The remodelled Housing Pact 2.0 will enable communes to have simpler access to subsidies, promoting affordable housing and the construction of new buildings.

The Housing Pact 2.0 – one of the government's key instruments for promoting affordable housing – is undergoing further amendments.

New financial support measures are being introduced to encourage municipalities to expand affordable housing, while existing subsidies will remain in place and become easier to access.

The Council of Government approved the changes on Friday, and Housing Minister Claude Meisch presented the updated approach during a press conference.

Former Housing Minister Maggy Nagel took the opportunity to reflect on past shortcomings. She recalled that in 2014 – following the transition from a CSV–LSAP to a DP–LSAP–Green coalition – municipalities received substantial funds under the original Housing Pact, in some cases without proper justification.

In response, stricter eligibility criteria were implemented. However, those requirements later proved overly complex, and in recent years municipalities have failed to fully utilise the financial resources allocated to them.

To address this, the criteria are now being simplified once again. Municipalities will be required to provide a yearly report outlining how the funds were used – a measure intended to balance accountability with accessibility.

Claude Meisch did not criticise the current state of Pacte Logement 2.0. He highlighted, for instance, the success of the €2,500 subsidy per housing unit in social rental management, noting that the number of homes sublet by municipalities at lower rents has doubled to 4,000 over the past four years.

Three additional subsidies will be introduced:

€2,500 per VEFA housing unit (i.e. a home purchased by a municipality off-plan),
€2,500 per housing unit built in a Priority Housing Zone from the national land-use plan
€2,500 for every unit built in an infill territory (a previously unused building gap within existing development).

Housing Minister Claude Meisch stated that the combined support measures will have a significant impact – though he acknowledged they come at a cost to the state, with €560 million expected to be invested between 2025 and 2035.

He also expressed confidence, on Friday, that the long-awaited reform of the property tax, along with new taxes on vacant homes and undeveloped plots, will be approved by the Government Council in the coming months.