Article 29bis – Pacte logement 2.0

The main goal of the Housing Pact 2.0 is to support municipalities, who are a central partner of the government, in the development of affordable housing. To achieve this goal, the Housing Pact 2.0 has the following three objectives:

  1. Increasing the supply of affordable and sustainable housing;
  2. Mobilising existing land and residential potential;
  3. Improving residential quality.

In particular, the Housing Pact 2.0 introduced a new article 29bis in the amended law of 19 July 2004 on municipal planning and urban development. In order to strengthen the provision of affordable housing, Article 29bis aims to contribute to a substantial increase in the public housing stock.

Article 29bis ensures the creation of a higher number of affordable dwellings in each special development plan “new district” (PAP NQ) and thus ensures that a good social mix is maintained in new residential areas.

Tutorial video

This video presents the main changes brought about by said article and explains how these new provisions on affordable housing will be integrated respectively in the PAPs NQ and in the agreements to be concluded between the developers and the municipalities or the State.

Percentages of affordable housing

For each new PAP NQ affected by Article 29bis, a certain percentage of the total area meant for housing is reserved for affordable housing.

The land on which these dwellings will be built is transferred to the municipality or the State.

In return for this transfer of land in the PAPs that fall under the scope of the aforementioned article, the building potential reserved for normal housing is increased by 10% compared to the general development plan (PAG).

Overview of the PAPs NQ affected by Article 29bis and the share of gross built area to be reserved for affordable housing:

Scope of the PAP NQ

Share of gross built area to be reserved for affordable housing

 

For land classified as a building zone before 18 February 2022

10-25 dwellings

At least 10%

> 25 dwellings

At least 15%

For land classified as a building zone after 18 February 2022

5-9 dwellings

At least 10%

10-25 dwellings

At least 15%

> 25 dwellings

At least 20%

 

As mentioned above, Article 29bis provides for an increase in the level of land use initially foreseen by the PAG as a compensatory measure for the transfer of land for affordable housing. It has been ensured that this compensatory measure is balanced and reasonable for each of the parties concerned.

The increase in the level of land use is aimed at increasing the gross built-up area dedicated to housing, or even the areas that will be used for commercial operations. For these reasons, it has been decided to increase the coefficients relating to the degree of land use (CUS, DL, COS, CSS) across the board.

In the specific case of a PAP NQ located in a "priority housing zone" according to the sectoral master plan for housing (PSL), 30% of the gross built-up area for housing is reserved for affordable housing.

In return for this reservation, the building potential reserved exclusively for housing in the PAP is also increased by 10% compared to the PAG. For the part of the additional transfer imposed by the PSL, an additional counterpart is defined between the transferor and the transferee. This compensation can, for example, take the form of an additional increase in the building potential or a financial compensation.

Plot Reservation

The PAP NQ defines for each lot or parcel the number of affordable dwellings as well as the gross built-up area to be reserved for affordable housing. Lots or parcels with significant constraints on implementation that could result in disproportionate costs for the creation of affordable housing are excluded from such a reservation.

Lots and plots reserved for affordable housing do not necessarily contain affordable housing only. Thus, affordable housing may be subject to co-ownership. In this case, the affordable dwellings concerned will have to be transferred with their corresponding shares of the funds.

Transfers

There are two different possibilities for transfer, first the municipality benefits from them, in the event of renunciation by the latter, the State, through the Minister having Housing in his or her attributions, who can be substituted by a public promoter other than the municipality (Fonds du Logement, SNHBM).

Once they are the owners of the affordable dwelling, the municipalities or other public promoters may proceed to rent it in accordance with the provisions and criteria laid down in particular by the amended Grand-Ducal regulation of 16 November 1998 on the implementing measures relating to rental housing.

Alternatively, they may opt for the sale of the affordable dwelling by means of a long lease and a right of repurchase should they wish to transfer the land in order to have affordable housing built there by third parties, which would substantially reduce the financial impact.

The transfer agreements for affordable housing with their corresponding share of land must contain at least the costs of construction, the plans for the construction of the affordable housing and a specification of the level of finish and equipment.

This provides transparency for the benefit of the purchasers, but also greater legal certainty for the contractors as to the exact terms of the transfer. In this way, the contractors are on an equal footing and have the same information about the details and quality of the work and equipment to be realised.

It is also important that prior to any transfer of affordable housing, the contractors are able to understand how the price will be determined, based on the information contained in the development plans and specifications. The transfer of affordable housing by means of a sale in future state of completion is also possible.

In return for the above-mentioned transfer of land, the degree of land use exclusively for housing to be met by the PAP NQ is increased by 10%. The PAG does not have to be amended accordingly to take account of this increase, as this amendment is made through a legal disposition.

If the parties do not agree on the value of the affordable housing to be transferred, they each appoint an expert. If the experts are divided, the parties call on an arbitrator. In the event of disagreement on the arbitrator, the president of the district court of the place where the concerned land lies shall appoint the arbitrator.

Compensation for the land to be transferred

The increase of the land use coefficients by 10% results from analyses carried out on the basis of data collected by the Housing Observatory.

In addition, the compensation is estimated on the basis of projects in which the time lag between the acquisition of the land and the selling of the housing was between 24 and 36 months. This means that the compensation is particularly advantageous for projects where the developers acquired the land at an earlier stage, and that the developers will be able to take the compensation into account for most of their future projects.

An increase in building density will allow for economies of scale, which implies an overall reduction in development costs per unit of saleable housing space. The land impact per unit of floor space will also be reduced, as the price of land acquisition and even development remains unchanged despite the increased building density referred to in this provision.

On the other hand, greater compensation would not only lead to over-compensation for the transfer of land for affordable housing, but would also generate building densities that are too high and not compatible with the surrounding urban and rural environment in which the projects concerned must be integrated.

The great advantage of this approach is that it reduces the financial burden on the public hand for the acquisition of affordable housing funds, while ensuring that the private property rights of the developer of a PAP NQ are safeguarded.

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