Tax Incentives and Housing Renovation: Evidence from France

This paper investigates the impact of the Denormandie tax incentive, introduced in 2019 to promote the renovation of dilapidated housing in medium-sized French municipalities. The study employs a spatial difference-in-differences framework, exploiting geographic discontinuities at municipal boundaries induced by the policy to identify causal effects. The analysis focuses on areas within a 1--5 kilometer range of the policy boundary to ensure robust identification while addressing potential spillover effects from neighboring untreated zones. The findings reveal a 19% increase in building permits and a 32.3% rise in renovated rental units within the treated zones. Additionally, vacant housing sales increased by 18%, reflecting the reintegration of underutilized properties into the active housing market. These impacts were resilient to displacement effects and robust to different distance specifications. Furthermore, the policy induced a temporary 2% decline in older housing prices, which dissipated within two years as the market adjusted. This study highlights the effectiveness of renovation-focused tax incentives in addressing housing market inefficiencies and fostering urban revitalization. The findings offer actionable insights for policymakers seeking to balance housing affordability with urban regeneration objectives.