Luxembourg MPs Approve Housing Measures

Luxembourg's Ministry of Housing and Spatial Planning has announced that the Chamber of Deputies (parliament) voted on the housing recovery package on Tuesday 14 May 2024; the majority of MPs approved the measures.

This package was developed by the Ministry of Housing and Spatial Planning and the Ministry of Finance as part of an "intense" exchange with representatives of the housing sector. The housing ministry noted that the objective is to facilitate access to housing but also to support the construction sector through various short- and medium-term measures.

From now on, more households will be eligible for the aid schemes provided for the rental and acquisition of housing, and public investments for the creation of affordable housing have been strengthened. The ministry added that a series of temporary tax measures - limited to this year and retroactive to 1 January 2024 - are being implemented by the Ministry of Finance targeting buyers, owners and investors.

Beyond this first housing recovery package, the government is currently holding discussions to put in place additional measures strengthening collaboration between the public and private sectors, aimed at administrative simplification and the mobilisation of private and public land for the creation of more affordable housing. The results of will be communicated in June 2024, according to the ministry.

"In this difficult situation in the real estate market, affecting more and more households, it was important for us to provide more support to families. We have therefore placed particular emphasis on families with children, who particularly suffer from the shortage of affordable housing," stated Claude Meisch, Luxembourg's Minister of Housing and Spatial Planning, during a press conference on Wednesday 15 May 2024.

In this context, the income ceilings for all individual housing assistance have been adapted to changes in the corrected standard of living and take into account domestic composition. Thus, the income ceilings for single people are expected to increase on average by 6% and those for households with children will increase by about 8% to 25% (depending on the number of children).

The rent subsidy is also being adjusted upwards for households with dependent children. The share provided per child is being increased to €80 instead of the previous €40.

The ministry added that, with the new income limits, 59% of all households are theoretically eligible for a homeownership bonus.

Moreover, by allocating the interest subsidy, the state will cover part of the interest expense on the subsidised property loan. Given the high level of interest rates on the real estate loan market, the maximum rate provided for the interest subsidy has been increased to 3.5%. This measure is expected to help reduce the interest burden on property purchasers. It applies to new home loans, as well as existing loans. The income limit taken into account to be able to benefit from an interest subsidy is also being increased.

Concerning the state guarantee for housing access, the ministry noted that, in the absence of the basic capital necessary to obtain a real estate loan from the bank, the state can, under certain conditions, act as guarantor of the loan. With the recovery package, the conditions for granting the state guarantee are being revised upwards as follows: the ceiling of the maximum lending rate of the loan to be guaranteed increases from 3% to 6%; the maximum rate of the state guarantee in relation to the cost of the project from 30% to 40%; income ceilings applicable to the state guarantee.

The eligibility ceilings for housing built by public developers (municipalities, housing funds, SNHBM) intended for affordable sale or sale at moderate cost are also being increased. In principle, 70% of households are now eligible to acquire affordable housing, and 80% of households are eligible to acquire moderate-cost housing. This is also expected to support the sales of public developers, noted the housing ministry.

To find out more about the different housing aid for individuals, potential applicants can visit the website: https://logement.public.lu/fr.html.

Employees of the Housing Assistance Service (Service des aides au logement) are also available to provide information to the public on the premises of the one-stop desk for housing benefits at 11 Rue de Hollerich, L‑1741 Luxembourg, Monday to Friday from 08:00 to 12:00 and from 13:30 to 16:00, as well as on Thursdays from 08:00 to 17:30 (by appointment only). Such information can also be requested via email: guichet@ml.etat.lu and via tel.: 8002-1010 (Monday to Friday from 08:00 to 16:00).

The housing ministry added that it is planning several targeted campaigns to raise awareness about the various aid schemes for tenants in the private market and homebuyers.

For information about the tax measures put in place by the recovery package, the public is advised to contact the Ministry of Finance.

Alongside the measures provided for in the recovery package, the state is reportedly providing itself with "substantial means to invest massively" in the creation of affordable housing.

This includes the extension and strengthening of the off-plan sale (VEFA) programme. This measure, on the one hand, aims to increase the public affordable housing stock, and on the other, to support cash-strapped developers who are having difficulty selling their housing projects. As such, the special fund for affordable housing will receive an additional multi-year financial envelope of €480 million for 2024 to 2027.

Moreover, the state plans to "significantly increase" the creation of public affordable housing. This is expected to help support access to affordable housing and boost the activity of construction companies. According to the voted budget for 2024, €1.45 billion (€1,447,654,152; including the additional €480 million planned for the acquisition of VEFA projects) will be invested in the creation of affordable housing (for rental and sale) through the special fund for affordable housing, from 2024 to 2027. This corresponds to an annual average of more than €360 million, and double the expenditure of the special fund for 2023 which amounted to €184 million.