Inflation is rising again and this is not good news for homeowners. Admittedly, this inflation yield will automatically allow them to raise their rents, since the IRL is calculated from the average, over the past 12 months, of the evolution of prices at consumption excluding tobacco and rents. However, an increase in this indicator over the past few months (+2.6% over one year in October) should push IRI up at the start of 2022. But it’s still hard to tell the ratios. Anyway, and that’s the main bad news, this return of inflation will also increase local taxes.
In fact, since 2018, the rental values of dwellings, which are used as the basis for calculating property tax on built property, have been reassessed every year on a flat rate basis, in accordance with the observed evolution of Harmonized Consumer Prices (HICP), between November of year n-1 and November of year n-2. This year, this formula has proven favorable for owners, since the HICP development between November 2019 and November 2020 was only 0.2%. The lowest level since 1981. But according to preliminary results revealed this Tuesday, November 30 by INSEE – which will be consolidated in December – the index is up this time: +3.4%. This means that in 2022, rental values will be revalued, at least, by at least +3.4% across the entire territory. This is the biggest increase since the turn of the century! An increase would also have repercussions for other local taxes, which also include areal rent in their calculation, such as the Household Waste Removal Tax (TEOM) or the housing tax for families that are still responsible.
Understand that no matter what rates will be voted on next year by municipalities, authorities and inter-municipal administrations, your property tax can increase by at least +3.4%. Unless your community decides to lower its rate…or the government decides to step in. In the face of inflation, the CEO may already be tempted to introduce an amendment to the Finance Act of 2022 in order to amend the reassessment of rent rules. But there is little chance of that happening. At the recent Congress of the Union of Mayors in France, the Minister of Public Accounts, Olivier Dusupt, confirmed that the revision of the fixed-rate rent rules will be at least 3% in 2022. “This is the rule, we do not change not the rule, we maintain the same rule as in Previous,” he said before the elected representatives of the Arab Monetary Fund.
This is excellent news for elected officials, who will therefore be able to count on increasing their tax revenue in 2022… and much less beneficial to owners, who will face another increase in their taxes. Between 2010 and 2020, the average property tax amount jumped by about 28%, according to the latest Property Tax Monitor released by the National Union of Property Owners (UNPI). Triple increase in inflation and rents for the same period.
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