Luxembourg government working on rent ceiling reform

Housing Minister Claude Meisch has confirmed that the government is continuing to work on reforming the rent regulation mechanism, but there are no concrete legislative proposals yet.

The rental market in Luxembourg has experienced strong changes in recent years. According to the Housing Observatory, from 2010 to 2018, rental housing yields were stable (4.26-4.56%) and rental and property price growth developed synchronously (+4-4.5% per year). However, from 2018 to 2022, there was a sharp decline in profitability. In 2021, property prices rose by 16.3% at once, but rental rates did not keep pace with this growth. As a result, average yields fell to 3.04% in 2022.

The Minister emphasised that the new system of regulating rental prices must take into account the balance between protecting tenants from inflated prices and ensuring sufficient profitability for landlords. Otherwise, the rental market could shrink further, exacerbating the housing crisis.

The draft reform should be submitted to the Parliament by 30 June 2025. Consultations with experts and stakeholders are currently underway to work out a compromise solution.

To prepare for the reform, the Housing Observatory and think tank Liser studied different models of rental regulation in Europe. Among the key studies:

• Analysis #13 on the profitability of rental housing
• Analysis No. 14 on cadastral registration of leases
• Analysis #15 on the geographical distribution of property prices
• Analysis #11 on differences in rental prices by region
• Analysis No. 12 on the dynamics of housing prices

In addition, in June 2020, the Parliamentary Commission on Housing studied the experience of rent regulation in different European countries and this report will also be taken into account in the preparation of the reform.

The Ministry continues to work on specific measures, but a consensus between landlords and tenants has not yet been reached. The authorities are trying to find a balance between protecting the interests of both parties in order to avoid a further reduction in affordable housing.

Tenants are expecting a cap on rent rises, but property owners warn that too harsh measures could scare off investors, leading to an even greater shortage of rental accommodation.

Final reform proposals are due in the first half of 2025.