Luxembourg's population growth continues to outpace its building permit authorisations, creating a challenging housing market for new arrivals and existing residents alike.
According to Statec, the grand duchy's statistics bureau, only 4,709 new housing units were approved in 2022, a decline of 23% from the previous year, when 6,105 units were approved. In stark contrast, the number of residents increased by 10,667 individuals in 2022, nearly a 24% increase from 2021.
This trend has been going on for more than a decade, as the annual average number of authorisations for new residential building units or dwellings in Luxembourg has been around 4,900 units since 2010, while the population has grown on average by 11,700. This means that there is a significant gap between the demand and supply of housing in the country, especially in urban areas where most of the economic activity and job opportunities are concentrated.
One of the reasons for the slowdown in building permits was the economic and political uncertainty caused by high inflation and the rise in interest rates, which discouraged investors and developers from launching new projects. Another reason was the complexity and bureaucracy involved in obtaining a building permit from the commune authorities, which can vary from one commune to another and require several documents and certificates.
The decline in demand for authorised building types was less severe for individual houses, which experienced a 9% decrease, compared to buildings with two or more dwellings, for which requests for authorisation dropped by 28%. This suggests that more people are opting for single-family homes over apartments or flats, perhaps due to the preference for more space and privacy amid the pandemic.
Interestingly, Luxembourg City experienced the largest decline in new building permits, with authorised dwellings dropping from 1,701 in 2021 to 772 in 2022, which is a reduction of 929 units, or a 55% decline. However, the city also recorded a net increase of 4,268 individuals in 2022, a 7% rise compared to 3,984 the previous year. This indicates that the housing shortage in the capital is becoming more acute and that more people are moving to or staying in Luxembourg City despite the high cost of living and limited availability of housing.
The mismatch between population growth and building permit authorisations poses a serious challenge for Luxembourg's housing market and social cohesion. It also affects the quality of life and well-being of its residents, who may face difficulties in finding affordable and adequate housing that meets their needs and expectations. Therefore, it is imperative that the government and the commune authorities work together to streamline and simplify the building permit process, stimulate and support the construction sector, and promote sustainable and inclusive urban development.