Should you take advantage of the Pinel law before it goes away?

It's official. On December 31, 2024, the Pinel program will come to a definitive end—with no other program to replace it. There are fifteen months left to take advantage of the program.

On December 31, 2024, the Pinel program will come to a definitive end, with no other program to replace it. This leaves fifteen months to take advantage of a program that offers significant benefits. “The Pinel program has societal benefits, including the requirement to adhere to rent caps and tenant income limits.”

Rents, which fall at an “intermediate” level between public housing and the private rental market, are set at 20 percent below the average market rent. If they deem this gap insufficient, prefects have the option to lower the rent caps. More than three-quarters of households have incomes that meet the Pinel income limits, which frees up units in the social rental housing stock.

The Pinel program thus enables young working professionals or middle-income households in essential occupations (such as nurses, police officers, and elementary school teachers) to move into new, energy-efficient housing close to their workplace. Each year, the Pinel program has helped bring an average of 50,000 to more than 60,000 housing units onto the rental market through sales to investors under the Pinel program, and has done so since its inception.¹

It also offers environmental benefits. Indeed, unlike its predecessors—which were too broadly defined—eligibility for the Pinel program is limited to municipalities located in high-demand areas (A bis, A, B1), where demand exceeds supply. Municipalities in Zone B2 (medium-sized cities or those located on the outer outskirts of metropolitan areas) are eligible for the tax reduction only with approval from the regional prefect. This ensures that construction takes place in densely populated areas, sometimes replacing dilapidated housing or on former brownfield sites. There is no—unlike a pitfall encountered in certain previous programs—forced land development in areas lacking a genuine rental market. Furthermore, access to the tax benefit is subject to environmental conditions, which have been strengthened under the “Pinel+” program.

But above all, the Pinel program is also an attractive tax incentive. “ Investors benefit from a tax credit calculated based on the transaction amount, which is capped at both a total budget of 300,000 euros and 5,500 euros per square meter. As of this year, the tax credit rate is set at 10.5% for 6 years, 15% for 9 years, and 17.5% for 12 years.”
 

These rates will be lowered again next year for the standard program. The “Pinel+” program, however, continues to offer higher rates (12% over 6 years, 18% over 9 years, 21% over 12 years) provided that the investment is made either in a priority neighborhood under urban policy (QPV) or in a residence offering enhanced comfort and livability. In addition to energy efficiency exceeding current regulations, the apartment must also have a minimum floor area based on its type and include an outdoor space that also meets a minimum size requirement based on the type; dual exposure is mandatory for units with three or more rooms.

It should be noted that, in light of energy considerations and requirements related to new building codes, a Class A energy performance certificate (DPE) is required to maintain the original tax reduction rate of 21% for transactions completed in 2024.

From an investor’s perspective, the Pinel+ program remains a bet on the future, offering the assurance of sustainable, energy-efficient housing that will retain its value. It is also a largely responsible and ethical approach to committing to providing decent housing for tenants.
Here’s a tip: investing in the Pinel program can also be done through an SCI (real estate investment company), which offers the advantage of planning for the transfer of ownership. To do this, you must retain the usufruct of your shares (to collect rent) and transfer bare ownership to your children, thereby maximizing the €100,000 tax exemption per child, which is renewable every 15 years.

Considered too costly for the public budget, all Pinel real estate tax-exemption programs (Classic Pinel, Pinel+) will therefore end on December 31, 2024. This leaves only 15 months to make an investment. “This is a major blow, especially for low-income households, who have invested heavily in new or existing real estate to benefit from tax breaks under the Pinel program. Investors will have to look into the Malraux or Déficit Foncier programs, which may offer viable alternatives now that the Pinel program is being phased out.”

Otherwise, we will have to wait for the new tax measures the government plans to implement in 2024 to encourage investment in intermediate rental housing.

Created in 2014, intermediate rental housing (LLI) consists of units with rent that is regulated to allow middle-income households who do not qualify for public housing to rent at a price 10% to 15% below market rates. 
Eligible housing units must meet certain criteria, such as being located in a high-demand area with high rents, being part of a housing complex that includes at least 25% social housing, and being intended for rent as a primary residence to individuals whose income does not exceed a certain threshold.

The 2014 Finance Act established a specific tax regime to encourage corporations and institutional investors to support the development of intermediate rental housing. The government’s 2024 budget is expected to include a measure to encourage intermediate rental housing. This measure would consist of granting a tax benefit to legal entities investing in this type of housing through SCPIs (real estate investment trusts). The SCPIs in which these institutional investors would invest would benefit from a reduced VAT rate of 10 percent, instead of 20 percent.

The government could also allow social housing providers to hold up to 20% of LLI units in their portfolios (up from 10% today). In addition, 220 more municipalities could be added to the list of municipalities with tight housing markets. 
According to AFP, 400,000 housing units are built each year in France, including 100,000 social housing units and 10,000 LLI units. With these measures, the government hopes to reach 20,000 or 30,000 LLI units next year. Some of these SCPIs could be made accessible to individual investors through life insurance policies, allowing them to contribute to the financing and development of intermediate housing with as little as a few hundred euros.