When the Real Estate Crisis Threatens RSA Funding

The Court of Auditors has highlighted the financial difficulties facing the departments, about 20 of which are at risk of becoming financially vulnerable in 2024, due in particular to the decline in transfer taxes (DMTO).
 

In a report published on July 22, the Court of Auditors sounded the alarm about the precarious financial situation of local governments, which lost 3.9 billion euros in 2023. The departments, whose expenditures are primarily devoted to medical and social services—such as payments of the Active Solidarity Income (RSA)—saw their savings decrease by 4.7 billion euros.
 

A Funding System in Need of Reform
 

The departments have been particularly hard hit by the slowdown in the real estate market, as a large portion of their revenue comes from transfer taxes (DMTO) levied on real estate transactions, which are included in notary fees. In 2023, DMTO revenue across all local governments fell by 4.5 billion euros, the Court notes, and it once again recommends reforming the departments’ financing system, which is overly dependent on economic cycles even though much of their spending is fixed.
The Court of Auditors warns that “about twenty departments” risk becoming financially vulnerable in 2024 due to the continued decline in DMTO revenue.
 

As for the regions, their gross savings (excluding debt repayments) fell by 0.4 billion euros, as their operating expenses rose due to inflation.
 

This trend affected all local governments, with operating expenses rising by 6.1% overall due to higher utility bills, wage increases, and higher interest payments on their debt. However, their debt increased only slightly, rising from 186 billion to 188 billion euros.
 

Municipalities and intermunicipal associations are the only ones to see their savings increase—by 1 billion and 0.2 billion euros, respectively—thanks to higher revenue from property taxes. Local governments are expected to contribute to the stabilization of public finances, but “the current programming law does not include any provisions capable of enabling the achievement of objectives related to local public finances,” the Court criticizes.