WRITTEN QUESTION E-2277/99

by Inger Schörling (Verts/ALE) to the Commission

(13 December 1999)

Subject: Purchase of holiday homes by foreign nationals

Most countries used to restrict the right of foreign nationals to purchase property. Sweden has a derogation from the current rules until the end of the year, but all parties now agree that such restrictions should be scrapped.

A potential problem that would eventually have to be resolved is that house prices in attractive areas could skyrocket to such an extent that locals find themselves priced out of the property market. In the long run, this could mean that communities wither away and come to life only during the summer months. Many coastal municipalities in particular are deeply concerned about such trends.

According to an ECJ judgment last summer, laws designed to protect or promote local interests are acceptable provided that certain conditions are met. They must not, for instance, be discriminatory or more stringent than is required to achieve their objectives.

What, in the Commission's view, are acceptable regional or local factors which Member States may take into account, and what must the objective of such laws be?

Answer given by Mr Bolkestein on behalf of the Commission

(4 February 2000)

The EC Treaty stipulates, in Article 56 (ex Article 73b), that mldr all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited. This rule is applicable to the acquisition of real estate by non-residents, since such acquisition is a capital movement. The EC Treaty provides for some exceptions to this general rule. Of relevance in the present context is Article 58 (ex Article 73d) of the EC Treaty which allows Member States to take measures which are justified on grounds of public policy or public security. But that Article also stipulates that such

measures mldr shall not constitute a means of arbitrary discrimination or a disguised restriction on the free movement of capital mldr.

Moreover, judgements of the Court of justice (e.g. Case 17/92) indicate that economic grounds as such are not acceptable grounds for an exception. The mere fact that the opening of borders for capital movements puts an upward pressure on prices does not justify an exception from the freedom of such movements. However, if a large demand for secondary homes in a certain, but limited, area leads to undesirable social consequences such as that described by the Honourable Member, certain restrictions on the acquisition of second homes may be justified on grounds mentioned in the EC Treaty. Such restrictions could be accomplished by town and country planning guidelines, which may restrict the building of second homes and the use of existing buildings as second homes in certain limited areas, reserving those areas in a municipality or region to other land uses. The applicability of such measures was confirmed in a joint declaration on secondary residences (Declaration no. 5 in the Treaty of Accession of Austria, Finland and Sweden), which states that nothing in the acquis communautaire prevents individual Member States from taking national, regional or local measures regarding secondary residences, provided that they are necessary for land-use planning and environmental protection and apply without direct or indirect discrimination between nationals of the Member States mldr.

That declaration recalls that discrimination vis-à-vis non-residents, in particular Community nationals, must be avoided when applying such planning guidelines. The recent Court judgement mentioned by the Honourable Member (Konle vs. Austria of June 1999) provides further interpretation of this condition, as well as recalling the need to observe proportionality mldr to the extent that a Member State can justify its requirement of prior authorisation by relying on a town and country planning objective such as maintaining in the general interest, a permanent population and an economic activity independent of the tourist sector in certain regions, the restrictive measure inherent in such a requirement can be accepted only if it is not applied in a discriminatory manner and if the same result cannot be achieved by other less restrictive procedures (Case C-302/97).

The Commission's answer to the Honourable Member's question is therefore that a Member State may apply town and country guidelines which include a restriction on the acquisition of second homes in certain limited areas, if there is a clear risk of social disruption. Such a restriction must be clearly non-discriminatory, that is, it must also apply to the residents or nationals of the Member State in question. The regime implementing the restriction shall not constitute a disguised (indirect) discrimination. Furthermore, the regime must be proportional to the aim of the restriction. Following the Court of justice's judgement in Konle vs. Austria, a prior authorisation scheme should not be used, since there exist other, preferable, implementation schemes, such as, for instance a declaration procedure. Furthermore, a restriction may not be applied if there exist other, preferable, means to accomplish the purpose of safeguarding the residential needs of local inhabitants of modest financial means, for instance, by subsidised rents or municipal housing projects.