French Furnished Rentals: Why New Taxes Will Reshape the Market

Will France's latest fiscal maneuvers truly rebalance its housing market, or merely shift a heavier tax burden onto a critical segment of property owners? The upcoming changes to the tax regime for furnished rental properties, particularly those under the Loueur en Meublé Non Professionnel (LMNP) status, are poised to reshape the landscape for a significant number of landlords starting in 2027.

The French government's Projet de Loi de Finances (PLF) for 2027, deposited on October 1, 2026, outlines significant adjustments that directly target the tax advantages previously enjoyed by owners of furnished rentals. These measures are not a full suppression of the LMNP regime, as some might fear, but rather a substantial tightening of its benefits, as Jedeclaremonmeuble.com reports. The stated aim is to correct market imbalances and, according to BFMTV, save €200 million.

The Erosion of Tax Advantages

At the core of these reforms is a reduction in the notional deductions and a severe limitation on depreciation allowances, which have long made furnished rentals an attractive investment. For non-classified short-term rentals, the notional deduction under the Micro BIC regime is set to drop sharply from 50% to 30%, accompanied by a reduced income threshold, according to My-French-House.com. This means a significantly larger portion of rental income will be subject to taxation.

Even more impactful are the proposed changes to depreciation for those under the régime réel. The PLF 2027 proposes capping the depreciation of furnished rental properties for non-professional landlords at 2.5% per year, with an additional limit of €7,000 per tax household, as Legifiscal.fr and LMNP-Facile.fr detail. For tourist rentals specifically, this depreciation rate would be further reduced to 1.5% annually, notes BFMTV. We view this as a direct blow to the financial viability of many LMNP investments, which have historically relied on depreciation to minimize taxable profits, effectively increasing the tax burden on owners, as Le Figaro Immobilier suggests. The removal or severe limitation of depreciation for newly acquired furnished properties signals a clear intention to make these investments less fiscally appealing, according to Eresrelocation.com.

A Shifting Landscape for the Rental Market

The consequences of these changes are likely to reverberate throughout the French housing market. With many landlords affected, we anticipate several potential outcomes. Many landlords, facing higher tax bills, may choose to increase rental prices to offset their reduced returns. This could exacerbate affordability issues for tenants, especially in already strained urban centers like Paris, where other measures like a vacant home tax are also being considered for 2027, as Paris Rental explains.

Alternatively, some landlords might choose to exit the furnished rental market altogether, converting their properties to unfurnished rentals or even selling them. This could reduce the supply of furnished properties, which are often crucial for expatriates and those seeking flexible housing options, as Eresrelocation.com notes. The government's push to curb the tax advantage of furnished rentals risks creating unintended shortages in a segment of the market that serves specific, often critical, needs.

Reconciling Policy with Practical Impact

The government's stated goal of rebalancing the market and addressing perceived abuses in short-term tourism rentals is understandable. However, we must question whether a broad-brush approach to tax reform will achieve the desired equilibrium without creating new distortions. By making furnished rentals less profitable, the policy might disincentivize investment in property maintenance and upgrades, particularly for less energy-efficient homes. While renovating before 2027 might allow deduction of costs under the régime réel for such properties, as Pulp Immobilier highlights, the overall outlook for new investments appears less favorable.

In our view, while the intention may be to level the playing field between furnished and unfurnished rentals, these reforms could simply shift the financial burden. Landlords will likely pass on increased costs to tenants, or the supply of furnished accommodation will shrink, neither of which truly solves the underlying housing challenges. The French housing market, already complex with various tax obligations for owners, including social charges, as Kohen Avocats details, now faces an additional layer of uncertainty that could deter future investment.

The verdict is clear: these fiscal adjustments are a significant tightening of the screws on furnished property owners. While the precise long-term effects remain to be seen, landlords with furnished properties in France would be prudent to review their financial strategies now, preparing for a less forgiving tax environment come 2027.