A reform of rent laws in Luxembourg is supposed to provide more transparency in the market, but it has come under fire from within government ranks and faces more debate. Photo: Shutterstock

A reform of rent laws in Luxembourg is supposed to provide more transparency in the market, but it has come under fire from within government ranks and faces more debate. Photo: Shutterstock

A much-anticipated reform of rent laws in Luxembourg has hit a snag after a wave of criticism from outside organisations and from within the government.

The reform, first outlined in 2020, lowers deposit payments to two months’ rent, splits agency fees between tenant and owner, and limits rent to 3% to 3.5% of capital invested, depending on the property. The invested capital is assessed at the time of construction and every change in ownership.

But in a new year’s interview with RTL, prime minister Xavier Bettel (DP) criticised the law and didn’t rule out further changes after industry players cautioned it would deter investors and result in rising rents. Just days later, Francine Closener of fellow coalition partner LSAP said the party doesn’t support the law in its current shape.

“I was surprised by the news,” said Max Hahn, who sits on the parliament housing committee for the DP. But he also downplayed the debate speaking to Delano. “We are in a process that isn’t extraordinary.” The DP is clearing matters up within its ranks, he said, adding that the party would not communicate externally until then.

Meetings between the DP’s group in parliament and members of government are planned, but Hahn could not provide a timeline of the next steps ahead.

Council of State opinion

A key document in this process will be the opinion of Luxembourg’s Council of State, a body that reviews all laws for their compatibility with the grand duchy’s constitution and other legal texts. The council can issue formal oppositions to drafts it deems legally unsound.

The council issued a first opinion in May 2021, but a second document is still pending since the government introduced a series of changes in October last year. This included a new formula to assess the capital invested, determining the amount a landlord can legally charge in rent.

Déi Lénk in a statement on Tuesday called for the text as a whole to be binned.

But Hahn warned of misunderstandings of what the reform aims to achieve. “The law won’t be a revolution,” he said, adding that its primary goal had never been to lower rents but prevent abusive practices in the market. It also introduces new rules for flatshares.

“We haven’t had the opportunity to broadly discuss the amendments in the commission,” said Yves Cruchten, who sits on the housing committee for the LSAP. “This should happen in February.”

Cruchten said the party wants to work constructively to solve any problems. “There are important and good changes for tenants foreseen in the law; we hope that we will move forward quickly.”

Like Hahn, Semiray Ahmedova (déi Gréng), who chairs the committee in parliament, said the bill aimed at undercutting excessive rent payments, such as landlords claiming rent for separate rooms in a property thereby raising the total amount to much more than would be possible if rented out as one unit. “It’s a very technical law,” she said, adding that industry players would be given the opportunity for discussion during a meeting in February. 

“The law will be discussed in the chamber committee soon, not just with the LSAP and the DP but will all parties in the committee,” she said. “The goal isn’t to release a law that is counterproductive.” 

Supply and demand

Rents in Luxembourg rose 17% over the last decade. This pales in comparison to a . For most new constructions, landlords already charge rent below the 5% ceiling.

A slowdown in construction is set to further squeeze supply and demand. With higher interest rates and prices, Luxembourg’s property market saw fewer transactions last year. However, instead of this leading to a drop in prices as the market adjusts to lower demand, prices are expected to remain high with fewer properties available, Hahn said.

“The housing market won’t be regulated by a [price] cap,” he said. “If we want prices to go down, we must ensure that the offer increases.”

The government in October last year presented plans to introduce a mandatory tax on properties and land lying vacant. At the same time, however, developers and construction companies are warning of rising costs as well as staffing and materials shortages.

Housing minister Henri Kox (déi Gréng) showed himself surprised by the criticism levelled at the draft law by the coalition partners speaking with RTL last week, adding that all government parties had agreed on the text before it was submitted to parliament.

With 2023 an election year, bills must be voted before parliament breaks before summer to prevent being delayed by the outcome of the election.