Real estate: the deduction of loan interest could make a comeback

Posted Oct 8, 2022 10:19 AM

“Make France a country of owners”. This is what Nicolas Sarkozy wanted in 2007, when he introduced his “tax package”. Will the government resuscitate one of its flagship measures? An amendment tabled by the deputies of the majority Mathieu Lefèvre and Aurore Bergé, goes in this direction. Adopted during the examination of the budget in the Finance Committee, their proposal adds however very restrictive conditions, and in particular a “green” dimension to the mechanism which had been tested until 2010.

It is a question of “allowing French people looking for a first home to benefit from a deductibility of their loan interest, as long as it meets the requirements of environmental construction”, according to the text presented to the committee. Taxpayers who undertake energy renovation work following the acquisition of their first home will also be able to benefit from the reimbursement of part of the interest, which will take the form of an income tax credit.

The two elected officials seek to kill two birds with one stone: “to respond to the ecological emergency” and “to make borrowers solvent”, in other words to facilitate access to real estate credit, in this period when it is in the process of being rise sharply. Reimbursement will only be possible if the accommodation concerned has a level of energy and environmental performance corresponding to class “A”.

Windfall effect

“We look at this proposal with benevolence,” says a member of the executive. The amendment is also calibrated to “limit the impact on public spending”. The tax credit, reserved for first-time buyers, would be limited in time but also capped. It could not exceed 30% of the loan interest and would be applied only for the first 7 installments of the schedule.

Under Sarkozy, the device was open to all, provided they acquire their main residence. The reimbursement covered 40% of the loan interest the first year and 20% the following four, up to a limit of 750 euros per year for single people and 1,500 euros for couples.

The measure was a failure. It cost between 1 and 3 billion euros per year and created a windfall effect for the wealthiest. As the banks do not take this type of assistance into account to assess the solvency of their client when negotiating the loan, access to property for low-income households has been very limited. The right therefore preferred to replace it with a zero-rate super-loan (PTZ) reserved for first-time buyers from 2011.

By reserving the deductibility of loan interest for first-time buyers, the Renaissance deputies no doubt hope to avoid this pitfall.

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