Rents Rose Faster Than Wages: Tenant Effort Rate Reached 39% in Luxembourg

The financial strain on tenants in Luxembourg continued to deepen over recent years, as rents grew at a faster pace than wages, pushing the tenant effort rate — the share of income spent on rent — from 32% in 2016 to 39% in 2023, according to a new report from the Observatoire de l’Habitat published Thursday.

This marks the sharpest rise among neighboring countries, while housing costs in France, Belgium, and Germany either stabilized or decreased. The study highlights that despite Luxembourg’s higher average income, residents are facing an increasingly heavy housing burden.

Between 2016 and 2023, tenants now spend nearly four out of every ten euros on rent and housing-related expenses. The Grand Duchy has now surpassed France (34%) and trails just behind Belgium (40%), remaining far above Germany (28%).

The report identifies a clear imbalance between wage growth and rent inflation, noting that housing costs continue to rise more quickly than incomes — a key factor driving this upward pressure.

Inequalities are also widening. The 20% of households with the lowest income now spend on average 55% of their earnings on rent, while single-parent families face a 50% effort rate and adults living alone spend 43%. These groups are the most vulnerable in Luxembourg’s tight rental market.

Although Luxembourg maintains one of the highest standards of living in Europe, this paradox underscores a severe shortage of affordable housing and relatively limited regulation in the rental sector compared to neighboring Germany.

In response, the Ministry of Housing reaffirmed the need to accelerate the creation of affordable housing solutions and to closely monitor market trends across the Greater Region to prevent further deterioration in housing affordability.
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