On Friday 26 March 2021, Luxembourg's Ministry of the Interior, together with the Ministry of Housing, confirmed that the Housing Pact 2.0 will support more affordable housing.

In order to provide the municipalities and the State with an effective means of acquiring affordable housing or even land allowing the construction of affordable housing, the Housing Pact 2.0 proposes to insert a new article 29bis in the amended law of 19 July 2004, concerning municipal planning and urban development with the objective of acquiring a significant number of housing units by the public sector, which is essential in order to increase the supply of affordable housing and maintain a good social mix in the future living quarters.

Following the opinion of the Council of State and, after consultation with civil society partners, the government has just adopted, by way of government amendments, a new version of article 29bis aimed at further strengthening the mechanism for the transfer of affordable housing in the public sector.

The first version provided that if municipalities and the State renounced the acquisition of affordable housing, housing would be sold according to the old provisions of the Housing Pact, which turned out to have been ineffective, given that a good number of housing thus created were sold at market price. This option has just been abandoned in favour of state management, thus guaranteeing the creation of a considerable number of affordable housing.

Housing is the biggest challenge in Luxembourg for more and more people. However, with the impact of the health crisis and its consequences on public finances, the risk that municipalities and the state would give up on acquiring a significant number of affordable housing units was foreseeable. This would have compromised the purpose of our reform. That’s why we have come up with an alternative!” said the Minister of the Interior, Taina Bofferding.

Based on the observation that it is above all the price of land that weighs heavily in the creation of affordable housing, the government has decided to opt for a reduction in the financial burden on the public hand for the acquisition of reserved funds for affordable housing. Thus, it was opted for the introduction of a counterpart mechanism aimed at reducing the financial impact on the public sector while ensuring that the private property rights of the initiator of a particular development plan are guaranteed. This involves allocating an additional 10% of the built area to the originator in exchange for the cession of land reserved for the construction of affordable housing. This compensation is the result of analyses carried out on the basis of data processed by the Habitat Observatory.

"The Housing Pact 2.0 will thus bring about a major systemic change: in each municipality where housing is built, the density will be increased and, automatically, new affordable public housing will be created. With this automaticity, the new Housing Pact will have a major impact! In addition, this coherent, transparent and efficient system will allow more planning security for developers, municipalities and the State", underlined Housing Minister, Henri Kox.