Affordable housing: What needs to change to get the private sector on board

"So, to quote Shakespeare: 'Much ado about nothing.'" In early May, this remark by Claude Meisch (DP), Minister for Housing and Spatial Planning, drew laughter in the parliamentary committee. The response to the opposition's question regarding the state of cooperation with the private sector to create affordable housing could be interpreted as a retort laced with irony: The state has created the framework that enable private property developers to participate in the construction of subsidised rental flats. And yet, one year after the launch of a pilot project, there is only one project in the pipeline.

In June 2024, the government, for the first time, revealed details of its plans from the coalition agreement and framed the collaboration as a "public-private partnership for affordable housing" (see info box). Another year passed before the DP minister launched the first call for projects in early June 2025.

The "Partenariat locatif public-privé" (PLPP) works as follows: a private property developer carries out a housing project on a plot of land they own. The developer bears the financial risk and makes the initial investment. The state guarantees the developer – or the investor who purchases the flats once they are completed – a return over a period of 20 years. The flats are let through the Fonds du Logement (FdL) on the basis of social criteria. The FdL also handles the letting management.

To make the model financially attractive, the monthly compensation payment to the owner is higher than 'merely' the income from the sublet flats, but lower than what renting them out on the private housing market would yield (see info box). The state guarantees payment of the pre-determined amount, regardless of whether the flats are permanently occupied or not.