Section 1: Factors for Rent Estimation
Section 2: Calculating Monthly Rent
- Additional Rental Charges
- Regulated Rent and Rental Charges
- Setting Rent for New Tenancies
- Tools to Determine Market Rent
- Rental Index (Indice de Référence des Loyers, IRL)
- Rental increases
- Affordable Rentals
- Louer Abordable Program
- What is the exceptional rent supplement?
- Maximum rent
Section 3: Rent Freeze (Encadrement des Loyers)
Section 4: Calculation of Rental Charges
Setting the right rent price for your investment rental property means more than trying to make a profit. First, understand that you cannot estimate the rent price of an apartment instantly; you must actively research it.
So take your time for the estimation process from the start, and do not rush.
We suggest to start by Understanding the French Rental Market.
The level of rent varies enormously over the country, and they can even do so within regions for similar properties. So, it may be challenging to determine the market rent for your property.
You should check local adverts to understand the advertised rents and visit some properties to compare them with your own.
Once a rent has been agreed upon and a tenancy agreement has been signed, there are specific controls on further increases in the rent level during the tenancy period.
Section 1: Factors for Rent Estimation
Several factors can impact the rent value of your rental apartment. These include the location, size, condition, and amenities of the property, as well as the current real estate market conditions. If you need a precise estimate, it’s always a good idea to have an experienced rental real estate agent assess these factors on-site.
The location of your rental property will play a vital role in the estimation. For instance, the value of the same apartment can vary significantly from one arrondissement to another. Depending on the facilities or establishments around your rental property, it will get more or less value.
For example, someone will rent a 35 m2 apartment across from a university quickly, but they might not rent a villa in that location as fast. Similarly, the condition of the property can also affect the rent price. A well-maintained and renovated property will command a higher rent than one in poor condition.
The property condition you want to rent out directly impacts its price. Renovating your property before renting is advisable to increase your rental income. Additionally, the condition of the building and the common areas also affect the rent price for apartments.
The size and exposure of your rental apartment are equally important factors. For example, a small and dark apartment may be difficult to rent.
Section 2: Calculating Monthly Rent
The monthly rent for a rental property is based on a “referenced rent” rate, which is specified per square meter for the type of property you’re renting.
To determine your monthly rent, multiply the referenced rent rate by the total number of habitable square meters in the property. For example, if the referenced rent is €10 per square meter and your apartment is 50 square meters, the rent would be 10 x 50 = €500 per month.
It’s important to note that this calculation only covers the basic rent. It does not include additional charges or fees (often called “charges”). These are costs related to the building’s services and maintenance and utilities like water and garbage collection.
Additional Rental Charges
Separate determinations of extra charges depend on the tenant’s specific accommodation expenses. These might include maintenance of common areas, heating, and sometimes even building concierge services.
The landlord then adds these charges to the basic rent. So, using the previous example, if your rent is €500 and the additional charges are €50, you would pay a total of €550 per month.
Regulated Rent and Rental Charges
Regulated Rent: This is the main rent for the property, which may be subject to limitations or controls depending on local laws.
Rental Charges (Building Charges): In addition to the rent, tenants pay for their share of the building’s everyday expenses. People often refer to these as “rental charges” or “service charges,” covering building maintenance, cleaning of common areas, and sometimes utilities.
Example:
For a furnished apartment of 80m2 composed of three rooms, built between 1946 and 1970, located in the district of Saint-Germain des Prés in Paris 6th, the increased reference rent is € 36.1 / m2. The rent will amount to:
80 m2 x 36.1 = € 2,888
A. Setting Rent for New Tenancies
Landlords in France can generally set rent prices freely when renting out their properties for the first time. There are no nationwide limits on how much they can charge, and rent levels vary significantly across the country and even within the same region.
To determine a property’s fair market rent, landlords can examine local advertisements and compare the features and rents of similar properties in the area.
B. Tools to Determine Market Rent
Carte des Loyers
Carte des Loyers is a government website that provides average rent figures for different properties in various locations (communes) across France. Publishers of the millions of yearly property adverts in France derive these figures.
If data for a specific location is insufficient, the site uses data from a broader area.
There is a general figure for apartments with an average surface area of 52m2, with two others measuring 37m2 and 72m2. The figure for houses is based on a property measuring 92m2. Therefore, you should use the data only as a guide.
Observatoires des Loyers
Another source of information is the Observatoires des loyers, which provides more detailed information for 50 towns and cities in France.
Online Simulators
If the owner wishes to lease his apartment without going through a real estate agency, many online simulators help estimate the rent value of a property, and most are free.
For example, you can check this simulator for a start.
These tools generally start by asking you for information about your rental property, such as the address, surface area, heating, energetic condition, etc. They then use the database of rental properties in your vicinity to calculate an average and thus estimate how much you can charge for your rental apartment.
