In an effort to tackle the ongoing housing crisis, the Luxembourg state is increasingly turning to the private sector – not just to buy, but also to rent.
Since the start of 2024, the government has signed 17 contracts with private developers for a total of 293 housing units currently under construction, costing around €179 million. An additional 257 units are already in the pipeline, Housing Minister Claude Meisch told members of the relevant parliamentary committee.
While purchasing housing projects is one strategy, the government is now exploring a more controversial approach: becoming a tenant itself.
The concept is simple: the state rents housing from private owners, manages the properties, and then sublets them affordably to eligible individuals. For CSV MP Alex Donnersbach, this approach is entirely reasonable:
“The state commits to paying rent for 20 years, but only at 80 percent of the market rate. That’s a financially solid deal. And after 20 years, the state has a pre-emptive right to buy the property, though it’s not obliged to use it.”
However, not everyone agrees. The LSAP takes a fundamentally different view on housing policy, as MP Paulette Lenert explained:
“The state should focus on buying first. Any rent paid with taxpayers’ money is money lost, you can’t recover it. That’s why I was glad to see this model framed more as a subsidy for housing that’s been purchased. Of course, we do have concerns as there are still many unknowns. The entire model depends on how the reference rent is set.”
The Greens and The Left are also critical of the state acting as a tenant. Meris Sehovic of the Greens argued that such a model could benefit developers twice:
“You pay rent to a private developer for 20 years, guaranteeing the profitability of their property. And then you buy it at the full market price. The minister explained that the pre-emptive right would be exercised at the going rate. So that’s 20 years of rent, and then the purchase cost, essentially paying twice.”
DP parliamentary group leader Gilles Baum disagreed with that characterisation:
“You have to keep in mind that after 20 years on the market, the property no longer has the same value it did at the start. So it’s not entirely accurate to say you’re paying twice. And this rental scheme has absolutely no impact on our broader acquisition programme.”
Whether renting or buying through off-plan VEFA deals, some remain critical of the government’s continued reliance on private partnerships. David Wagner of The Left made his position clear:
“The majority parties still seem to believe the private market will solve the housing crisis. But the private market is the problem.”
For now, Housing Minister Claude Meisch was unable to confirm how many rental partnerships are currently being negotiated.
However, he did reveal during an interview with RTL that a key tax reform – targeting vacant land and empty homes – is expected to be submitted to the government council before the summer.
