Luxembourg has "some catching up to do" on affordable housing

Luxembourg Times: Were you surprised when you were given the housing minister job?

Claude Meisch: It was already clear to me before the 2023 elections that I wanted to continue as education minister and continue the policies I had initiated. But I have to admit, it was a surprise to me - and probably to the voters too - that I was also given the housing department at the end of the coalition talks.

The government's slogan for its housing policy is "build more and faster”. What does that mean concretely? Is it about lowering prices sustainably or is it about filling the housing shortage that has widened over the last 15 years without getting prices down?

It is about making sure that eventually everyone in Luxembourg can find a home that they can afford, which today is not the case. But we will not get there overnight. We see that people are moving abroad, we see that people can no longer afford the high prices, we see that housing issues hurt our competitiveness.

We need people who move to Luxembourg to sustain our economic growth and that will only happen if we can offer housing to all segments of the socio-economic spectrum. Today that is in question and it is weighing on our societal cohesion. If we do not solve the housing crisis, we should be worried about social peace in our country. And that's why housing is a top priority for this government.

We need more housing, that is a simple arithmetic truth, as more people have moved to Luxembourg than we have built homes. But it is also a question of affordability. We need more affordable housing and that's why we need a strong public hand on the market to build more than state developers and councils have thus far. We need to build more publicly owned housing and do it more quickly. That's why this government tabled reforms earlier this year to cut red tape to speed up construction.

Luxembourg Times: Potential buyers who don't have enough funds to buy on the private market nevertheless often make too much to qualify for a publicly subsidised property built by the public developer SNHBM. Do eligibility criteria need to change?

Claude Meisch: We have already modified eligibility criteria. Take high interest rates, for example. Someone who before rates rose might have been able to afford to buy an SNHBM property with an average wage now has problems to get a mortgage.

That has led to a situation where there are currently no waiting lists for an SNHBM property.

Before rates rose, flats that were [still] being built by the SNHBM had already been sold. That's why we - for now temporarily - increased the threshold of wages that a single person or a couple can have to be eligible to buy an SNHBM property. In general, we see that even people from the deep middle class qualify to buy or rent such a property.

Luxembourg Times: But when rates fall, we might end up in a situation again where people are priced out of the private market but earn too much for a subsidised property. Is that a real concern?

Claude Meisch: Yes, that is a real concern. That's why we need to build more. If supply is tight, the person with the deepest pockets determines the price, and that is not sustainable. It is at the expense of the lower and middle classes, and at the expense of young people.

We have to be careful not to scare young professionals or soon-to-be graduates away from Luxembourg. These are people who have done everything right and on which our country depends. That's why we expanded SNHBM eligibility criteria, but also increased them for housing subsidies and first-time buyer aids. But we will not get around building more to satisfy the big demand.

Luxembourg Times: Yet, the public developers SNHBM and Fonds du Logement managed to put very few properties on the market. The latter managed just 80 in 2023. Surely that cannot be enough?

Claude Meisch: I think that characterisation is a little unfair. The properties they brought to the market in 2023 are those where construction started during the pandemic. We knew there weren't going to be many. The Fonds du Logement as well as the SNHBM have increased their building capacity and we will see an increase in new properties in the next few years.

For the Fonds du Logement, I am counting on double or even triple of what they delivered last year, 200 to 300, once new projects are finished. The SNHBM said they would be able to deliver 400 units per year. But that is not enough.

Many more actors are involved on the property market, including councils, charities and private developers.

Luxembourg has one big problem and that is housing. One actor will not be able to solve it by themselves.

Luxembourg Times: Vienna's model of owning and renting out housing units en masse is an often cited possible solution to Luxembourg's housing crisis. Why won't the government pour billions into such a scheme even if it makes a loss?

Claude Meisch: First of all, when we rent out properties, we do it at a loss already. Rents for affordable housing units are not enough to cover the construction costs. Renting out properties - be it through the SNHBM or the Fonds du Logement or councils or charities - is a loss making transaction. The SNHBM only breaks even or makes a small 'profit' through big state subsidies.

Should Luxembourg embark on the Viennese model? Absolutely. I think it was wrong - though hindsight is always20/20 and it is easy to blame past generations - to conduct a housing policy whose sole aim it was for people to buy their own home. That was the modus operandi in Luxembourg for a long time. But we have started moving away from that over the last 15 years and invested more in rentals.

Luxembourg Times: Wasn't that an inevitability, given that home prices rose so much faster than salaries in that time and forced people onto the rental market?

Claude Meisch: I don't think so. I think a new generation is coming of age that does not necessarily want to buy a property. We might have grown up with the crescendo that one should buy a property to 'pay rent to yourself' but I think Luxembourgers who come back after a stint abroad or foreigners in general, who might not know how long they will stay in the country, would rather rent.

A big part of the pressure we have on the rental market comes from people coming from abroad. They may like the flexibility that renting offers to their job or family situation. In that way, I see that more rentals will play a bigger role in Luxembourg. The public developers but also the councils should create more such publicly owned rental units, so that the state becomes a big enough actor on the market to influence prices.

Right now the state plays a marginal role. If we controlled 40% of rental units, I would imagine we would have enough weight to influence rent prices. Vienna has been doing this for 100 years. Luxembourg has some catching up to do.

Luxembourg Times: So it is deliberate government policy to become a big player on the rental market?

Claude Meisch: Yes, that is this government's policy. It is our goal to create more and more affordable rental units to become an important actor on the market. But there is a big gap to plug and we won't be able to do this in the next 10 to 15 years.