C. Rental Index (Indice de Référence des Loyers, IRL)
Rental increases
Once you set the rent and sign a lease, there are specific rules that regulate how and when you can increase the rent. If the lease does not include a specific clause, you cannot increase the rent.
A landlord can increase the rental once a year, provided the tenancy agreement allows it.
Missing such a clause means you cannot raise the rent, whether the property is furnished or not. Additionally, regulations restrict rent increases for properties with poor energy efficiency ratings in certain high-stress housing areas.
However, the rent increase cannot be higher than that of the previous letting, adjusted by the inflationary increase in the rental index—the Indice de Référence des Loyers (IRL).
The “L’Indice de Référence des Loyers” (IRL), a government index, regulates annual rental increases in France, reflecting changes in the cost of living, excluding tobacco and rent. It’s a common practice to include a clause in rental agreements that allows for rent adjustments based on this index.
Typically, you can only raise the rent for a property by a set amount each year. Still, there are some cases where a more significant increase may be allowed. For example, if the property has undergone substantial improvements or the previous rent was much lower than similar properties in the area, the tenant must permit the increase to proceed.
Example:
If your rental contract includes a clause that allows annual increases based on the “L’Indice de Référence des Loyers” (IRL), and the IRL rises by 2% over a year, you can then adjust the rent to €816 per month for the following year.
This adjustment allows the rent to reflect cost-of-living changes as recorded by the IRL, but you can only apply it if the contract explicitly agrees to this term.
In simpler terms:
| Cap on Increase (IRL) | IRL (Indice de Référence des Loyers) is the French Rent Index, which measures inflation related specifically to rental costs. It provides a guideline or a cap on how much the rent can be increased annually. |
| Capped by Inflation | The actual increase is limited to the IRL’s inflation rate. This means that the rent cannot be increased by more than the inflation rate from the previous year. This cap helps prevent unreasonable rent hikes and ties the increase to the overall economic conditions. |
| Calculation of Increase | To determine the new rent, the landlord takes the current rent and increases it by the percentage increase in the IRL. |
| Example | For example, if the current rent is €1000 per month and the IRL for the year shows an inflation rate of 2%, the new rent can be increased to a maximum of €1020 per month (€1000 + 2% of €1000). |
Rental Increases
This system ensures that rent increases are fair and reflect economic realities, protecting tenants from unexpected and excessively high rent increases.
What is the exceptional rent supplement?
For some apartments, the law allows adding a supplement amount to the controlled rent for additional comfort. It is possible to calculate an exceptional rent when most other apartments do not have the same qualities. Yet, prime rents are not allowed on first rentals.
The elements taken into account for prime rents may be:
- A terrace
- A view of the great monuments of Paris
- Luxury furniture and equipment
- Parking
- A sauna
- A home cinema
- Ceiling height exceeding 3.30m
Maximum rent
Since 2019, in Paris and certain other areas, the rule is more rigid, as there is a ceiling on the maximum rent that can be charged.
In these areas, landlords can only increase rents in line with the IRL until they reach the ceiling figure.
The list of places concerned by this rule are Paris, Lille, Hellemmes, Lomme, Aubervilliers, La Courneuve, Épinay-sur-Seine, L’Île-Saint-Denis, Pierrefitte-sur-Seine, Saint-Denis, Saint-Ouen-sur-Seine, Stains, Villetaneuse., Lyon, Villeurbanne, Bagnolet, Bobigny, Bondy, Le Pré Saint-Gervais, Les Lilas, Montreuil, Noisy-le-Sec, Pantin, Romainville, Montpellier, and Bordeaux.
Marseille will join this list in 2024, and 24 communes in the Communauté Pays Basque will follow in 2025. The communes concerned in the latter are Ahetze, Anglet, Arbonne, Arcangues, Ascain, Bassussarry, Bayonne, Biarritz, Bidart, Biriatou, Boucau, Ciboure, Guéthary, Hendaye, Jatxou, Lahonce, Larressore, Mouguerre, Saint-Jean-de-Luz, Saint-Pierre-d’Irube, Urcuit, Urrugne, Ustaritz and Villefranque.
In Paris, rent levels are set district by district, size by size, and by age of construction. Information on the maximum rental levels in Paris can be found at Loyers de Reference.
Exceptions
- Where rents are capped, a landlord can justify a higher rent only if the property has exceptional features; this is known as a complément de loyer.
- Additionally, if a property is in poor condition or has an F or G energy rating, the increase cannot be applied.
- If a property has been vacant for at least 18 months and has at least an E energy rating, the new rental charge can be freely set.
Rent control
In cities located in tense areas, rent control applies. In these cities, the rent must not exceed a maximum amount in the case of a new tenant or the same tenant.
