Buying bare ownership: what the discount is really worth

An apartment priced at 63% of its market value, with no tenant to manage, no rental income to declare, no wealth tax. The bare ownership pitch is remarkably effective. It rests on a single number, the discount, held up as proof of a bargain. Except that a 37% discount spread over fifteen years tells you nothing about what you actually earn each year. It also says nothing about the notary fees paid on the full amount, nothing about the condition of the property you will recover at the end of the term, and nothing about what happens if property prices stagnate for the entire duration of the split.

Bare ownership and usufruct, explained simply, means splitting the right of ownership in two: the usufructuary uses the property and collects the rent, while the bare owner holds the walls without earning a single euro for the agreed period. You buy a right that produces nothing, and you pay less for it precisely for that reason. The whole question is whether the discount granted properly compensates for those years of immobilised capital. This article gives you the calculation tools to decide, with the numbers to back it up.

Paying 60% of a property's price and waiting: the split ownership bet

The mechanism fits in one sentence: you buy the walls, someone else buys the use for a fixed period, and at the end you automatically recover full ownership with no formalities and no additional taxation on the reconstitution of the right.

In the most common French structures, known as social rental usufruct, the usufructuary is a social housing operator that rents the property to households below income ceilings for fifteen to seventeen years. The private investor acquires the bare ownership at a discount that roughly corresponds to the rent they forgo.

One documented example gives a sense of the real gap. A thirty-three apartment development in Viroflay, in the Paris western suburbs, was marketed as bare ownership at 3,615 euros per square metre, while the local full ownership market stood at 5,737 euros per square metre. That is a 37% discount, a price representing 63% of the unencumbered value. It sits exactly in the middle of the range applied to fifteen-year splits.

This model is not experimental. The sector's longest-established operator produced around 8,000 homes between 1999 and 2018, across three hundred operations carried out on behalf of eighty-six social housing landlords. The pace rose from roughly 160 homes a year in the early 2000s to nearly 620 a year over the following decade. Almost half of that supply is concentrated in the Paris region, in municipalities falling short of national social housing quotas, where land pressure is at its highest.

Documented exits from these arrangements, on the other hand, remain rare. The same operator reported that after twenty-one years of activity it had unwound only seven programmes, representing close to two hundred homes. The product works, but the number of complete cycles observed remains small relative to the volume marketed. That is worth keeping in mind when you project a fifteen-year operation.

So the bet is simple to state: accept zero income for a long period in exchange for a purchase discount and the automatic reconstitution of full ownership at the end. The remaining question is whether that discount is correctly calibrated.

How the bare ownership discount is calculated

Two methods coexist, and they serve entirely different purposes. Confusing the two is the most common mistake made by buyers discovering split ownership.

The statutory tax scale and why it does not set the price

French tax law sets a fixed grid for splitting value between usufruct and bare ownership. For a fixed-term usufruct, the usufruct is worth 23% of the full ownership value for each ten-year period started, capped at 30 years. So 23% from 0 to 10 years, 46% from 11 to 20 years, 69% from 21 to 30 years. For a lifetime usufruct, the grid starts at 90% for a usufructuary under 21 and falls by ten points for each decade of age, down to 10% beyond 90.

This scale has been unchanged since 2004 and still applies in 2026. But it covers only three uses: transfer duties on gifts and inheritances, and the base for wealth tax. It has no role in setting a sale price. A notary who used it to value an acquisition in a paid split ownership transaction would be making a methodological error.

The economic method: present value of the rent you forgo

The price actually paid is determined differently. You estimate the rent the property would generate over the whole duration of the split, deduct the costs borne by the landlord, then discount that cash flow to obtain its present value. That sum represents the economic value of the usufruct. The bare ownership equals the full ownership market price minus that amount.

In other words, you are not paying an arbitrary discount: you are paying the property's price less the present value of the income you give up. The discount rate applied, the vacancy assumed and the capped rent level in social housing can shift the result by several points.

An important and rarely stated consequence: on a fifteen-year split, the negotiated discount generally lands between 32% and 38% based on ranges observed by sector professionals, whereas the tax scale values the usufruct at 46% over that band. So you often pay more for bare ownership than its theoretical tax value.

Duration and the usufructuary's age: the two dials that set the price

Duration is the first lever. The ranges reported by market participants in 2025 and 2026 break down as follows: roughly 32% to 38% discount over fifteen years for residential with an institutional landlord, 36% to 42% over seventeen years, 42% to 45% over twenty years, with a few structures reaching 50%. The progression is close to linear, on the order of half a point to seven tenths of a point of additional discount per extra year of usufruct.

