The Millionaire and the Renter

Two items crossed the wire within a day of each other, and read together they say more than either says alone. The Local reported that Italy remains one of Europe's most attractive destinations for millionaires, even after the government raised its flat tax on wealthy new residents by half. The same outlet, the following day, reported that rising rents have pushed the country's housing crisis onto the budget agenda, with politicians warning that Italy is 'not far behind Spain's'.

We do not present this as a contradiction. It is a design. A tax regime calibrated to draw mobile capital will succeed at drawing mobile capital; it will not, by itself, build a single apartment in a city where a nurse cannot afford the neighbourhood she grew up in. The world's financial pages have long praised Italy's flat-tax experiment as a clever piece of statecraft. The world's social pages, rather less loudly, have begun to note who pays for it.

What the foreign coverage captures, and what it tends to flatten, is that these are not two Italys but one. The same cities that appear in relocation brochures — Milan, Florence, Rome, the lakes — are the cities where the rental squeeze is sharpest. The millionaire arrives, and the neighbourhood he arrives in becomes more expensive for everyone already there. This is not a moral failing peculiar to Italy; it is the arithmetic of a desirable place with a slow supply of housing.

We note, too, the second half of the story. The Local reports that would-be foreign residents are delaying their moves, citing heavy taxes and a healthcare system they perceive as deteriorating. The country that courts the very rich is, in the same season, failing to persuade the merely comfortable. That is the more interesting signal, and the one the budget will have to answer.

Rome is not unique in facing this. But Italy's particular difficulty is demographic: a country of roughly fifty-nine million, ageing, with its young people leaving, cannot afford to be inhospitable to arrivals of any income. The flat tax is a lever. It is not a policy.