People ‘crossing borders’ to escape rent in one of world’s richest nations

This wealthy nation faces a housing crisis; citizens cross borders seeking affordable rent, impacted by legislative elections.

Luxembourg is known for its wealth, faces a dire housing crisis that overshadows all other concerns. With sky-high prices for homes and rentals, even those with good incomes find it difficult to secure affordable housing. Residents are crossing borders to live in neighboring countries like Germany, Belgium, or France due to more reasonable property costs. Despite Luxembourg’s strong economy, the housing market has created significant challenges.

Pascale Zaourou, a mother of three and teacher, waited five years for social housing, highlighting the scarcity of affordable options, especially for young people and single-parent families. Antoine Paccoud of the Housing Observatory noted that this issue has led more Luxembourgers to move abroad, despite the nation’s thriving financial services sector.

The housing problem is striking in a country with the EU’s highest average earnings, estimated at €47,000 annually in 2022. In Luxembourg City new apartments can cost around €13,000 per square meter, while older ones go for €10,700. The average house price is €1.5 million. Rents have surged by 6.7% between June 2022 and June 2023 outpacing inflation.

Housing has become the dominant issue in legislative elections, with both major political parties pledging action. Prime Minister Xavier Bettel’s Liberal Party proposes creating a housing super-ministry, taxing vacant properties more, and investing in social housing. Socialist leader Paulette Lenert seeks substantial investments in affordable housing.

However, structural issues persist. A lack of inheritance tax and nominal duties have encouraged landowners to hold onto property without development. Around 0.5% of residents, or 3,000 individuals, own half of the buildable land. High demand from foreign workers and the unequal housing market further inflate costs.

While native Luxembourgers have an 80% home ownership rate, foreign residents have only a 50% rate. Despite high incomes, the risk of poverty is significant, particularly for single-parent families with one income. The housing crisis poses a substantial challenge to Luxembourg’s otherwise thriving economy and must be addressed urgently.

(With inputs from AFP)

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