The second dial only matters in lifetime arrangements, typically a sale with reserved usufruct by an elderly seller. There, the usufructuary's life expectancy drives the value, and the statutory scale serves as a negotiating reference. A 75-year-old usufructuary retains a usufruct valued at 30%, leaving bare ownership at 70%. At 85, the usufruct falls to 20%. A decade of age shifts the price by ten points.

Is a 40% discount better than a 25% discount?

Framing the question that way immediately exposes the marketing trap around bare ownership. The headline discount is an absolute figure. Return, on the other hand, is an annualised figure. Until you relate the discount to the period your capital stays locked up, you know nothing about the performance of the deal.

Three worked simulations over 10, 15 and 20 years

Take a property valued at 300,000 euros in full ownership and reason at constant prices, with no property inflation and excluding fees.

First case, a 25% discount over ten years. You pay 225,000 euros. At term, your right is worth 300,000 euros. The annualised reconstitution rate comes out at roughly 2.91% a year.

Second case, a 35% discount over fifteen years. You pay 195,000 euros. At term, 300,000 euros. The annualised return works out at roughly 2.90% a year.

Third case, a 40% discount over twenty years. You pay 180,000 euros. At term, 300,000 euros. The annualised return drops to roughly 2.59% a year.

The result is counterintuitive. The smallest discount, 25% over ten years, delivers the best annual return of the three. The apparently most generous discount, 40% over twenty years, is the weakest performer. For a twenty-year split to match the performance of a short one, you need a discount of at least 45%, which yields around 3.04% a year.

The annualised return hidden behind the headline discount

The calculation is simple and you can reproduce it yourself: raise the ratio of full ownership value to price paid to the power of one divided by the number of years, then subtract one. No sales brochure will hand you that figure, even though it is the only honest basis for comparison with a bond, a listed property fund or a life insurance guaranteed account. If you want to put it side by side with a classic buy-to-let, the method for calculating the return on a rental property investment uses the same discipline.

These rates, between 2.5% and 3% a year, should be read for what they are: a return at constant property prices, before notary fees, before any major repairs, and with no interim cash flow whatsoever. They are not comparable to an income-distributing investment, since you receive nothing for the entire duration. They also assume the property retains exactly its nominal value over fifteen or twenty years, an assumption that remains just that.

What you are really signing when you become a bare owner

A split ownership contract is not a simple sale deed with a discount attached. It organises a long-term legal coexistence between two holders of rights over the same property, with a cost allocation that deserves to be read line by line.

Major repairs, service charges, property tax: the actual split

French civil law lays down a clear rule: the usufructuary bears maintenance repairs, the bare owner bears major repairs. The statute lists these, and the Supreme Court treats the list as exhaustive: load-bearing walls and vaults, restoring beams and entire roofs, dikes, retaining walls and boundary walls. Everything else counts as maintenance.

In practice, the usufructuary bears ordinary building service charges, maintenance and local taxes, including property tax. The bare owner is only on the hook for structural work, and can settle it at the latest when the usufruct expires. One exception applies: if the major repairs result from a failure to maintain the property since the usufruct began, the usufructuary is liable. The general logic of who pays what between landlord and tenant is a useful reference point here.

Key point: these rules can be contracted around. Institutional structures very often include an agreement transferring major repairs to the usufructuary landlord for the whole period. Do not rely on the civil code, read the split ownership agreement.

The condition of the property when you get the keys, the real blind spot

You recover a home occupied for fifteen years by successive tenants, maintained to the landlord's standards, not yours. No legal mechanism guarantees you a like-new condition at term.

Case law is clear on one point that works in your favour: a usufructuary who carries out improvement works cannot claim any compensation, even if the property's value increases as a result. The Supreme Court confirmed this in 2012. But the reverse is not automatically true. If wear and tear is simply normal, you have nothing to claim.

Two reflexes are essential before signing. Check that a joint condition report was drawn up when the usufruct began, then check what the agreement says about restoration, facade work and energy retrofitting. Over fifteen years, environmental standards will change. Knowing who bears the cost of compliance can move the real return by several points.

The costs the discount does not always cover

The discount is expressed as a percentage of market price, but costs are added in absolute terms to the amount you disburse. They eat directly into the annualised return calculated above.

Notary fees, structuring commission, management fees

Good news on one point: transfer duties are calculated on the bare ownership price, not on the full ownership value. On a 300,000 euro property acquired for 195,000 euros, the tax base shrinks accordingly. For new-build, which covers most of the social rental usufruct supply, acquisition costs are reduced, generally around 2% to 3% versus 7% to 8% on existing properties.

Less good news on everything else. Structuring commissions and distribution fees taken by intermediaries are not subject to any consolidated disclosure. There is no sector-wide data on these levels. Transparency depends entirely on who you are dealing with, and nothing guarantees the commission is separated out from the headline price.

