How the state wants to increase the inventory of affordable rental apartments

The government wants to increase the existence of public, affordable rental apartments. One means of achieving this goal is the purchase of new housing projects (VEFA projects) of private real estate developers by the state.

To date, the state has bought projects with a total of 293 planned apartments, according to the Minister of Housing Claude Meisch (DP). Cost: 179 million euros. In 2023 and 2024, the number was 208 units for a total of 125.95 million euros. In the meantime, 29 units have been added. In addition, there are six contracts with a total of 257 units that the state will soon sign, says Meisch on Friday at a press conference.

The state VEFA purchase program is not the only solution. Meisch launched an appeal to private owners on Friday to rent its real estate for 20 years at a price that is below the market price. These are then rented out via the Fund du Logement at an even cheaper price. This is the principle of the Locative Sociale Gestion.

After 20 years, the rental agreement can be extended or the state that has a right of first refusal can purchase the residential property. The owners can also sell their property to another prospect before the deadline has expired, but including the rental agreement with the state.

Cooperation with private developers

Another and new solution is the possibility for private real estate developers to make their space available for the construction of affordable apartments or to build the apartments themselves, which will then be rented to the state – in this case to the Fonds du Logement – (private public partnership). The rental agreement ends after 20 years. The owner can then rent the apartments in his conditions or sell them to the state if he has a right of first refusal.

A committee consisting of representatives of the Ministry of Housing and State Planning as well as the Ministry of Finance and the fund du Logement is responsible for the analysis and selection of the projects.

If there is a collaboration, the rent may not be higher than 80 percent of the average rent in the respective region at the time of the signing of the fundamental agreement (Accord de Principe) (Accord de Principe) – there are six different regions. In addition, the annual rent may not be more than five percent of the capital invested in the project.

Before signing the rental agreement, the rent will be checked again based on the latest data from the Observatoire. The annual rent remains limited to a maximum of five percent of the investment capital. From the time of the contract, a rent adjustment (indexing) can take place-but only every two years and limited to three index tranches.