The future of family living

The Covid-19 pandemic prompted many families to reflect on the way they have been living. Parents found that long commuting journeys and the demands placed on them by high living costs were leaving little time for family life, while home-working arrangements offered a glimpse of an improved work-life balance. But are housing markets flexible enough to meet the new needs?

Even before the Covid-19 pandemic, it was already clear that some housing trends were unsustainable, at least in the medium or long term. For example, housebuilding in Luxembourg has for decades failed to keep up with expansion of the country’s population – a situation partially masked by a workforce in which around 47% commute in from adjacent regions of Luxembourg’s neighbouring countries.

The country’s population, now estimated at just short of 690,000 in October 2024, is more than 250,000 higher than in 2000. This supply/demand imbalance has contributed to one of the most expensive property markets in Europe. Home prices almost doubled between 2007 and 2020, before diminishing affordability, exacerbated by rising interest rates, sent the trend into reverse after 2022.

Two decades of fast-rising home prices have left many families in housing that is poorly suited to their needs. In 2020 Yves Mersch, then a European Central Bank executive board member and former governor of the Luxembourg Central Bank, summed up the problems facing the country’s housing market: “Insufficient housebuilding owing to capacity constraints in the construction sector, but also to regulatory restrictions, has exacerbated the shortage of housing.”

While successive Luxembourg governments have adopted measures such as tax incentives for construction of new homes and investment in property development projects needing capital to be completed, policymakers have struggled to make a significant impact on the chronic shortage of suitable housing. Critics say the approach to housebuilding needs to be reimagined – rather than just building more, ministers should also think about building better.

What might building better look like?

Too often housebuilding focuses on packing as much accommodation as possible into the available space, increasingly through high-rise buildings, with little consideration given to the needs of the people who will live there. If a family was to design the perfect home for its needs, what might it look like? If we’re talking about a house rather than an apartment, it would need some basics – functional but preferably attractive design, a garden, some individuality.

Too often housebuilding has focused on packing as many houses as possible into the available space, increasingly through high-rise buildings, with little consideration given to the needs of the people who will live there.

Then there are local facilities and environment; families want good schools that don’t require lengthy travel. They need access to doctors and other essential services such as childcare. They also need that elusive element, quality of life, which means access to green spaces including parks and leisure amenities such as swimming pools, sports facilities and cinemas.

Other factors to consider include a back-to-the-future approach: homes may again need to be large enough to accommodate an extended family, as they often did before the mid-20th century. With living costs high, plus the burden of student loans borne by many parents, some families are increasingly dealing with the phenomenon of a ‘boomerang’ generation in which adult children return to live in the family home.

The most recent survey on household composition and wellbeing conducted in February 2020 by an EU agency, the European Foundation for the Improvement of Living and Working Conditions, found that more than three-quarters of young adults aged between 18 and 24 in the EU usually live with at least one of their parents, falling only to 37% of those aged from 25 to 29.

This makes downsizing difficult since parents need a larger home for longer. This is coupled with the needs of an ageing population; compared with many other European countries, Luxembourg has a relatively young population, but with the cost of care facilities high, many households may also need to accommodate elderly relatives.

Changing attitudes of younger generations

Home ownership does not appear to have the same appeal for millennials – the generation born between 1981 and 1996, now mostly in their 30s or early 40s, also nicknamed ‘generation rent’ – as it did for their parents. And it may prove no different for the next population cohort, Generation Z. For many it is unaffordable; for others it is simply expensive and constraining to members of an age group that prizes the flexibility to move around, travel and take career breaks.

Home ownership does not appear to have the same appeal for millennials – the generation now mostly in their 30s or early 40s, also nicknamed ‘generation rent’ – as it did for their parents.

Research has indicated that up to one-third of millennials in the UK may never be able to afford their own home, while half will rent until well past the age of 40. As a result, planning and housing policies need to be formulated to accommodate people who want to rent as well as those seeking homes to buy.

While the end of the Covid-19 pandemic saw the return of many people to offices, working from home has become an expected part of an employee’s package. In the second quarter of 2023, according to national statistics agency Statec, 32% of Luxembourg residents worked at least two days a week from home.

By contract, an average of 20% carried out some work remotely between 2015 and 2019 before the pandemic. Statec says almost 90% of office workers worked from home at least one day a week in 2023, requiring employees’ homes to be capable of accommodating work requirements.

Constraints on home working for cross-border commuters

Non-resident employees in the grand duchy from Belgium, France and Germany are restricted in the number of days per year they can work outside Luxembourg before they become liable to income tax at home, under rules that were suspended at the onset of the pandemic but reinstated in June 2023. EU requirements also set a ceiling of 49% of total working time from home before cross-border commuters fall under their home country’s social security regime rather than that of Luxembourg.

And in the financial services industry, the fact that work is being carried out from the employee’s home country rather than Luxembourg may complicate an institution’s compliance with legislation on substance – employees on the ground – in the country where it is domiciled, potentially raising tax issues for the business.

Nevertheless, the limitations on movement under lockdown restrictions in 2020 and 2021 has prompted many people to reconsider their living space. Access to a garden, for example, or shared green space may increasingly become a priority. Employees may be less inclined to accept long commuter journeys into big cities and business hubs, although such journeys may be more tolerable if they are only required once or twice a week.

Imagining change

There are signs that policymakers are starting to take greater account of the needs of families in the planning of new housing developments. For example, the Elmen project in the municipality of Kehlen, which will take 15 years to implement completely, aims to create a set of interlinked village structures comprising a total of 750 housing units accommodating 2,200 people. Sustainability principles are being incorporated to preserve and enhance the area’s biodiversity and its green spaces, with power coming from renewable energy.

Meanwhile, business leaders are also examining ways to address dissatisfaction with commuting, including across borders, reflecting the environmental cost even of less carbon-intensive transport modes such as rail travel. Companies have established offices in locations around Luxembourg’s borders, both to reduce the regular travel distance and time for employees resident abroad and to circumvent the tax and social security restrictions on working from home.

The Covid experience has given impetus to an existing trend to incorporate environmental and climate protection into the planning process, a tendency also driven by a shift in attitudes among investors.

Consensus is growing that new types of housing that better suit the needs of occupants and also contribute toward environmental goals may be more financially sustainable, too. For this process to become more widespread, families must insist on better-quality homes. As long as property developers and construction companies were enjoying elevated levels of profit from low-quality housing – which is no longer the case in Luxembourg – there was no real incentive for change.

For this process to become more widespread, families must insist on better-quality homes; while property developers and construction firms can continue to enjoy elevated profits from low-quality housing, there is no real incentive for change. Better co-ordination of policy between developers and planning authorities is also needed. When previous patterns of living and working no longer suit people’s needs and preferences, it’s time for a different approach.