The reform comes after a 2018 Liser report found that among the 20% of households with the lowest living standards in the country, 18,000 spent more than 40% of their disposable income on rented accommodation.
Meanwhile, the cost of housing in Luxembourg has rocketed in recent years, with prices rising 11% from September 2018-2019.
In addition to equally splitting agency fees, which were previously covered almost entirely by the tenant, the reform will reduce the cap on guarantees from the equivalent of three months’ rent to two months.
In the event of a disagreement between landlord and tenant when leaving a property, the bill aims to clarify the rules and enable sanctions if deadlines are not respected.
The law will for the first time introduce legal provisions on shared housing, or “co-location”, in which several tenants rent a property under a single lease contract. Kox explained that such housing was a practical solution for maximising occupancy in larger houses.
Previously annual rent amounts were capped at 5% of the capital invested by the landlord. In future, the landlord must outline in the lease contract how the rent charged meets this criterion.
If the building is 15 years old or more, the capital invested is discounted 2% for each additional two-year period. The age of the building is calculated starting from the day of first occupation, regardless of when the property was purchased.
For furnished accommodation and rooms, the legal rent ceiling is set at 5% of capital invested in the property in the case of co-tenancy or rooms rented individually to tenants. The landlord may ask for a rent supplement for the use of furniture, for which criteria will be set by law on the age of the furniture. If a landlord offers additional services, such as concierge services, they must make a distinction in the lease between the amount of rent and additional services.
The category of “luxury housing”, which made it possible to avoid the rent ceiling, will be abolished.
If a lease is extended, it will become applicable for an indefinite period, as opposed to a fixed term, which is currently the case.
The May 2020 increase in the cost-of-living allowance, aimed at supporting low-income households hit by the health crisis, will not impact the calculation of social rents by public promoters, i.e. the Housing Fund, SNHBM and municipalities.
The proposals have drawn mixed reviews from MPs, with some concerned that sharing agency fees will only push up costs elsewhere, among other things. The draft law will be further debated when parliament resumes in the autumn.