This paper investigates the impact of the Denormandie tax incentive, introduced in

2019 to promote the renovation of dilapidated housing in medium-sized French mu-

nicipalities. The study employs a spatial difference-in-differences framework, ex-

ploiting 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 po-

tential 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 im-

pacts were resilient to displacement effects and robust to different distance specifi-

cations. Furthermore, the policy induced a temporary 2% decline in older housing

prices, which dissipated within two years as the market adjusted. This study high-

lights the effectiveness of renovation-focused tax incentives in addressing housing

market inefficiencies and fostering urban revitalization. The findings offer action-

able insights for policymakers seeking to balance housing affordability with urban

regeneration objectives.

JEL Codes: R31, R38, C23, H71.

Keywords: Public Policy, Housing Price, Difference-in-Differences, Dynamic Treat-

ment Effects.