Ecole d'Economie de Paris
PSE
Fondée en 2006 par le CNRS, l’EHESS, l’École des Ponts ParisTech, l’ENS-PSL, l’INRAE et l’Université Paris 1 Panthéon-Sorbonne, Paris School of Economics rassemble une communauté de près de 150 chercheurs et 155 doctorants.
ID: 908127550484-40
Lobbying Activity
Response to European Affordable Housing Plan
4 Jun 2025
The EU Tax Observatory is an independent research institution hosted at the Paris School of Economics. Our core focus is on tax avoidance, evasion and progressivity, areas that are closely linked to the housing crisis. Housing is both a critical social need and a central vehicle for wealth accumulation, subject to tax policy and increasingly exposed to speculative and opaque investment. In support of the initiative for the first-ever European affordable housing plan, we draw on our research in public finance and economic inequality to provide evidence-based recommendations that support sustainable and equitable access to housing. 1. Demand-side policies have severe limitations and are often regressive Most national housing policies have focused on demand-side interventions. Measures like publicly supported loans or mortgage interest deduction aim to ease transition to homeownership and therefore relieve rental markets, rental investment incentives seek to expand rental supply, while housing vouchers aim to reduce costs for low- and middle-income tenants. However, evidence suggests these measures frequently increase housing prices without substantially improving supply. Subsidies for ownership do not significantly influence tenure decisions but do inflate prices (Lei, Ay & Le Gallo, 2025; Kunovac & Zilic, 2022). Rental investment incentives tend to drive up prices without triggering adequate supply due to crowding out of public initiatives (Levy, 2021; Eriksen & Rosenthal, 2010). Housing vouchers are often captured by landlords through rent increases, rendering them regressive (Fack, 2011). 2. Property taxation can influence housing supply and prices Vacant and secondary homes reduce the effective housing supply, especially in land-constrained metropolitan areas. Increasing the property tax burden on these units can incentivise owners to rent, sell, or renovate them. In the French context, a forthcoming EU Tax Observatory analysis finds that municipalities that increased property tax rates experienced a decline in average housing prices the following year. While these findings are preliminary and require further investigation into causal mechanisms, they suggest that tax policy can impact prices and supply. Introducing a differentiated tax rate for vacant and secondary homes might further help to mitigate affordability issues. However, where permitted by national regulation, landlords may pass on increased property taxes through higher rents (Löffler and Siegloch, 2024). 3. Housing markets are shaped by speculative and opaque capital flows Recent studies highlight the growing role of international capital, including illicit financial flows, in European real estate markets. Offshore ownership and opaque investment vehicles are particularly concentrated in high-value urban areas, exacerbating affordability issues (Alstadsæter et al., 2022; Johannesen, Miethe and Weishaar, 2022). Improved cross-border enforcement and transparency in real estate ownership are necessary to ensure that housing markets function in the public interest. 4. Social housing remains the most robust tool to address affordability Public investment in social housing offers direct and durable improvements to housing affordability. Though costly, it provides capped rents for low-income households and helps renters build savings and transition into homeownership over time (Goffette-Nagot and Sidibé, 2016). In France, the SRU law requires municipalities with over 3,500 inhabitants to allocate at least 25% of their housing stock to social housing. This requirement has significantly increased the supply of affordable units (Gobillon and Vignolles, 2016). In parallel, some cities have implemented rent control policies, allowing metropolitan areas with high housing costs to cap private-market rents. While rent control has reduced rents, especially in Paris - enforcement remains a key challenge.
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