In an effort to ease pressure on the housing market, the Luxembourg government is rolling out a pilot scheme that will see it lease private homes and offer them to tenants at reduced rents.
The Luxembourg government is launching a new pilot project to increase the supply of affordable housing by working more closely with the private sector in areas where the state usually has limited access to housing.
According to Housing Minister Claude Meisch, the project will not only continue to acquire housing units, but also lease properties from private owners and sublet them at reduced rents.
To tackle the housing crisis, Meisch said that cooperation with a wide range of stakeholders is essential, including private landlords. Under the new scheme, landlords who are not in financial difficulty will be offered long-term rental agreements with the state, providing them with 20 years of rental income security. While rents will remain fixed during this period, they can be adjusted if necessary, and the contract may be indexed after 20 years.
The core concept is that the state rents properties at 80% of the market rate and then rents them out again at an even lower price. Meisch justified this 80% figure by saying that the state is a reliable and secure tenant. The Fond du Logement will cover the rent gap and manage the rental properties.
Ultimately, how much tenants pay will depend on the region. The government has defined six zones with different price ceilings to reflect regional variations in the housing market. Rent levels will be adjusted based on the municipality, neighbourhood and local market conditions.
Another key factor in determining rent will be the household’s situation, including income level, number of children and whether dependants are employed. If a household’s circumstances change, the rent may be adjusted accordingly.
The eligibility criteria are consistent with those of other public housing schemes. Anyone who qualifies for social or affordable housing from the Fond du Logement can apply. Although no figures were provided regarding the number of developers who have expressed interest, the government hopes that the initiative will result in the creation of around 300 homes.
As Meisch explained, in order to be eligible, homes must comply with local planning regulations (PAG & PAP), as well as meeting the standards set out in the state’s affordable housing framework. The government is seeking units that comply not only with local zoning plans but also with the national standards for affordable housing. They should range from one to four bedrooms and be designed in a way that ensures a good quality of life while keeping investment costs reasonable.
