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  • Writer's pictureLuxRelo

The Housing Crisis in Luxembourg: A Barrier to Attracting Top Talent?

The property market in Luxembourg has long been a source of worry for both residents and foreigners, and reports warn that it may eventually hinder the nation's capacity to draw in new talent. In this blog, we will examine the challenges faced by Luxembourgers and expats looking for housing as well as any possible effects on the labor market.

In 1990 (32 years ago...), the Luxembourgish parliament said that the nation was dealing with a severe housing problem that, if left unattended, may develop into a social disaster [Delano]. The nation's government has been urged to acknowledge that housing affordability and population growth are long-standing problems and to take steps to address them.

In spite of this, estimations indicate that Luxembourg will need to construct between 5,500 and 7,500 new dwelling units annually by the year 2060 in order to keep up with demand [Luxembourg Times]. Real estate prices in Luxembourg continued to grow in 2021 and 2022 compared to the EU average, as a result of the housing shortage.

The country's population has been significantly impacted by the housing shortage, as many individuals are having difficulty locating cheap accommodation. The housing market has proven to be particularly tough for expats as well to negotiate, with high costs and a lack of housing making it challenging to find adequate lodging. As a result, many Luxembourg nationals and expats (EU citizens) are now compelled to commute to Luxembourg for work while living in neighboring nations. Unfortunately for non-EU nationals they have no choice than to live in Luxembourg due to their work/residence permit.

The inability of Luxembourg to provide inexpensive accommodation could also affect the nation's future capacity to draw in new talent. Lack of accessible housing options could deter highly trained employees from moving to the country, who are in great demand. Highly trained employees can decide to work in other capitals with more inexpensive housing options as a result, causing a brain drain.

The Idea Foundation argues in its most recent publication that private and public developers must work together to expand Luxembourg's rental housing supply.

According to the report's author, Michel-Edouard Ruben, tax breaks should be reinstated to encourage investment in rental properties, thereby assisting investors who can then help tenants by requesting lower rents.

He believes that government aid should be subject to strict conditions, such as temporary rent caps, in order to provide lower-income households with greater access to the rental market. According to the economist, this would also avoid the risk of a housing shortage caused by a drop in sales and construction [RTL Today]

In conclusion, the Luxembourg housing market presents significant challenges for both locals and expats. A lack of affordable housing could have a negative impact on the country's ability to attract new talent in the future. It is essential for the government and other relevant stakeholders to take action to address this issue and ensure that the country remains an attractive destination for highly skilled workers.

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