Luxembourg residents ranked housing as the biggest issue facing the country, in the latest Eurobarometer survey. Here’s what Luxembourg is doing to tackle it.

While most EU countries are battling with unemployment, health and social security, the main preoccupations in Luxembourg centre around housing (58%) and the rising cost of living (25%), according to a Eurobarometer survey published in June. While in Ireland 56% of respondents shared concerns about housing, across the EU these were low priorities--housing was the eighth most-important and living costs the fourth, after unemployment, health and immigration.

Luxembourg’s housing shortage compared to a growing demand is widely blamed for causing housing prices to spiral. The latest data from Liser and Statec found the average cost of a family house was €5,002/sqm and, for a new flat, €6,316/sqm. There are regional variations--the average cost of a house in the Luxembourg canton was €968,918, twice that of a similar property in the north of the country. But prices don’t appear to be stabilising.

The government’s strategy is to shift towards state-owned, low rent properties. Last year it said it was in the process of developing a new model for renting flats out at 30 to 40% below market value. Its pilot project in Grevenmacher, in cooperation with the Fonds de Compensation, will be the litmus test for this model.

The Fonds du Logement constructed some 133 new affordable homes in 2017, up from 20 in 2016. Its homes are intended for rent, sale and/or emphyteutic lease (meaning the lessee must improve the property). In coming years, its biggest affordable housing project will be on brownfield sites in Wiltz and Dudelange, where some 2,000 new homes will be built. And the national affordable housing corporation, the SNHBM, was expected to build 250 new dwellings in 2018.

Government intervention

In 2015, the government fixed the sale price of properties constructed by private developers in new districts of Kirchberg at €4,200, 40% below market value. The SNHBM was tasked construct half of the housing on the site for people receiving housing support. The sale price of these properties was capped at €3,250/sqm. The housing is to be made available on a 99-year lease hold only and the owner must occupy the property.

A proposed new law introduced in 2018, meanwhile, expands the threshold for net monthly earnings to be eligible for a state deposit guarantee. It aims to help tenants paying rent of up to 40% of their net income.

All these measures help provide a roof over people’s heads but full home ownership also remains an out-of-reach goal for many in Luxembourg, even if six out of 10 Luxembourgers aged 20 to 64 own their own homes.

Why buy?

Owning one’s home not only offers stability and autonomy but it has become common practice for people to sell their home in Luxembourg and retire to warmer, cheaper climes. This trend plays on the speculation which is has thus far benefited from spiralling property prices and, one could argue, sustains the irksome price rise.

One solution mooted by innovators is to encourage forms of cooperative home ownership. Nouma, a not-for-profit founded by Emma Zimer in 2016, is helping groups of senior citizens to build their own participatory co-housing or cooperatives though, not for financial reason--but to share their twilight years in good company.  

Could it catch on?

Zimer says that the Luxembourg legislation would have to change in order for low-cost cooperative housing projects to get started in Luxembourg. “You cannot get financial assistance to build. You also can’t get reduced VAT for new constructions because a cooperative is considered a company,” she told Delano.