New housing: when taxation and regulations discourage mayors from building

Uninspiring revenues despite the construction

According to the IPR, municipalities with little or moderate construction saw their revenues increase by approximately 20% between 2016 and 2024, a comparable development regardless of their construction dynamics.

Only the most active municipalities, with +11% of housing built, recorded a more marked increase of +26% in their revenues.

A difference deemed insufficient to compensate for the costs associated with welcoming new residents (facilities, infrastructure, public services).

Property tax: a limited lever in the face of inflation

Housing-related revenues represent 37% of the tax resources of municipalities, the main one being property tax, with 5,9 billion euros collected in 2024 in Île-de-France.

Each new building "mechanically" increases the number of taxpayers, but the effect remains limited:

• +6% increase in the tax base related to construction since 2016
• compared to +22% automatic discounting linked to inflation, which is “much less”

Revenue growth therefore relies more on automatic mechanisms than on housing production.

A delayed financial return of up to 30 years

Another major obstacle for elected officials:

• property tax exemption for 2 years for new properties
• 15 to 30 year exemption for social housing

This discrepancy penalizes local decisions: the costs are immediate, the revenues are deferred.

Abolition of the housing tax: one less incentive

Since 2018, tax reform has reduced the incentive to build.

As Valentin Sauques, an expert in local finance at the Paris Region Institute (IPR), points out “There is less incentive to build social housing from a tax perspective, because the occupants of social housing were subject to the housing tax.”

The Court of Auditors also confirms a decline in the incentive for mayors to build.

State compensation deemed disconnected

Current mechanisms remain largely ineffective.

The study notably indicates: "no link between the evolution of the general operating grant and the evolution of the number of housing units"

In short: building does not guarantee more resources

ZAN, RE2020: additional constraints for construction

Beyond taxation, mayors must now contend with an increasingly demanding regulatory framework:

• Zero Net Artificialisation (ZAN)
  • drastic reduction of available land
  • complexity of development operations

  • more sensitive political trade-offs

• RE2020
  • rising construction costs
  • enhanced technical requirements
  • direct impact on project profitability

The result: even when the political will exists, projects are more difficult to balance.

A direct effect on the construction industry

For construction companies, the consequence is immediate:

• fewer licenses issued
• fewer operations launched
• decline in order books

The obstacle is now twofold: fiscal + regulatory.

Aid to mayors who are building projects: a key lever

Faced with these constraints, the IPR emphasizes one essential point:

- "The relevance of aid to mayors who are building"

in a context marked by

- "all the constraints that housing production places on a municipality, the lack of coherence between local taxation and construction objectives"

Key takeaway for construction professionals

• Revenues up 20% to 26%, but not very encouraging.
• Construction = only +6% tax base vs +22% inflation
• Exemptions for up to 30 years
• Less incentive since the abolition of the housing tax
• ZAN constraints + RE2020 = more complex and costly projects

The revival of new housing now requires a global rebalancing: fiscal + regulatory.