Affordable Housing Act to Provide Financial Incentives for Social Landlords

On Friday 4 April 2025, Luxembourg's Ministry of Housing and Regional Planning held a press conference on The Affordable Housing Act, entitled "Targeted Optimisations for Strengthened Implementation".

During the press conference, Claude Meisch, Minister of Housing and Regional Planning, explained the main measures of the bill aimed at optimising the implementation of the amended law of 7 August 2023, on affordable housing.

This bill is part of a desire for targeted optimization of the existing legislative framework. It is the result of a structured dialogue with stakeholders on the ground and feedback from practical experiences. It also reaffirms that affordable housing is a public service mission, essential to social cohesion and the dignity of all. The objective is clear: to further facilitate and encourage the creation of affordable housing, in the interest of both households in need of affordable housing and social housing developers and landlords.

A consolidated framework, built through dialogue

Adopted in 2023, the Affordable Housing Act introduced an attractive framework to support the creation of affordable housing for rental or long-term leasehold purchase. Its entry into force on 1 October 2023, marked a significant milestone in national housing policy, providing Luxembourg with an ambitious and innovative instrument.

This law encompasses three fundamental pillars: the social developer, the establishment of the social landlord, along with a framework for affordable leasing, and the creation of the National Register of Affordable Housing (RENLA). It laid the foundations for a coherent, structured and forward-looking system to develop a sustainable supply of affordable housing in Luxembourg.

According to the ministry, since taking office, Minister Meisch has placed the creation of affordable housing at the centre of his actions: aware that this objective cannot be achieved without the active involvement of all stakeholders, he initiated a feedback process within the framework of the structured dialogue formalised by the 2023 law, bringing together representatives of FEDAS, Syvicol, the Housing Fund, SNHBM and the Ministry of Housing and Regional Planning.

Continuing his commitment to tailoring the Ministry's actions to the reality on the ground, Minister Meisch also undertook a wide-ranging tour of municipalities. These meetings with local political leaders aim to actively listen to the needs of municipalities and foster synergies with local stakeholders through a shared approach: identifying obstacles, leveraging land potential and transforming intentions into concrete projects.

In this spirit, and in line with the ambitious logic of the 2023 law, concrete avenues for optimisation in the broadest sense have been identified to make the work of social developers and social landlords even more attractive and effective.

Areas for Optimization to Better Meet Affordable Housing Needs

Single Parenthood and the Fight Against Child Poverty in Luxembourg

Luxembourg is facing a worrying reality: nearly a quarter of children are at risk of poverty, according to the latest STATEC data. The situation is particularly critical for single-parent families, 44% of whom live below the poverty line. They face a combination of housing challenges: precarious living conditions (overcrowding, humidity, darkness), a degraded residential environment and high financial burdens. To provide concrete solutions to these challenges, the bill proposes the introduction of single-parent status as a new socioeconomic criterion for the allocation of affordable housing. This measure aims to increase access to affordable housing for single-parent households. It is part of a broader approach to combating child poverty and strengthening prospects for all families.

Increased financial support for developers of affordable housing

To make the creation of affordable housing by social housing developers even more attractive, additional financial incentives are being introduced.

A new financial incentive is being introduced to encourage the renovation of existing buildings to create affordable housing. This new tool complements the two existing bonuses related to climate change resilience and innovation, with which it can be combined. It thus offers a particularly attractive framework for enhancing the value of existing buildings while meeting housing sustainability needs.

A geographic segmentation of land is being introduced to adapt the ceilings for the Ministry's financial contribution to local realities. This approach takes into account land price differences between municipalities and regions and better directs public efforts towards areas where the need for affordable housing is most pressing. Land located in strategic areas becomes accessible thanks to increased financial support, enabling the development of affordable housing in the most appropriate locations, while strengthening the coherence of territorial development across the country.

Enhanced Financial Support for Municipalities

Every municipality is a potential social developer. To further encourage the involvement of municipalities in the development of affordable housing, the bill provides for the expansion of their financial support. Thus, municipalities will be able to receive a return on their invested capital for affordable housing projects, even with retroactive effect from 1 October 2023.

A Key Driver of Diversity

Social landlords play a central role in the management of affordable housing and the promotion of social diversity. To better support them in their complex missions, which evolve with the realities on the ground, the bill provides for a set of concrete measures to facilitate their daily work.

"By optimising the provisions relating to affordable leasing in accordance with the experiences reported and shared by social landlords, we are giving them the means to offer quality housing to a greater number of people, in a more stable and sustainable environment," explained Minister Meisch.

Among these measures, additional financial assistance is being introduced specifically for the management of employee housing. This measure responds to a growing need for employment-related housing and helps ensure its sustainable and efficient management, while contributing to a better functional and social diversity in the affected neighbourhoods.

In the same spirit, the bill also provides for a management fee for student housing, if it is managed by a landlord other than the University of Luxembourg, in order to further expand the range of housing available.

A new threshold for the "free quota" for so-called "all-public" housing will be introduced: from now on, the free quota will be available to any social landlord managing an affordable housing stock of 100 units or more, thus expanding the circle of social developers, particularly municipalities, who can use it.

This change in the free quota is part of a broader approach to strengthened social targeting, which aims to adapt housing allocations to the realities encountered by professionals working on the ground with households seeking housing.

Similar to the call for projects launched in February to increase the capacity of youth housing facilities (Jugendwunnen), calls for projects are planned for other categories of dedicated housing, particularly housing for people aged sixty and over and for employees, in order to support a more targeted offering that respects the multiple needs of diversity.

In the future, social landlords, in order to strengthen their capacity to operate throughout the country and, consequently, meet the needs for social and functional diversity, among other things, will also be able to integrate affordable housing into their housing stock through the rental of units developed in partnership with private investors.

Additional Optimisations: the Housing Fund and Individual Housing Assistance

The bill amending the 2017 Organic Law of the Housing Fund highlights this public institution's role as a central player in housing policy. It expressly enshrines the public utility of the Fund's missions and adapts its tools and operating methods to better address current challenges.

In addition, a separate bill provides for amendments to the 2023 Law on Individual Housing Assistance, with the aim of simplifying administrative procedures for citizens and the Housing Assistance Service.

Towards a Clearer and More Concerted Implementation of Affordable Housing

Finally, the bill establishes the public utility status of affordable housing. This recognition underscores the importance of affordable housing as a structural response to the shortage of affordable housing and its fundamental role in implementing the right to housing enshrined in the Constitution.

"Through these optimisations, we aim to involve a broader network of social developers. Ultimately, more than 100 municipalities—public developers par excellence alongside the Housing Fund and the SNHBM, as well as all other social developers—will be able to fully participate in the creation of affordable housing in our country,” stressed Minister Meisch.