The Luxembourg government has proposed three new instruments aimed at stengthening the fight against soaring housing prices in the Grand Duchy.
As housing prices continue to increase, a worrying number of households are unable to purchase housing or even pay free market rents. According to Luxembourg's Ministry of the Interior, it is namely the price of land which has led to the rapid evolution of housing prices.
Taina Bofferding, Minister of the Interior, stated on Thursday: “If we want to curb land speculation and soaring housing prices as much as possible, the state and municipalities will have to become much more active players in the housing market. The Ministry of the Interior is making its contribution, in particular in the planning of new neighbourhoods and by creating new effective instruments to increase the supply of available land and accelerate the creation of housing and affordable housing".
Consequently, the government has proposed three new instruments to strengthen the fight against soaring house prices. The so-called “Baulandvertrag” ("building land contract") bill has been amended with a view to establishing constraints determining deadlines for starting work on the servicing and construction of “Baulandvertrag” housing. This system is supplemented by an accelerated procedure for modifying a general development plan as well as a ministerial consolidation procedure.
1. The "Baulandvertrag"
In the context of an obvious housing shortage, the aforementioned law plays a key role in regulating the urban planning and development of municipalities. More specifically, this legislation calibrates the building potential in the various municipalities, which is considered an essential prerequisite for the development of new residential areas. It is in the general development plan (plan d'aménagement général - PAG), which covers the entire municipal territory, that the future urban development of the municipality is fixed.
Until now, once the land use is fixed in the PAG, the concrete realisation of a construction project remains absolutely dependent on the attitude of the land owners. The current PAG does not implement binding deadlines within which owners must begin construction work. In addition, the municipal authorities classify land in building zones, without knowing the urbanisation intentions of the owners concerned. Often the classifications are based on the single criterion of conformity to the general interest without having a guarantee of urbanisation and the creation of housing within a determined timeframe. This concept of municipal development, in the absence of a participatory approach involving the owners concerned, called “Negativplanung” (negative planning), is thus opposed to collaborative or "positive" planning, i.e. “Positivplanung”, which encourages landowners to actively participate in the urban planning process.
Based on these findings, the previous government initially decided to use an innovative instrument to accelerate the mobilisation of building land: the administrative development contract. This project provides that the servicing works must be started significantly within a maximum period of twelve years, on the basis of an administrative contract concluded with the municipal authorities.
“Faced with the current trend in prices, this approach was no longer sufficient. That is why we have completely reworked the bill in order to strengthen it further and also to introduce a deadline for the construction of housing", stressed Minister Taina Bofferding. In accordance with the coalition agreement, the bill has been amended in this direction.
While the administrative contract initially planned was content to speed up the servicing of building land by setting a deadline, the new “Baulandvertrag” now also aims to accelerate the concrete construction of housing. Therefore, an additional deadline was introduced. Penalties are foreseen if the owners do not provide services or build on their land within the deadlines determined in the PAG.
The initial draft was also reworked from a legal point of view. The aim of the “Baulandvertrag”, initially conceived as a real contract between the owner and the municipality, is now pursued by the creation of new constraints in the PAG, which is expected to make the mechanism more transparent.
2. Simplified procedure for modifying a PAG
Currently, the procedure for modifying a PAG extends over a period of approximately twelve months. For the sake of administrative simplification and in order to allow the municipalities to adjust the constraints to the realities on the ground, the initial bill is also supplemented by a simplified procedure for ad hoc modification of PAGs. From now on, PAGs can be modified from time to time within a theoretical period of seven months, which also helps to facilitate and accelerate the supply of available land and the creation of housing and affordable housing.
3. Ministerial consolidation
The third instrument included in the bill consists in the introduction of a ministerial consolidation mechanism. Land consolidation can be analysed as the regrouping and redistribution of land which reshapes the existing plot in order to bring it into line with the land to be built as fixed in a special development plan (plans d'aménagement particulier - PAP).
According to the Ministry of the Interior, practice has shown that the land covered by a PAP often presents a complex plot configuration and belongs to a large number of owners, which is a source of blockages when building new residential areas. With the establishment of a new consolidation instrument, this problem is expected to be remedied. This will now be done through a forced ministerial consolidation in cases where some of the owners disagree with a construction project. Thus, at the request of the college of mayors and aldermen or of one or more owners, the Minister of the Interior may reconfigure the plot in order to make it comply with the prescriptions set by the PAP.
The funds from uncooperative owners which are necessary for the good and prompt implementation of the PAP can now be moved and relegated to a later phase of development. Thus, the PAPs covering such funds could already be executed for the most part unlike the current regime where a single owner need only be reluctant to completely block urban development.
“Ministerial consolidation will allow the execution of construction projects for new neighborhoods even in the event of disagreement between individuals, so as not to block certain projects for years or even decades", concluded Minister Taina Bofferding.
