tax increases in 2023. The 31 million individual property owners paid 33.8 billion euros in property taxes on built properties, which is the main component of the property tax. According to the report, "with an average tax of €1,082, their contribution represents 63% of the TFPB in 2024." In contrast, the 311,000 companies paid an average of 24,428 euros. The increases experienced by individual property owners were more significant, with an average increase of 5.7% year-on-year, compared to 4.3% for companies.

One of the key reasons for this disparity is that the property tax on built properties increased more sharply for residential properties, which are primarily owned by individuals, compared to commercial properties, which are more commonly owned by companies. The tax on commercial properties increased by only 3.3% in 2024, while the increase for residential properties reached 5.9%, with apartments experiencing a 6% increase, houses a 5.8% increase, and outbuildings a 7.2% increase.

Despite the higher percentage increases for residential properties, the average property tax remains higher for houses, at 1,072 euros, than for apartments, at 851 euros. This difference is primarily due to the fact that the size of the property is a significant factor in calculating the property tax. For residential properties in France, the average property tax is 12.50 euros per square meter. The intercommunalities that stand out with high property taxes per square meter are located in the Île-de-France region, the French Riviera, and Martinique. For example, in the Greater Paris Metropolis, the property tax reaches an average of 20 euros per square meter, while in Aix-Marseille-Provence, it amounts to 17.50 euros per square meter.

The data highlights the financial pressure placed on individual property owners in France due to rising property taxes. The automatic indexation to inflation, combined with local tax increases, has resulted in a substantial increase in the tax burden for homeowners. While the easing of inflation is expected to moderate the increases in 2025, the property tax remains a significant expense for property owners.

The report emphasizes the importance of understanding the factors that influence property tax calculations, including the rental base, inflation rate, and local tax rates. Property owners should also be aware of the average property tax rates in their area and how they compare to other regions of France. The disparities in property tax increases between residential and commercial properties also highlight the need for a nuanced understanding of the tax system and its impact on different types of property owners.

The findings of the DGFIP report have implications for both property owners and local governments in France. Property owners need to be prepared for potential increases in their property tax bills and consider the impact on their household budgets. Local governments, on the other hand, rely on property tax revenue to fund essential public services. Understanding the factors that drive property tax revenue is crucial for effective financial planning and resource allocation.

As the French economy navigates the challenges of inflation and economic growth, the property tax will continue to be a subject of discussion and debate. The DGFIP report provides valuable insights into the dynamics of the property tax system and its impact on property owners and local governments. This information can help inform policy decisions and promote a more transparent and equitable property tax system in France.

The situation underscores the importance of individual property owners staying informed about local tax policies and engaging with their local governments to voice their concerns. Understanding the mechanisms behind property tax calculations, including the role of inflation and local council decisions, empowers citizens to better manage their finances and advocate for fair and transparent taxation. It also brings into focus the broader discussion on tax reform and the balance between funding public services and ensuring affordability for property owners.

The report’s findings have sparked renewed debate about the fairness and sustainability of the current property tax system in France. Some argue that the automatic indexation to inflation places an undue burden on property owners, especially during periods of high inflation. Others contend that property taxes are essential for funding local services and that any changes to the system must be carefully considered to avoid undermining the financial stability of local governments. As France continues to grapple with these issues, the DGFIP report provides a valuable foundation for informed discussion and policymaking.