Why rental prices across France are set to rise in 2022
Consumer price inflation is rising sharply in France after it slumped in 2020 with the pandemic. This will have a knock-on effect on rental prices as they are linked to inflation
Consumer price inflation in France is at its highest since 2008, which could increase rental prices for certain tenants.
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Rental prices are set to increase across France in 2022 due to a rise in consumer price inflation, following a period of low inflation in 2020 due to the Covid pandemic.
Yearly rental price increases are based on the ‘rent reference index’ (indice de référence des loyers, or IRL in French). This is calculated each quarter based on the year-on-year change in the average consumer price, excluding tobacco and rent, over the past 12 months.
France’s national statistics body, INSEE, published on October 15 the latest IRL for the third quarter of this year, which shows an increase of 0.83% over the past year. This is far higher than the figures for the second (+0.42%) and first quarter (+0.09%).
The IRL is expected to continue to increase over the next few quarters.
This could mean rental prices going up for tenants, with landlords able to calculate new rent prices based on this index.
Consumer price inflation in France was at 2.6% in October, its highest level since 2008, up from 2.2% in September. It is expected to continue increasing.
How rental increases work
Private landlords can increase rent once a year (révision annuelle) if the rental agreement includes a provision for it, called a clause de révision. This increase must be based on the IRL.
If the lease does not contain a review clause, the rent must remain the same for the duration of the lease.
The contract may specify a specific date for the yearly review, or if not the default date is set as the day the contract comes into effect.
Rental increases cannot be applied retroactively, and only apply from the date of the request to increase the rent.
A second rental increase cannot be enforced until after the next yearly review date.
Read more:How to declare French rental income
How rental increases are calculated
There is a formula for calculating rental increases using the IRL.
It is:
(Current rent) x (new IRL of the reference quarter of the contract / IRL of the same quarter of the previous year).
The date of the IRL to be taken into account is the date indicated in the rental agreement.
If the date is not indicated in the lease, the date of the last IRL published by INSEE when the lease was signed must be used.
Here is an example:
Take the current rent price of €700.
Imagine the latest INSEE IRL when the contract was signed dates to the third quarter (Q3) of 2020.
The IRL in Q3 of 2020 was 130.59, as per INSEE figures.
The new IRL is going to be from Q3 of 2021 if the landlord decides to increase the rental price. The IRL for Q3 in 2021 is 131.67.
So the rental amount will be 131.67 / 130.59 which equals: 1.0083.
You then times that by the current monthly rent (€700), which equals: €705.81. So a tenant’s rent could increase by €5.81 a month.
You can also use this online tool to calculate your possible rent increase.
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