The cost of housing in Luxembourg has risen disproportionately in relation to nominal salaries, which grew on average 2.8% annually since 1995 while annual housing prices shot up 6.3%, the Chambre des Salariés wrote in its report published on Wednesday.
Q2 2018 to 2019 growth was the most marked yet, with housing prices leaping 11.4%.
“A cap on property prices” and “significant taxes on land retention and the non-assignment of vacant housing units,” would help stabilise prices, the CSL concluded.
Current property taxes, it said, “fall far short of the issues they are supposed to address” and reform is the only way to develop “a certain fiscal justice”.
The CSL stressed that reforms should not penalise taxpayers who own a home which they also live in. “The tax must be transformed into an effective tool to counteract the excessive concentration of real estate assets in the hands of a few wealthy multiple owners, as well as speculation and the retention of land and real estate in Luxembourg,” it wrote.
Below is a summary of some of the CSL’s proposals:
- Transform property tax into a progressive tax on real estate assets, which takes into account the aggregate value of each individual's real estate assets and whose rates are greatly increased in the event that the land or real estate in question is intentionally withheld from the market;
- Abolition of the tax niche for specialised investment funds that are active on the Luxembourg property market to re-establish a certain tax justice in the field of housing;
- Abolition of the half-rate taxation of real estate capital gains in the event of real estate sales and tax property capital gains at the overall rate, in order to limit property speculation and finally bring the taxation of this type of asset in line with the taxation of earned income;
- Improve the supply of affordable rental housing;
- Revise the legal ceiling on rents in relation to household purchasing power;
- Reform and increase the amount of rent subsidy offered, reduce the legal ceiling for a rental guarantees, and review the charging of real estate agency commissions to the lessor;
- Ensure ecological housing subsidies take into account the financial situation of applicants, in order to facilitate access to aid;
- Reassess or temporarily suspend the deductibility of interest on mortgages for rental properties and depreciation for wear and tear to reduce profitability of investments and reduce pressure on prices;
- Adjust the amount of tax credit called “Bëllegen Akt”;
- Ensure a substantial increase in the supply of housing in view of the country's high population growth. The CSL called on the state, communes, public developers and compensation funds to “assume, without exception, their responsibility and commit themselves to creating more affordable housing.”