Untaxed - How governments lure capital into real estate and feed the housing crisis

The investigation project "Untaxed" was conducted by Investigate Europe, a journalistic organization focused on in-depth reporting across Europe. The project aims to shed light on the tax policies that significantly favor real estate investments and how these policies contribute to the ongoing housing crisis in various European countries. The investigation was uploaded to the public domain on August 17, 2023, and is accessible via the URL: https://www.investigate-europe.eu/posts/untaxed-real-estate.

Investigate Europe’s team analyzed the taxation frameworks and loopholes surrounding real estate investments across several European nations, revealing a common trend: governments provide substantial tax benefits to investors and owners in the real estate sector. This policy persists despite differing political contexts among member states. The investigation encompassed countries including Austria, Belgium, France, Germany, Greece, Hungary, Italy, Norway, Portugal, Spain, Sweden, and the UK, all of which maintain tax regimes that disproportionately favor real estate investments over other types of businesses or investments.

The investigation uncovered prevalent tax privileges such as complete exemptions on capital gains, special tax-free guarantees for investment funds, and lower taxation rates on rental income compared to other profit types. Economists, tax experts, and legal professionals interviewed during the investigation arrived at a consensus: real estate, both commercial and residential, is often under-taxed or untaxed in most European countries. The lack of a cohesive European regulatory framework and oversight complicates efforts to prove patterns of tax avoidance by real estate investors.

Investigate Europe’s research highlights the misallocation of capital in countries like Germany, Italy, Portugal, and Belgium, resulting in billions of euros being diverted to the real estate sector due to these exemptions. This phenomenon has tangible social ramifications, fueling rising property prices and exacerbating the housing crisis in many European nations. Statistics indicate that in all EU countries except Italy and Malta, house prices have increased at rates surpassing inflation and average wage growth since 2010. This trend is also observable in Norway and the UK.

In major European cities such as Prague, Bratislava, and Paris, it will take over 20 years of average wages to purchase a flat, illustrating the severe impact of these economic policies on ordinary citizens. Investigate Europe reached out to individuals affected by the housing crisis, offering personal stories that underscore the human cost of real estate tax privileges. The investigation also confronted national governments with these findings, seeking accountability for the social costs associated with the tax benefits provided to real estate investors.

The findings from the "Untaxed" investigation reveal critical insights into how tax policies favoring real estate investment contribute to the housing crisis across Europe. By highlighting the economic and social consequences of these tax regimes, the investigation aims to foster a broader understanding of the issues at hand, pushing for necessary reforms in the pursuit of sustainable housing solutions across the continent.