Europe’s governments inflate housing prices with huge tax privileges for real estate

The article "Europe’s governments inflate housing prices with huge tax privileges for real estate" was published by Investigate Europe, an organization dedicated to in-depth journalism that examines significant issues across Europe. The piece, uploaded to their database on February 7, 2023, reveals the extent to which European governments provide substantial tax benefits to real estate investors and owners, a policy that is prevalent across various member states regardless of the political differences among them.

Investigate Europe’s comprehensive analysis highlights that over recent months, the taxation systems and loopholes associated with real estate investments in numerous European countries have attracted billions of euros to an already overheated real estate market. Countries such as Austria, Belgium, France, Germany, Greece, Hungary, Italy, Norway, Portugal, Spain, Sweden, and the UK have been identified as having tax regimes that disproportionately favor specific types of real estate investments compared to other business ventures or investments.

The privileges most commonly noted in these tax regimes include full exemptions on capital gains, special tax-free guarantees for funds, and lower tax rates on rental income compared to other profit types. Such tax advantages create a landscape where real estate, encompassing both commercial and residential properties, is frequently under-taxed or entirely untaxed, as concluded by economists, tax experts, lawyers, and organizations consulted by Investigate Europe.

The investigation also sheds light on various tax avoidance schemes practiced by real estate investors within these countries. Notably, the lack of European regulation and oversight complicates the ability to establish definitive patterns of tax avoidance. Nevertheless, Investigate Europe’s research indicates a significant misallocation of capital in member states, including Germany, Italy, Portugal, and Belgium, amounting to billions of euros arising from these tax exemptions.

The findings of this investigation raise critical questions about the sustainability of housing in Europe. As tax privileges continue to inflate housing prices, the potential for equitable housing solutions diminishes. The implications of these tax policies underscore a growing concern for sustainable housing initiatives in Europe, as significant financial resources are diverted towards real estate investments rather than addressing the pressing issues of affordable housing and community development.