Moreover, Paris, Lille, Hellemmes and Lomme, Lyon and Villeurbanne, Montpellier, Bordeaux and the municipalities of Common plain and d’Est Ensemble apply even stricter rules.
Although, the rent control does not cover some dwellings, as they are subject to other rules: housing under 1948 law, accommodation contracted by the Anah (excluding intermediate rent agreements), accommodation LOW-COST HOUSING, furnished tourist, and subleasing.
To do a simulation for the apartment you wish to rent, go to the DRIHL website to obtain the exact estimation of the controlled rent.
If you have doubts about the year of construction of the house, feel free to consult https://www.bercail.com/
Section 3: Rent Freeze (Encadrement des Loyers)
In certain high-stress housing areas, there are tighter controls. Here, the rent for a new tenancy cannot exceed the amount charged to the previous tenant. This rule is active in specific cities and will expand to over 2,000 more communities from January 1, 2024. However, annual rent increases in line with the IRL are still allowed.
Poorly Insulated Dwellings
Rental rules for poorly insulated properties, specifically those rated F or G in energy efficiency (which means they use much energy for heating and cooling):
1. Restrictions on Rent Increases
From January 2021, landlords cannot raise the rent when they renew or rent to a new tenant if the property has inferior thermal insulation (more than 331 kWh per square meter per year).
Landlords also face restrictions on:
- Charging more than the previous tenant when starting a new lease.
- Increasing the rent annually based on inflation.
- To raise the rent after making property improvements, the lease must explicitly agree to it.
-
Proposing rent increases at lease renewal, even if the previous rent was very low, unless explicitly agreed upon.
However, rent increases are still allowable for leases that began before 24 August 2022 and that last for three years, until the lease is renewed or ends.
2. Restrictions
Properties that consume more than 450 kWh/m^2/year cannot be rented out.
From 1st January 2025, properties rated ‘G’ (using 420 kWh/m^2/year) and later properties rated ‘F’ from 1st January 2028 and ‘E’ from 1st January 2034 will also face rental restrictions.
Affordable Rentals
Louer Abordable Program
Since January 2022, landlords can choose to rent their properties at rates lower than the usual market rate and receive tax relief as an incentive.
The tax relief amounts to:
- 15% if the landlord rents the property at 15% below the market rate.
-
35% if the rent is 30% below the market rate.
To qualify for this program, landlords must register with the National Housing Agency (ANAH) and commit to these reduced rates for at least six years.
Section 4: Calculation of Rental Charges
These charges can be set in two ways:
Fixed Price: A constant amount that doesn’t change month to month.
Provision (Provisional Charge): An estimated charge that is adjusted at the end of the rental year. The adjustment is based on the actual expenses incurred. It is often aligned with the inflation index known as the IRL (Indice de Référence des Loyers), which is also used to adjust regulated rents.
Special Consideration for Furnished Rentals:
Landlords may charge a flat rate for furnished rentals. This rate remains the same throughout the tenancy and is not adjusted annually like the provisional charge.
Example Scenario:
Apartment Details:
- Location: Lyon, France
- Size: 60 square meters
- Type: Unfurnished apartment
- Rent: €800 per month
-
Additional Parts: Includes a cellar and a parking space
Rental Charges:
- Type of Charge: Provisional (variable)
-
Estimated Monthly Charge: €150 per month (initial estimate based on previous year’s expenses)
Yearly Adjustment:
At the end of the rental year, the property manager reviews the expenses incurred for maintaining the building and compares them to the provisional charges collected. Suppose the costs were higher than estimated due to an unexpected repair in the building’s heating system.
Actual Annual Expenses for Common Areas (including cleaning, maintenance, elevator service, and heating system repair): €10,000 for the entire building.
Your Share: Assuming the allocation is based on apartment size and your apartment represents 5% of the total communal space:
- 5% of €10,000 = €500 per year
-
Monthly Actual Charge: €500 / 12 = €41.67 per month
Calculation of Charges at the Year-End:
- Original Monthly Charge: €150
- Total Collected from You: 12 months × €150 = €1,800
-
Actual Charge Needed: 12 months × €41.67 = €500
Since the provisional charge was significantly overestimated:
-
Overpayment: €1,800 (collected) – €500 (actual) = €1,300
The overpayment of €1,300 would typically be credited back to you, or it could be adjusted against future payments.
Monthly Rent and Charges Breakdown:
- Rent (Monthly) i.e. Base: €800
-
Monthly Rental Charges (after adjustment): €41.67 (actual, after first year’s reconciliation).
Final Monthly Payment After First Year:
- Total Monthly Payment: €800 (rent) + €41.67 (revised charges) = €841.67
Please note: This article does not constitute legal advice – the information on this page has been prepared solely for your information. As we are not a law firm and act as a platform, we can and may share our estimations, but we cannot give you legal advice for your individual further proceedings.
