It is often claimed, though rarely with concrete figures, that Luxembourg’s housing policy has relied heavily on tax incentives. A recent study now provides a first estimate of the financial scale of these measures between 2010 and 2024.
Researchers Antoine Paccoud of the Luxembourg Institute of Socio-Economic Research (LISER) and economist Samuel Ruben set out to calculate the cost of public interventions in the housing market over this 14-year period. While they stress their results are not “precise to the euro,” they offer a clear order of magnitude.
Accounting for spending on affordable housing, direct household subsidies, and tax expenditures, they arrived at a total of €10.5 billion – a figure the authors describe as a conservative baseline. “Knowing exactly how many billions of euros public authorities in Luxembourg have spent […] is an impossible task,” they note, citing the large number of actors and types of aid involved.
Within that total, the share attributed to tax expenditures is strikingly large: €8.4 billion. By comparison, only €1.4 billion was directed toward affordable housing over the same period. This imbalance, the researchers point out, underscores a little-known reality: “the central architect of housing policy remains the Ministry of Finance,” not the Ministry of Housing.
The super-reduced VAT rate on housing (3%) and the tax credit on notarial acts (“Bëllegen Akt”) together account for more than half of all housing-related expenditure since 2010. These figures do not include certain tax benefits – such as accelerated depreciation, wear-and-tear allowances, and special property tax deductions – which could not be estimated due to a lack of data.
This suggests the actual scale of tax incentives is likely even greater. According to Paccoud, the heavy reliance on such measures means the €10.5 billion in public support “has mainly made life easier for those who would have become homeowners (and sometimes multiple-property owners) anyway.” He argues it is time to “redirect public spending towards the populations most vulnerable in the housing market.”
Paccoud further illustrates that if half of the €10.5 billion had been invested in social housing, Luxembourg could today provide affordable housing for an additional 10,000 households. Ruben adds that nearly 80% of support took the form of tax benefits, implying that “the tax burden would have been higher – and therefore public revenues greater – if these ‘housing tax expenditures’ did not exist.”
