The Profitability of Rental Housing Under Debate
Released on July 15, the parliamentary report on rental taxation, authored by Finistère Representative Annaïg Le Meur (Renaissance), appears to confirm that returns for landlords are too low.
To assess this return on investment calculated over a 12-year period, four cities were considered: Montpellier, La Rochelle, Annecy, and the 13th arrondissement of Paris. They were chosen because the market in each of these cities is representative of the typical rental apartment sought—namely, a 40-square-meter studio or one-bedroom apartment.
Low profitability
In these four cities, rental yields are relatively low, especially for households with a marginal tax rate (MTR) of 30% or higher. However, these households—which tend to own multiple properties and have comfortable or even very comfortable incomes—own the bulk of the private rental housing stock. Whether they keep their properties on the long-term rental market or remove them from it therefore has a significant impact on the rental supply.
Negative profitability
Thus, for a very affluent household (with a 45% marginal tax rate and falling within the 0.7% real estate wealth tax bracket), the rate of return on an unfurnished rental property ranges from -0.4%—observed in Montpellier under the “micro-foncier” tax regime—to +0.6% for a rental property also taxed under the “micro-foncier” regime located in the 13th arrondissement of Paris.
For a household with a more typical standard of living (with a 30% marginal tax rate), the rate of return is slightly higher but never exceeds 2%. It ranges from 1.1% to 1.9% depending on the city and the tax system.
Taxation of Real Estate Income
As a reminder, taxation of property income depends on annual revenue. If revenue is less than 15,000 euros, the income is automatically subject to the “micro-property” tax regime, which entitles the taxpayer to a flat-rate deduction of 30 percent. Although it is expected to be amended soon, this “micro” tax regime for furnished rentals is much more advantageous than that for unfurnished rentals.
On the one hand, the so-called “micro-BIC” tax regime—which does not require proof of expenses—is more accessible. It can be chosen for annual rental income of up to 77,700 euros for a furnished residential property, and up to 188,700 euros for guest rooms and classified tourist accommodations.
On the other hand, the tax deduction is higher than for unfurnished rentals. For the 2024 tax filing season, it was 50% for a standard furnished rental and 71% for a guesthouse or a classified tourist rental.
Result: The estimated rental yield for a furnished property is much higher than for an unfurnished rental. “We note […] that furnished tourist rentals are between 35% and 300% more profitable, after taxes, than long-term furnished rentals, and even more so than unfurnished rentals,” according to Annaïg Le Meur’s report.
Nevertheless, even in the most tax-advantaged segment—the rental of classified furnished tourist accommodations—the return remains relatively low compared to the returns that non-real-estate investments can generate. For example, in Paris’s 13th arrondissement, a very affluent household renting a 40 m² classified furnished unit to tourists will achieve a return of 3.9%. As a simple comparison, the interest rate on the Livret A savings account currently stands at 3%.
"In none of the segments studied does the calculation of rental profitability yield truly high returns. The exception is a low-income household renting out a furnished vacation rental purchased in Paris, which is likely not the most common scenario."
