No longer in the news following the controversy surrounding the reform of the pension system, the housing crisis is still very much in the news. While things seem to be gradually picking up, there is still a long way to go to return to the levels of activity seen before the Covid crisis and achieve - finally - a housing supply capable of absorbing population growth. For Housing Minister (DP), everyone needs to fit their piece of the housing policy jigsaw.
On 16 September, at the Chamber of Commerce's back-to-school economic forum, Carlo Thelen said: "The housing crisis, despite major investment in infrastructure and targeted state measures, continues to worsen." When do you think we'll get out of it?
Claude Meisch. - "Unfortunately, I don't have a crystal ball. But despite everything, I'm seeing a certain recovery. The demand, given the demographic trend, is still there: more than 9,000 people arrive in Luxembourg every year. We need to look at who they are and how they want to live, whether by renting or buying. We need to differentiate according to the target groups and develop projects tailored to their needs. We also need to catch up on the backlog that has built up over the last 20 years. The demand is there and the products are eagerly awaited. It's on the financing side that things get complicated, whether in terms of the value demanded or the costs. We have considerably increased the amount of assistance available for property purchases, because we know that banks often won't lend to people with little equity or modest incomes. We communicate extensively about this support for private buyers. It's also symptomatic of the current period: not so long ago, this support was useless, because the products sold themselves. Today, developers have to adapt their projects to the resources and financial support available to their customers. We are entering a new era, in which we will have to remain innovative to be able to adapt.
What do you mean by innovation?
"Take the question of joint tenancy, introduced in the law reforming residential leases. There has been a definite interest on the part of the property sector in investing in shared projects, where returns seem to be higher than for standard housing. Among politicians and professionals alike, the idea persists that everyone would like to live as we do, and that each home should correspond to our own pace of life. This is a mistake. Today's lifestyles are very varied: some people work three days in Luxembourg and live elsewhere the rest of the week; others work day or night and don't need a large two-bedroom home. We need to give ourselves the means to meet these new expectations by allowing the market to adapt better. At the moment, there is a shortage of two types of property: small studios and four- or five-bedroom homes.
The government has been very proactive in its housing policy. What more can it do in the face of a market that is still taking off slowly and only partially?
"We mustn't think that the solution will come from politics alone. We have a role to play and we have assumed our responsibilities in the acute phase of this crisis, in order to stimulate the acquisition of newly built property or investment in property, which has generated some activity. But we have said from the outset that the market itself needs to find a new balance between property values and financing costs. Today, it is moving in that direction. Our action has helped to curb the rise in prices, both for existing properties and off-plan. Prices have become more reasonable than those seen over the last two years. This is a good result, for which we must share responsibility with the private sector and local authorities. We have launched an ambitious package to facilitate construction.
Some of the measures have not yet been translated into law - the legislative process takes time - but they will make it possible to build more and build faster at a time when demand has returned. On the other hand, I don't think we'll be seeing interest rates hovering around 1 to 1.5% for the next ten years. We will have to live with the current 3.5%. So we also need to work on the design of the supply and its prices to get individuals and investors back into the market. At this level, we need to start thinking about how the VEFA model should evolve, because it will no longer be the only possible model in the future. The days when we could develop a project, put it on the market, quickly sell 80% of it, obtain financing and then build it were exceptional. Growth rates of around 10% a year were neither sustainable nor durable.
Attacked along with their margins, isn't the natural reflex of developers to make top-of-the-range products with better margins than affordable housing?
"Yes, it could. That's why it's up to the public authorities to house everyone properly. We need to have a sufficient number of affordable housing units on our territory. Developing such a stock is a priority for this government - and why not in collaboration with the private sector? The Vefa buyback programme is one example. We have also launched pilot projects in which we do not buy a property, but rent it out to eligible families at an affordable rent, with the difference being covered by the State. This innovative model allows us to involve the private sector in the creation of affordable housing.
We are not going to put tower blocks in small villages that are intended to retain their rural character.
This was not the policy before 2023, when a clear separation prevailed between, on the one hand, public developers (SNHBM, Fonds du logement), local authorities and charities, and, on the other, private developers. Two worlds that misunderstood each other, even opposed each other. Now we're building bridges between them to promote affordable housing. I believe that the solution to the crisis lies in collaboration between these players. I've always said that developing a project comprising two or three residences and selling one to the state makes sense: it improves the financing of the other two. There are intelligent ways of working together, where everyone benefits. That's a message I'll be repeating again and again this week.
Faced with the shortage of housing and floor space, shouldn't we be encouraging the construction of tower blocks?
"In a small country like ours, we need to manage land use as effectively as possible. That's what I say as Minister for Town and Country Planning. We want to build more, faster and, above all, in the right places. Wherever possible, we need to be able to go higher. Personally, I live on the thirteenth floor. It's the exception in Luxembourg, but it offers a certain quality of life. It's perfectly possible to accommodate 400 people on a small footprint while guaranteeing this quality of life.
This is not the Luxembourg tradition. Aren't you afraid that the fears of neighbours and mayors will make this solution impractical?
"We are not going to build towers in small villages, which are intended to retain their rural character. On the other hand, such developments are possible on industrial wasteland. This has already been done in Kirchberg and Gasperich, and is helping to change the mentality of residents. Building higher up is an option, but it's not a miracle solution: it's one element among others in achieving an overall solution.
How many homes would have to be delivered per year to be able to say that the housing crisis is over?
"This is not an easy question to answer, as the solution depends on many factors: economic growth, employment trends and the average number of people per home. For example, in Luxembourg, although housing is very expensive, we can afford the luxury of living with few people in a lot of square metres, compared with France, Belgium or Germany. It's hard to put a figure on it, but it will have to be higher than what we've achieved in recent years. (Editor's note: between 2009 and 2019, Luxembourg saw 35,939 homes completed, an average of more than 3,200 a year, according to the Ministry of Housing's 2024 activity report)."