The question to ask is simple: what is the market value of the property in full ownership, established against which comparable, and what does the distributor earn on the transaction? If the answer is vague, so is the advertised discount.

Selling before term: at what price and to whom

Nothing prevents you from selling bare ownership during the split period. Distributors quote three to six month timelines and emphasise the scarcity of supply on this secondary market. Those claims come from interested parties and deserve to be treated with caution.

The pricing mechanics, however, are objective. The closer the term, the shorter the remaining usufruct period, so the smaller the applicable discount. Bare ownership with five years of usufruct left logically trades at around 80% to 85% of full ownership value. Your potential gain on an early sale comes from that mechanical narrowing of the discount.

But the market remains thin, unlisted, with no public price reference. You sell to a buyer who knows the product and will negotiate. A rushed sale five years before term rarely goes through at the theoretical price.

When the deal actually pays off

The return on bare ownership does not hinge on the discount alone. It depends on two external variables the seller controls no better than you do.

The price assumptions that flip the calculation

Take the 35% discount over fifteen years again, or 2.90% annualised at constant prices. If the property appreciates by 1.5% a year over the period, the total return rises above 4.4%. If the market falls by 1% a year, it drops below 1.9%. Over fifteen years, the cumulative effect of price movement matters more than three or four points of initial discount.

That explains why supply is geographically concentrated in tight markets, particularly the Paris conurbation. The logic is not only about finding social housing landlords with demand, it is also about placing the investor where the assumption of price resilience is most defensible. A split ownership deal in a soft market stacks both risks: no income and no prospect of capital growth. Learning to tell a tight rental market from a merely expensive one is therefore part of the due diligence.

Wealth tax, income tax, estate planning: where the real gain sits

The tax advantage is real and immediate. No rent received means no rental income, no income tax and no social levies for the entire duration. For a taxpayer in a 41% marginal bracket, the saving compared with direct ownership is substantial.

On wealth tax, French law provides that the usufructuary declares the property at its full ownership value. The bare owner is excluded. An exception applies where the seller retains the usufruct, in which case the tax charge may be split, unless the bare ownership was transferred to a presumptive heir or a donee.

For estate planning, the benefit is twofold. You gift bare ownership valued according to the statutory scale, so on a reduced base, and the usufruct then lapses without further duties. A 300,000 euro property gifted at age 75 passes on a base of 210,000 euros before allowances.

Cases where you are better off walking away

Some configurations make the deal structurally unfavourable, whatever the headline discount.

The first is a wealth planning horizon shorter than the duration of the split. If you anticipate a liquidity need, a change in professional circumstances or a family project within ten years, locking up capital for fifteen years on a thin secondary market is an uncomfortable bet. This product cannot be redeemed with one click.

The second is a discount that is too small relative to the duration. Below 30% over fifteen years, the annualised return falls under 2.4% at constant prices, before fees. At that level, comparison with liquid, tax-efficient alternatives stops being favourable.

The third concerns lightly taxed investors. The central argument for bare ownership is the absence of tax on income you do not receive. If your marginal rate is 11% and you are not subject to wealth tax, that advantage shrinks to very little. You then carry the drawback of illiquidity without collecting the tax benefit in return.

The fourth is a split ownership agreement that is vague on restoration and major repairs. A document leaving the bare owner exposed to structural work for fifteen years, with no cap or reserve, turns a calibrated investment into an open-ended commitment.

The last is location. A property in a soft market, with no rental pressure and no demographic outlook, will benefit from neither price growth nor the market depth needed for a decent sale at term.

Locking up capital for 15 years or earning from month one: choosing by horizon

Bare ownership is a serious instrument, with sound economic logic and attractive tax treatment for taxed estates. But its real numbers are more modest than the sales presentation suggests. A 35% discount over fifteen years is roughly 2.90% annualised at constant prices, before fees, with not a single euro received along the way. A 40% discount over twenty years performs worse than a 25% discount over ten years. The headline discount is never a performance figure; it only becomes one once divided by time.

Three checks before signing: always relate the discount to the duration to obtain the annualised return, read the split ownership agreement rather than the civil code on cost allocation, and question the full ownership market value used as the reference. Those three reflexes are enough to filter out most poorly calibrated deals.

Which leaves the underlying question: should your capital sit unproductive for fifteen years to capture a deferred gain? For part of your portfolio and a long horizon, that can be defended. For another part, a logic of regular income and controlled duration answers the need better. That is exactly what Shelters offers, with real estate operations of known duration set out in advance, from 12 to 24 months for property trading up to 5 years for rental, a target return stated from the outset and distributions that do not ask you to wait a generation. Shelters co-invests in every project alongside its users, with an accessible entry ticket and full visibility on the asset being financed. Browse the live operations to compare, numbers in hand, what each investment horizon really produces.