Housing Crisis in France: Criticisms Mount Over Extension of Rent Caps Amid Sharp Supply Plunge

The housing issue remains at the core of residents' concerns in France, as confirmed by a recent survey conducted by Ipsos bva. Securing a rental apartment has become a daily dilemma and an arduous journey experienced by millions of young people and housing seekers in densely populated cities. Scenes of long queues forming at building entrances, with applicants clutching thick files in hopes of persuading landlords, are increasingly common at a time when the rental market is suffering from a continuous contraction in available housing supply.

Extension of the Rent Control Experiment

In this tense environment, the majority in the French Senate (from the right) recently voted in favor of extending the "rent cap" mechanism (encadrement des loyers), an experiment launched following the passage of the "ELAN" law in 2018. The government subsequently rushed to place it on the National Assembly's agenda, despite its own reservations and prior critical assessments of the scheme's impact.

In a recent policy paper, Kevin Brookes, director of the think tank Génération Libre and lecturer at Sciences Po, and Bertrand Mohan, an entrepreneur and researcher at the same center, argue that this well-intentioned public policy has failed to deliver the intended outcomes. Instead, they contend, it is further fueling the housing crisis rather than extinguishing it.

Slight Price Drop and Financial Losses

According to the paper, the anticipated drop in rental values has remained extremely marginal. Economists Gabriel Fack and Guillaume Chapelle noted in a policy brief for the Institute for Public Policies (IPP) that rent reductions have generally ranged between merely 2% and 4% compared to market conditions without caps. Furthermore, a third of monitored listings exceed legal limits due to the absence of rigorous enforcement mechanisms. Additionally, achieved savings are not tied to household income levels; an affluent tenant may benefit from a tangible financial reduction, whereas low-income individuals who cannot find housing in the first place are deprived of any support. Moreover, the decision has inflicted a direct loss on the state treasury estimated at approximately €181 million in tax revenues.

Severe Shortage in Available Units

Conversely, reports—including observations from the French Court of Auditors (Cour des comptes)—have affirmed that the primary side effect lies in the acute contraction of supply. Rental listings in Paris plunged by 47% between 2022 and 2025, a trend mirrored in Lyon, which implemented the mechanism in 2021. Experts believe that landlords lose the incentive to lease their properties when returns fall below costs—a pattern consistent with international experiences. A study published in the American Economic Review pointed out that price caps led to a 15% drop in housing supply in San Francisco, an outcome also observed in Berlin and Stockholm, whereas market deregulation in Buenos Aires sparked a surge in available units.

This crisis is exacerbated by additional factors weighing down France's housing sector, including tax hikes, strict restrictions on renting energy-inefficient buildings (passoires thermiques), declining construction rates, and rising interest rates. Consequently, administrative market interventions to freeze prices operate as a catalyst that deepens the social crisis, rather than enacting measures that incentivize construction and inject more homes into the market to meet the real needs of residents.