Why is pressure mounting in France's rental market?
The combination of rising mortgage rates is hindering home ownership, thereby exacerbating pressure on the rental market. This is according to a study by LocService.fr, which shows that the housing shortage persists and is worsening in France, with the rental market stress index rising from 2.71 in 2022 to 3.35 in 2023.
The situation is particularly tense in large cities that are already under heavy pressure. Rennes tops the list with a ratio of 9.79 between applications and available units, followed closely by Lyon at 9.76. The search for housing is also proving difficult in Annecy, where the supply-to-demand ratio stands at 8.83. Paris (7.18), Bordeaux (7.11), and Angers (5.97) round out the list of cities under the most pressure.
Notably, some of the cities with the highest demand are not necessarily the ones experiencing a sharp rise in rental pressure. Toulouse, ranked third in demand by LocService.fr, does not appear among the top three cities experiencing a sharp rise in rental pressure. Nice and Marseille are seeing an increase in demand without experiencing a surge in rental pressure, thanks to a supply that remains adequate. Paradoxically, Rennes, which faces the highest rental pressure, is only the tenth most sought-after city for rentals.
The prospect of banning the rental of energy-inefficient homes by 2034 could exacerbate the rental housing crisis, as nearly half of the housing units in the Île-de-France region would be affected. Ivan Thiébault, head of research at LocService.fr, has expressed concerns that the housing crisis could worsen if banks do not quickly ease the financing conditions for mortgage purchases.
One-third of renters are students, who focus their search near their schools and future jobs. Studio apartments accounted for 31% of the most-rented units in 2023, while furnished rentals now make up 55% of the rental market—up from 38% in 2019—due to tight conditions in the rental market, which have led to more frequent turnover in small units.
Despite sustained demand, the increase in rents remains modest at +1.7% compared to 2022, well below inflation—which exceeds 5%—and the rent benchmark index (IRL), which rose by +3.49% in the third quarter compared to 2022. The average rent now stands at 718 euros per month.
The price increase is more pronounced for large apartments, with an average rise of 7% for a three-bedroom apartment and 7.5% for single-family homes over the course of the year. Regions outside Paris have seen an average increase of 3.8% in rents, while Paris has limited rent increases to 1.7% due to prefectural regulations.
