Photo: Jisu Han/Unsplash. Housing was a key factor in placing households at risk of poverty in Luxembourg
Economic growth has helped richer households in Luxembourg but widened the gap with those on modest incomes, according to figures published by Statec.
The statistics and analysis body issued the “Travail et cohésion social” report to mark international day for the eradication of poverty on 17 October. It reported that the cost of housing was a key factor in placing households at risk of poverty in Luxembourg. It pointed out that modest income households were already spending a high proportion of their incomes on housing.
According to the report, residual income (income after paying rent or mortgage repayments) was 66% for modest households in 2012, when they paid 34% of total income on housing, but a mere 58% in 2017, when 42% of income went on housing.
In 2017, the cost of housing was considered an issue for four out of five households, the report found, referring to results from a perception study. Worst hit were single parent households, who spent between 42.1% and 58.4% of their gross income on housing, depending on how many children were in the household.
The report did not delve into details about the Luxembourg real estate market, but 2018 figures suggest they are rising on average 5% per year. This rampant growth can be explained by an acute housing shortage exacerbated by positive migration, as well as “moderate continued overvaluation of property prices,” according to central bank economist Sara Ferreira Filipe. Some would argue that salaries have increased in step, thanks to the indexation system, pegging salaries to inflation. But, that only impacts the salaries of people currently employed at the time of indexation and not necessarily starting salaries of newcomers or existing residents taking up a new fixed-term contract (CDD).
This has likely contributed to a new trend for overcrowded housing, which impacted 8.1% of residents in 2016, up from 6.4% in 2009, according to the Statec report.
Risk of poverty
Housing is one of a number of factors linked to the risk of poverty, which impacted some 18.7% of the population in 2017.
If you factor in material deprivation, defined as the inability for households to afford certain goods and activities typical in society, and people in the same household working fewer than 40 hours per week, the proportion of at risk households rises to 21.5%, the report said.
And even households in which people are in gainful employment are not immune to the risk of poverty. “In 2017, 13.7% of workers living in Luxembourg were at risk of poverty, a heterogenous group which has increased over time and is bigger than that found in neighbouring countries.”