Untaxed – how governments lure capital into real estate and feed the housing crisis

Hands playing shell game with three cups and a housing unit
Alexia Barakou

The investigation found that Austria, Belgium, France, Germany, Greece, Hungary, Italy, Norway, Portugal, Spain, Sweden and the UK all have tax regimes that favour certain kind of real estate investments more than other types of business or investments. The most common privileges include full exemptions on capital gains, special free-tax guarantees for funds, and rent income taxed lower than other types of profits. 

Economists, tax experts, lawyers and organisations interviewed by IE reporters arrive to a clear conclusion: real estate, both commercial and residential, is under-taxed or untaxed in most countries. 

The investigation reveals several examples of tax avoidance schemes by real estate investors. There is no European regulation nor oversight, so patterns are hard to prove. Still Investigate Europe’s research shows misallocation of capital in member states like Germany, Italy, Portugal or Belgium to the tune of billions of Euros due to these exemptions. 

This has direct social consequences: capital is lured into real estate, drives up prices, and by this contributes to the escalating housing crisis in many European countries. Statistics show that in all other EU countries apart from Italy and Malta, house prices rose from 2010 at rates that were higher than inflation or average wage growth. This is also true for Norway and UK as Investigate Europe’s findings show. In European cities like Prague, Bratislava and Paris, it will take more than 20 years of average wages to buy a flat. 

Investigate Europe spoke to people behind the figures, victims of the housing crisis in many European countries. The reporters also confronted national governments with the tax privileges and their social costs. Read those findings, human stories and political answers in our newest investigation, #Untaxed.