Why No One Wants to Live in the World’s Richest Country

Summary

Luxembourg, despite being the richest country in the world, faces significant challenges with poverty, inequality, and housing shortages. The nation’s transition from a steel-based economy to a financial hub has led to skyrocketing property prices, with 1 in 5 residents at risk of poverty. Limited affordable housing and an influx of cross-border workers have exacerbated the issue. While the economy flourishes, the housing crisis worsens, with a growing divide between the wealthy elite and the most vulnerable. Luxembourg must reform land use and social housing to address these deepening disparities.

Takeaways

• 😀 Luxembourg is the richest country in the world, with an average wage of $65,000 per year, but one in five people are at risk of poverty or severely materially deprived.
• 😀 Despite its vast wealth, Luxembourg faces one of the highest poverty rates in Western Europe, with poverty climbing since the year 2000.
• 😀 Housing prices in Luxembourg have more than doubled in the last 12 years, with an average home now costing €1.2 million, making it increasingly unaffordable for many residents.
• 😀 Finance, which makes up about a third of Luxembourg's economy, has benefited a small group of wealthy elites while pushing out ordinary citizens from the housing market.
• 😀 Luxembourg's economy transitioned from steel to finance in the 1970s, bringing immense wealth, but also creating a housing and poverty crisis.
• 😀 The demand for housing in Luxembourg has far outpaced supply, with just 3,000 new homes being built annually, while experts estimate that 30,000 are needed each year.
• 😀 The country faces a severe housing shortage, with only 2% of the housing being affordable, and long waiting lists for public housing.
• 😀 The high concentration of land ownership in Luxembourg, where just 5% of the population owns 50% of the land, prevents new housing developments and contributes to rising property prices.
• 😀 Cross-border workers, who make up nearly half of Luxembourg's workforce, further strain the housing market by renting short-term accommodations, pushing prices up and reducing availability for locals.
• 😀 There is a mismatch between available jobs and the local workforce, with many young people, lower-skilled workers, and non-EU migrants excluded from the high-paying finance and tech sectors.
• 😀 To address these issues, Luxembourg needs reforms in land use, more investment in social housing, and better workforce development to ensure more locals can benefit from the country's prosperity.

Q & A

What is the average wage in Luxembourg, and how does it compare to the number of millionaires in the country?

The average wage in Luxembourg is $65,000 per year, and more than one in six people in the country are millionaires. Despite this, poverty rates remain high, with one in five people at risk of poverty or severely materially deprived.

What is the main cause of poverty in Luxembourg, despite its vast wealth?

The primary cause of poverty in Luxembourg is the extremely high cost of living, especially in housing. Housing prices have more than doubled in the last 12 years, making it unaffordable for many residents.

How has the price of housing in Luxembourg changed over the past decade?

Housing prices in Luxembourg have risen by 140% since 2010, with an average home now costing around €1.2 million. The biggest increase occurred in the last four years alone.

What economic shift occurred in Luxembourg from the 20th century onwards?

Luxembourg transitioned from a heavy industry, primarily steel production, to a finance-based economy. This shift began in the 1970s, and by the mid-1990s, Luxembourg had become one of the richest countries in the world due to its focus on finance and banking.

Why did Luxembourg shift from steel production to finance?

The steel industry in Luxembourg declined in the 1970s due to oversupply and falling prices, leading to massive job losses. This economic downturn coincided with the rise of the finance industry, which was boosted by Luxembourg’s favorable tax laws and banking secrecy.

How did Luxembourg’s banking sector grow, and what impact did it have on the economy?

By 1996, the number of banks operating in Luxembourg grew by over 700%, from 37 banks in the 1970s to 223 banks. This boom in the financial sector significantly boosted Luxembourg’s economy, but it also led to economic inequality, with small and medium-sized businesses struggling due to high costs.

What is Luxembourg's current housing crisis, and what factors are contributing to it?

Luxembourg faces a severe housing crisis, with skyrocketing housing prices and a lack of affordable housing. Contributing factors include high demand from cross-border workers, limited new housing construction, and a small population size relative to the demand for housing.

Why are new homes not being built in Luxembourg at the rate needed to meet demand?

New housing construction in Luxembourg is hampered by a lack of available land, with 5% of the population owning 50% of the land. This land is often withheld from development to maximize future returns, and the country's low property taxes and inheritance tax exemptions allow landowners to keep land undeveloped.

How does cross-border employment impact the housing market in Luxembourg?

Cross-border workers, who make up nearly half of Luxembourg’s workforce, drive demand for housing, especially in urban areas. Many rent short-term accommodations, further limiting the availability of affordable housing for local residents, as landlords often prioritize higher-paying cross-border tenants.

What is the state of social housing in Luxembourg, and how does it compare to other European countries?

Luxembourg has the lowest provision of social housing in Europe, with just 5,000 units available. This is far below the 30,000 new units that experts say are needed annually. The lack of social housing exacerbates the difficulties for those already at risk of poverty.