Luxembourg

Luxembourg faces a severe housing crisis marked by some of the highest property and rental prices in Europe. Average home prices have surged, with the average house costing around €1.2 to €1.5 million and newer city apartments reaching €13,000 per square meter. Rents have escalated sharply—rising 6.7% in a single year—placing significant pressure on residents, especially in the private rental market where a two-bedroom apartment typically costs at least €2,000 per month. The crisis affects broad segments of the population. Young people, low- and middle-income earners, single-parent families, immigrants, and those living near or below the poverty line are particularly vulnerable. Many are forced to accept overcrowded or substandard housing, wait years for limited social or affordable units, or even move to neighboring countries (France, Belgium, Germany) where housing costs are lower but commutes are longer. The shortage of affordable housing has also increased the risk of homelessness and social exclusion. Over 28% of households rent, while home ownership has declined in recent years. Limited land supply, rapid population growth, large numbers of single-person households, and strong demand from both domestic and foreign buyers all fuel the crisis. The scarcity of public and affordable housing compared to need leaves thousands stuck on waiting lists, and the private market remains out of reach for many, exacerbating social inequalities and hindering social mobility.

The Luxembourg government is tackling affordable and sustainable housing through a mix of tax incentives, public investment, and regulatory reforms. Key targets include accelerating construction of new affordable homes and supporting energy-efficient renovations to meet climate objectives for 2030 and 2050. A major short-term spending programme for public purchase of off-plan housing, worth €500 million, has stabilised the construction sector and aims to augment the affordable housing stock. The government has also streamlined administrative procedures to speed up building permits and project delivery. Recent national measures include a €40,000 tax credit for primary residence purchases, a €20,000 rental tax credit, reduced registration fees, accelerated depreciation, and capital gains exemptions for energy-efficient or social rental properties. Public investments in affordable and social housing are being ramped up, with spending projected to reach about 1% of GDP by 2026. Sustainability is addressed through strict building standards—since 2021, all new residential buildings must meet Nearly Zero Energy Building (AAA) criteria. There is also renewed emphasis on deep renovation of older homes and decarbonisation of heating systems. Urban regeneration projects prioritise citizen participation, resource efficiency, and resilient neighbourhood design. These initiatives are complemented by increased rent subsidies for low-income families, expanded home ownership support, and financial aid for solar energy installations, aiming to balance social inclusion, affordability, and Luxembourg’s environmental commitments. In French: Le gouvernement luxembourgeois stimule le logement abordable et durable via des crédits d’impôt, des achats publics massifs de logements neufs, la simplification des procédures et la rénovation énergétique, tout en renforçant les critères écologiques et l’aide sociale aux ménages vulnérables.

Housing cooperatives in Luxembourg represent a small but emerging dimension within the national housing landscape. Their core role is to provide long-term, affordable, and community-oriented rental housing, where members collectively own and manage properties without profit motives. This model encourages not only affordability but also active resident participation in planning and governance, fostering social integration and communal living. The sector is in its infancy, with only a handful of cooperative projects like Adhoc and nascent initiatives such as the Belval South pilot, which for the first time allocates public land specifically for cooperative housing. These projects are typically small-scale, often targeting 10 to 20 households per cooperative. Despite increased attention, cooperatives account for a negligible share of Luxembourg’s overall housing stock, and no official figures suggest a substantial presence relative to total housing units. Development of the sector remains challenging due to high land and building costs, a competitive real estate market, and limited political and regulatory frameworks. However, recent governmental and municipal initiatives support the sector—for example, providing access to affordable land, technical assistance, and administrative guidance for cooperative start-ups. Policy signals and local government actions suggest growing interest in expanding cooperative options, though the impact remains limited. The current outlook is cautiously optimistic, contingent on continued political commitment and public awareness.

The Luxembourg housing market has recently experienced significant stabilisation following a period of price correction. As of June 2025, the average asking price for residential real estate stands at €8,179 per square meter across the country, with central Luxembourg (including Luxembourg City) averaging €10,493 per square meter. The market is among the most expensive in Europe. Rents remain high, with median monthly rents ranging from €1,600 for an apartment to nearly €3,000 for a house. Home ownership has declined in recent years: by the end of 2024, the home ownership rate dropped to 63.5%, down from 67.6% in 2023. This decline follows a previous high of 74.7% in 2017. About 28.3% of households rent their home, and 2.7% live in homes rent-free. In Luxembourg City, the share of homeowners is notably lower, at 47.9%. Publicly owned housing—comprising affordable, subsidised, and social housing—plays a relatively small but crucial role. Approximately 550 social housing units are managed in Luxembourg City, out of a national affordable housing stock that is dwarfed by demand, with thousands on waiting lists. Public housing is not identical to social housing; public housing includes both subsidised and affordable options for those who earn too much to qualify for social housing but too little to afford market rates. The government and municipalities, through agencies such as the Housing Fund and the SNBHM, are expanding this sector, with ongoing investment in new publicly owned units to address affordability and social mix. Nonetheless, public and social housing remain a small fraction of the total housing supply in Luxembourg.