In an effort to bring more housing onto the market, policymakers have long been discussing a land mobilisation tax and a new property tax. A corresponding draft bill is now on the table, and the Association of Luxembourg Cities and Municipalities (Syvicol) examined the proposal on Monday. Opinions among local representatives, however, were clearly divided.
There was broad agreement on one point: the land mobilisation tax. Municipal leaders acknowledged the seriousness of the housing situation and the need for action. While the first version of the bill left considerable room for interpretation, and therefore for potential legal challenges by affected property owners, this has been largely resolved in the revised text, according to Syvicol president Emile Eicher.
He explained that the new framework sets out clear distinctions, taking into account whether land is built on, whether it contains a residential building, or whether it includes annexes on large plots. Eicher clarified that areas classified as green zones are excluded from the calculation, as are parts of plots that straddle different zoning categories, with further distinctions made between new developments and existing neighbourhoods.
This level of precision, he noted, will require extensive work from the Land Registry and Topography Administration, which will need to measure and classify plots in detail.
Unlike the land mobilisation tax, over which municipalities have no influence in terms of rates, the planned property tax offers far more local discretion. An earlier version of the bill proposed a fixed range within which municipalities would have had to set their tax rate. That range has now been removed, giving councils complete freedom to decide.
Eicher explained that, under the current proposal, municipal autonomy would fully apply, meaning some councils could choose to set the rate at zero, while others might opt for much higher levels. He said the real impact would only become clear after a trial phase, which would allow authorities to assess how calculations work in practice and whether they deliver the intended results.
This is where opinions within the Syvicol committee diverged. Claude Clemes, a councillor from Mondercange, argued that municipalities should welcome the fact that their autonomy is being respected. By contrast, Dan Biancalana, mayor of Dudelange and one of Syvicol’s vice-presidents, warned against the absence of a defined framework.
Biancalana pointed to the business tax as an example, where minimum and maximum rates are set, allowing municipalities to operate within clear boundaries. Applying a similar model to the new property tax, he argued, would have prevented competition between neighbouring municipalities and avoided rate escalation.
Syvicol itself has not taken an official position on the issue, but noted that in its initial opinion it had not called for the removal of the rate range from the bill.
It is also worth noting that only municipalities with a General Development Plan (PAG) compliant with the 2017 legislation will be allowed to levy the new property tax. Seven municipalities do not yet meet this requirement, six are still operating under a 2004 version of the PAG, and Dahlheim is even working with a plan dating back to 1937.
Regardless of the age of their PAGs, municipalities will in any case have to wait before collecting the new taxes. Both the property tax and the land mobilisation tax are set to undergo a testing phase and are not expected to be fully implemented before 2030.
