Paris City Hall plans to promote the conversion of offices into housing with two new measures: a property tax exemption, and an option to make the decision reversible. Owners are not entirely convinced about the profitability of this exercise.
Five-year exemption from property tax
Following discussions on 15 and 17 February 2016, the Council of Paris voted to allow a total exemption from property tax for five years on housing created by the conversion of city offices. To qualify, these units must all have ‘principal residence’ status.
Moreover, the exemption must be expressly requested by the landlord, and will come into effect a year after completion of the conversion work.
Fifteen-year reversibility option
A further incentive for landlords leaves them free to reconvert back to office space. In effect, the city council has set up a declaration system allowing a property temporarily designated as residential premises to be reassigned for other purposes, provided this occurs within 15 years.
So over this 15-year period, a simple declaration would allow the landlord to restore his property to its former use. On the other hand, if this option is not taken up within this period, this right is forfeited and the property gains permanent residential status.
Any rental agreement for a temporary residential premises must accordingly specify the temporary nature of this designation.
The profitability of this housing conversion for the landlord
Though a five-year exemption from property tax may seem attractive, remember that converting offices into homes is a significant operation costing up to € 2,000/ m².
Furthermore, if the landlord then wishes to return a new property to its original use, the conversion will have to be removed, otherwise the amount of office space available will be reduced.
From a rental returns perspective, office rents in Paris are generally higher than today’s corresponding rents for both furnished and unfurnished tenancies.
So even if these new measures seem interesting at first glance, it would be surprising if landlords decided to go ahead with conversions in the light of the costs involved and the loss of rental income.