Ten years after its inception, the Pinel program is set to expire at the end of the year

Ten years after its creation, the Pinel program—which offers a tax break to those who invest in a new rental property—is set to expire at the end of the year. The government had confirmed in 2023 its intention to phase it out. Since then, voices within the real estate development sector have been calling for the program’s termination to be postponed by at least one quarter.
 

It was against this turbulent backdrop—marked, moreover, by a sharp slowdown in real estate transactions—that the Court of Auditors released an evaluation report on the Pinel law on September 5. While the report concludes that the program’s effectiveness has been mixed, it contains some surprising figures that shed light, in particular, on the program’s winners and losers. Here are seven of them.
 

7 Billion Euros Between 2014 and 2023
At a time when any source of budget savings seems worth pursuing, here is a figure that is likely to catch the attention of future public accountants. Although supporters of the Pinel law highlight the overall tax revenue gains—particularly from transfer taxes and VAT—the Court of Auditors focuses on the tax expenditure associated with the tax break granted to individuals. This tax expenditure totaled 4.02 billion euros cumulatively between 2014 and 2021. Over the next two years, the cost could amount to 3 billion euros, bringing the total cost to 7.3 billion euros by the end of 2023.
 

78 Million Euros in Taxes Recovered in 2021
These tax subsidies should be viewed in conjunction with Pinel tax breaks that were wrongfully granted. The Court of Auditors notes that quantifying these instances of fraud or misunderstanding of the program is difficult. One key issue is that the assessments rely solely on electronic tax returns. However, particularly in 2014, when the Pinel program was launched, electronic filing was less widespread and paper returns were still common.
 

Nevertheless, even electronic filings may contain errors. “The Court notes that nearly 20% of the filings reviewed do not identify tenants, 13% of these filings list rents above the caps, and 3% of tenants have incomes above the eligibility thresholds,” the report states.
 

Since 2018, the Directorate General of Public Finance (DGFiP) has gradually stepped up its audits. In 2018, for example, only 680 audits resulted in a total income tax assessment of 9.7 million euros—approximately 14,000 euros per taxpayer. In 2021, the number of successful audits reached 4,890, resulting in a total tax assessment of 78.2 million euros—or 16,000 euros per taxpayer.
 

69% of Investors Belong to the Wealthiest Households
Unsurprisingly, given the high minimum investment required for real estate investments, the vast majority of Pinel investors belong to the wealthiest household categories. Specifically, of the approximately 230,000 Pinel investors recorded between 2014 and 2020, 69% belong to the 

The top 10% of earners.
The Court of Auditors’ investigation also found that 86% of Pinel investors own their primary residence. Most were between the ages of 45 and 65 at the time of purchase, and they are primarily executives (54%) or retirees (11%). “The Pinel program is therefore primarily used by high-income investors, allowing them to derive greater tax benefits from their investments,” the Sages conclude.
 

9 out of 10 respondents invest for tax incentives
In addition, the Court of Auditors surveyed 19,354 homeowners to learn more about their profiles and motivations. Of these, 1,807 responded. Tax benefits emerged as the primary motivation, well ahead of building real estate wealth.
Specifically, for 92% of respondents, the tax benefit is a motivation for investing in rental real estate. And for more than 80% of them, it is even their main motivation.
 

An 8% rate of return
Since investors commit to charging moderate rents, the profitability of a Pinel investment can stem primarily from tax savings and the capital gain realized upon resale of the property once the rental commitment period has ended.
 

In 2018, the Council on Compulsory Levies, a body affiliated with the Court of Auditors, estimated that the rate of return on a Pinel investment—taking the tax reduction into account—could reach 5.8% if real estate prices remained stable and 8% if prices rose. Six years later, the Court of Auditors has expressed doubts about this figure, soberly describing the estimate as “optimistic.”
 

In 2022, the consulting firm PrimeView estimated that “regardless of the scenario considered, the annualized rental return on a property purchased through the Pinel program is low […].” However, “the return remains higher than that of a property purchased or rented under general law over a 20-year period,” the Court of Auditors points out. It supports its argument with discussions with wealth management advisors who indicated that their clients now prefer furnished rentals and financial products such as SCPIs.
 

Between 42,000 and 550,000 Pinel housing units
When the Pinel program was introduced in 2014, the government estimated that the program would lead to the construction of 40,000 housing units in 2014, followed by 50,000 housing units in 2015 and 2016. Beyond that, no figures were provided, the Sages point out. “Unless we consider the targets set for 2015 and 2016 to have been tacitly extended beyond those two years, the program’s performance and the actual achievement of the expected results cannot be measured,” notes the Court of Auditors.
 

As for the construction projects truly driven by the Pinel law, the lack of data makes it impossible to provide precise figures. Hence the wide range of estimates given on September 5. At a minimum, based on the addresses of housing units reported by taxpayers—and assuming each address corresponds to only one rental property—the Court estimates that 42,522 housing units were built under the Pinel program between 2014 and 2020. That is, not very much compared to the initial targets.
 

Nevertheless, based on data from the Center for Studies and Expertise on Risks, Mobility, and Urban Planning, the estimate is significantly different, resulting in an upper bound of 550,000 housing units between 2014 and 2020. However, the assumption underlying this figure is a strong one. This is because these 550,000 units represent all new housing units offered for rent. It is unlikely that all of them benefited from the Pinel program.
 

This is why the Court of Auditors appears to be using the figure derived from data on rental commitments (electronic tax returns for rental commitments (2044-EB)). This results in 243,931 Pinel properties between 2014 and 2020. It is, in fact, this figure that was reused to analyze the geographic distribution of Pinel properties.
 

Only 4% of Pinel units are in “highly strained” zones
The Pinel program receives a “fairly good” rating for land-use planning. While the majority of so-called Pinel housing units are located in strained zones (A and B1), very few are in highly strained zones (A bis). Of the 243,931 Pinel housing units, 10,723 are located in zone A bis (4% of the total), compared to 68,436 in zone A (28%) and 135,620 in zone B1 (nearly 56%).
 

“In terms of volume, the housing units are primarily located in Zone B1, with a share (55.6%) higher than that zone’s share of the private rental housing stock in France (28%). Zone A bis is rarely chosen due to land availability and cost,” the Court of Auditors notes.
 

That doesn't mean that some municipalities near Paris don't have a greater number of Pinel housing units. For example, “within the territory of the Plaine Commune public territorial authority, for the 2014–2022 period, ‘Pinel housing’ accounts for 20% to 30% of new construction in the most attractive cities closest to Paris,” note Les Sages, namely Aubervilliers, Saint-Denis, Saint-Ouen, and L’Île-Saint-Denis.