Luxembourg's Chamber of Commerce has published its opinion on the draft bill relating to Housing Pact 2.0 by which the government intends to set up a new programme within the national housing policy for collaboration between the state and the municipalities wishing to participate in it.

While the Chamber of Commerce expressed its agreement with the bill's observation that it is urgent to aim for a significant increase in the supply of subsidised rental housing, it questioned some of the modalities proposed by the authors of the draft bill to achieve this objective and explicitly expresses its concerns regarding the limited role reserved for the private sector in this new policy.

Furthermore, it observed a certain disconnect between the draft bill and the objectives of the national spatial planning policy, arguing that the text is lacking in a strategic territorial vision concerning the location of housing infrastructures.

Faced with soaring property prices, the main objective of draft bill no. 7648 relating to Housing Pact 2.0 is to speed up the establishment of a genuine public rental property reserve of a certain size and it aims to involve the municipalities as a central partner of the state in the development of the supply of affordable and publicly-owned housing. By "affordable housing", according to the Chamber, the draft bill is referring to low-cost housing for which public developers or the state ensure the allocation to tenants or buyers.

The Chamber of Commerce recognised that the sustained growth in property prices is a major challenge for social cohesion in the Grand Duchy. It added that this situation is also likely to hinder the socio-economic development of the country as a whole in the longer term. Faced with this challenge, the Chamber maintained that efforts to streamline authorisation procedures in terms of town planning and the environment must be continued and that the supply of building land on the market must be increased; both are essential conditions for boosting the rate of completion of new private housing.

In addition to the financial allocations aimed at stimulating greater involvement of municipalities in the planning of subsidised housing developments, the draft bill stipulates that the special development plans (plans d’aménagement particulier - PAPs) for "new neighbourhoods" will serve as a future instrument for defining "quotas of affordable housing" and for reserving areas for the construction of such housing. In order to increase the public housing supply, the bill also provides a major new feature which is the introduction of a legal transfer mechanism: for a property developer, it is thus foreseen that the parcels of land reserved for affordable housing, or alternatively the constructed affordable housing units, will have to be transferred to the municipality or the state, respectively. The transfer value of the parcels of land would be set on the basis of the price on the day the PAP is viable, which would take into account the actual cost of the completion of the road works and public amenities, but not the presumed added value of these works. The transfer value of the affordable housing units built would be based on the actual construction price.

The Chamber of Commerce confirmed that it considers that the lack of possibility for private developers to make a profit on the construction of affordable housing is surprising given that real estate professionals have repeatedly expressed their willingness to invest in a "win-win" model of collaboration. The Chamber also underlined that the legal transfer mechanism seems to be characterised by a lack of incentive to build housing, when compared to the simple transfer of land, a configuration that risks proving counterproductive for the authorities in their ambition to significantly increase the size of the public housing reserve, particularly given the very limited capacities of the main public developers.

The Chamber of Commerce has thus insisted on the need for an in-depth adjustment of the legal transfer mechanism as currently provided for in the draft bill or for the introduction of a compensation mechanism. The Chamber added that it favours a clearer and more precise definition of "affordable housing", while calling for a more substantial widening of the scope of "affordable housing" for private stakeholders.

The Chamber of Commerce noted some other shortcomings in the Housing Pact 2.0 project, which in its view seems to show a certain disconnect with the objectives of the Grand Duchy's spatial planning policy. Despite believing that the Housing Pact instrument can be a valuable tool to help channel future population growth to the most appropriate areas in the country and to move towards a more sustainable model in terms of the distribution of the resident population, the Chamber concluded that this strategic opportunity has not been fully grasped by the authors of the draft bill.