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On Friday 21 July 2023, the Chamber of Deputies (Luxembourg's parliament) passed two laws to make housing more affordable.

The first, the Affordable Housing Act, aims to establish a clear framework for financing affordable housing while the second seeks to expand and simplify individual supports to facilitate access to housing, rental and private market ownership.

Following the vote, Henri Kox, Luxembourg Minister for Housing, emphasised: “Luxembourg needs a housing stock that remains affordable over the long term. This is how we will ensure the right to housing and thereby social cohesion! I am relieved that the five years of intensive work on these reforms could be closed today and were able to garner such a large majority.”

The legal framework’s reform, dating from 1979, aims to provide a basis for accelerating the creation of affordable housing in public and associative hands and to give a perspective to the growing number of households who have difficulty finding affordable housing. The Affordable Housing Act aims to provide the necessary framework to meet this challenge.

The key elements of the Affordable Housing Act can be summarised as follows:

• harmonisation of financial contributions “building blocks” for the creation of affordable housing;
• introduction of the concept of the social landlord (manager of cohabitation and affordable housing in large neighbourhoods in development)
• possibilities of better collaboration between the state, municipalities, public promoters and social actors in the creation and management of housing;
• definition of the eligibility of prospective tenants according to a scale grafted onto the households’ life standard, the affordable rent adapts to the standard of living of tenants;
• new process for the harmonised allocation of housing intended for affordable rental and establishment of a one-stop shop for applicants for affordable housing;
• confirmation of the concept of social rental management.

According to Luxembourg's Ministry of Housing, the law relating to individual aid for access to housing seeks to reform these aids, in particular with regard to their amounts and their ceilings. The new law aims to simplify the administrative procedures and to allow a greater number of households to benefit from the aid, in particular single parents and families with children.

 “In reforming the system of individual housing benefits as a whole, our primary objective is not only to simplify the system of benefits, but at the same time to make them more generous and fairer. The amount that the State will pay to eligible households will double in the coming months,” summarised Minister Kox.

According to the ministry, the key elements of the law on individual housing assistance are to revise eligibility criteria and grant conditions to benefit a greater number of applicants (the ceilings are indexed and are based on the standard of living of the different types of household) and to increase the amount of financial aid. In addition, the ministry aims to simplify and digitalise the administrative system as a whole and to introduce a temporary aid of €20,000 for first-time buyers of newly built housing (and a bonus for the creation of integrated housing). Lastly, it aims to reinforce aid for energy renovation with the top up at 100% of the "Klimabonus" according to household income level.

“With these two laws on affordable housing and individual assistance, the government is fulfilling the promise made in the coalition agreement. Namely: fundamentally reform the legislation relating to housing aid. Together with the Housing Pact 2.0, the creation of the Special Fund for Affordable Housing, the adoption of laws for the financing of large-scale projects, the public affordable housing offensive launched is thus completed,” noted Minister Kox. 

According to the ministry, the conditions for granting aid for access to property will become more accessible, for example with a reduction in the minimum duration of residence from ten to two years or with the abolition of surface conditions for housing.

The savings premium has been revised. Aiming to encourage future owners to make an essential savings effort to build up initial capital, annual savings will be supported by a bonus representing 10% of their savings. Over ten years of savings, this premium can reach up to €5,000.

Finally, the bill supplements individual aids with two new aids: a newly introduced premium for the creation of integrated housing amounting to €10,000 and the improvement bonus for energy renovations.

Integrated housing consists of a second dwelling in a single-family house. Each of the two housing units must have its own entrance door (either from the outside or from a collective circulation space) and the owner who requests it must live in one of the two units after the end of the work. This bonus was increased to €20,000 for all integrated housing that will have been completed before the end of 2026.

Furthermore, the improvement bonus for energy renovations, the “Topup Klimabonus” will supplement the bonuses for energy renovations. This is an aid for lower-income households who can receive an additional bonus that can double the Klimabonus granted by the Ministry of the Environment, Climate and Sustainable Development.

The individual aid reform also introduced an individual aid package of €35,000 per person. The four capital bonuses (accession, savings, improvement and the “Topup Klimabonus”) are grouped together in a capped capital aid pool. A beneficiary can, thus, receive one or more of these premiums for several successive dwellings during their life depending on their current income and family situation. This aid is granted on the condition that the beneficiary personally occupies the accommodation for which they benefit and that it is their only accommodation at the time of the aid’s allocation.

In order to develop new constructions and to provide additional aid of €20,000 to first-time buyers, the government has decided to introduce a temporary compensatory bonus for beneficiaries of home ownership bonuses when acquiring newly-built housing. This cyclical compensatory bonus will be limited to households meeting the conditions and whose acquisition will be recorded before 31 December 2024.

The amounts that can be covered concerning interest subsidy will go from €175,000 to €280,000 taking into account market developments.

The entry into force of the laws passed will be at the start of the 2023/2024 academic year.