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Housing crisis and new government policy

Adaptation of chapter 4.3 from the report “Looking for the key; how do we retain key professions for the city”, by Jaap Draaisma

https://www.hva.nl/binaries/content/assets/subsites/urban-governance/2023/op-zoek-naar-de- key_hoe-reserven-we- key professions-for-de-stad_2023.pdf

 


Less than 7 years after the government withdrew from the housing sector and left it to the "free market", a housing crisis is widely spoken of and the government has proposed a whole series of measures to avert this crisis.

Since January 2022, the Netherlands again has a Minister for Housing and Spatial Planning in the person of Hugo de Jonge. He presented his plans in March 2022 with a National Housing and Building Agenda (Rijksoverheid, 2022a).


In the National Housing and Building Agenda the following characteristics of the current housing crisis are mentioned:


    • Major shortages of affordable housing, both social rental housing (for students, young people, starters, low-income groups), medium-priced rental housing (for people with middle incomes) and owner-occupied homes below the NHG limit.
    • Affordability. Since 2015, both rents and purchase prices have risen sharply, as a result of which the supply of medium-priced rental homes and affordable owner-occupied homes has shrunk sharply.
    • The housing market has stalled: poor circulation and long waiting times.

 

 


The minister has one large number of policies announced to curb the housing crisis. Some have already been approved by parliament, while others are still pending in the House of Representatives or are still being prepared.


1. Measures against 'buy to let'

'Buy to let' refers to investors buying up owner-occupied homes for the expensive rental. The minister has announced two measures to curb this.
1. Self-occupancy obligation, this applies to many new homes since 2020.
2. Buyback protection since 1/1/2022. To protect cheap and medium-priced owner-occupied homes, municipalities can impose a ban on buying homes for rent.

 

Amsterdam has chosen to set the limit at homes with a WOZ value of up to €512,000 (amount in 2022). In the third quarter of 2022, an average apartment in Amsterdam costs €611,000, the average single-family home costs €831,000 (Hypotheker 2022). This means that the majority of owner-occupied homes can still be purchased by investors for the expensive rental.

               
2. Regulation of rents – Affordable Rent Act

The minister wants to regulate a larger part of the rental market by reducing the size of the private sector in favor of medium-priced rents. The proposal in May 2022 was to increase the regulated rental sector to €1250 per month using the rental points. At the end of 2022, the minister came up with the final proposal, in which the limit has been adjusted to €1123 per month from 2024. The limit goes from 142 to 187 rental points. The minister stated that, instead of the current 80% of the rental housing stock, he will ensure that 90% will be regulated (Rijksoverheid 2022b). As a result of these measures, the rent of more than 300,000 homes will decrease by an average of € 190 per month, the ministry writes (Rijksoverheid.nl/actueel/nieuws/ 2023/02/27).

Parliament is expected to discuss this bill in the autumn of 2023.


What effect could this have in Amsterdam?

In Amsterdam and the MRA, a smaller part of the rental housing stock is now regulated. In Amsterdam this is about 68% and in the MRA about 70% (our own calculation based on table 4.1 in the Amsterdam housing market chapter). Within the free sector part, the share of expensive rental homes is much larger, which means a lot private rental homes will fall above the €1123 limit. That last is highly dependent on the new rental points system, ie the extent to which things such as the WOZ value and the energy label are valued in points. Depending on that interpretation, the effect will be that the surface area where a home falls in the free sector will go from the current 30 m2 (within the Ring) to a larger surface area, for example 50 or 60 m2.
If we view the current mid-priced rental sector (rent between €763 and €1069; prices in 2022) as the part to be regulated, then in Amsterdam around 25,000 private rental homes and in the MRA around 35,000 of these homes will come under the new regulation; resp. around 5% and around 3% of the total housing market (own calculation based on table 4.1). However, about half (Amsterdam 46%, MRA 47.6%) of private rented homes remain unregulated, ie with rents above €1123 (price 2024).

3. More allocation to residents, including professional groups

An amendment to the Housing Act will soon allow municipalities to allocate up to 50% in the regulated rental sector to their own residents, including those who are economically and socially bound to the municipality. That is now up to 25% (Rijksoverheid 2022c).
It is also proposed to place some of the owner-occupied homes under the allocation of municipalities. This concerns owner-occupied homes up to the NHG limit; as of 2023 this is set at €405,000.

The first plenary debate in the House of Representatives on this proposal will take place in mid-June 2023.

In the coalition agreement of B&W Amsterdam, May 2022, it is suggested to – if the amendment to the law is adopted - in Amsterdam this possibility to allocate homes to use (Municipality of Amsterdam 2022a). In Amsterdam, this concerns only a small proportion of owner-occupied homes, but in the MRA this part is larger.


4. Good Landlord Act

The Good Landlord Act was approved by the Senate in March 2023 and will come into force on 1 July 2023.

Under this law, a municipality can introduce a rental permit for all rental properties or part of the rental market. In this way, control of the entire private rental housing market is possible and - with regulated rent levels - allocation rules can apply, making a larger part of the rental housing market available to people with low and middle incomes. This is therefore strongly dependent on the rent determination, or the regulation of the rent as mentioned above under 2. 


5. More new construction

Both Amsterdam and the other MRA municipalities have ambitious new construction plans. However, no matter how much is built, this will always be only a small part of the entire housing stock on an annual basis. New construction will therefore be of relatively minor importance to the position of house hunters. On the other hand, a large number of homes will become available at once in large new-build complexes.
The minister wants more new construction: 900,000 homes must be added by 2030.
come. Of this, two-thirds must become 'affordable', defined as social rent, medium-priced rent and 'cheap' owner-occupied homes (Rijksoverheid 2022a).

 

In addition, the minister also wants more so-called flexible homes: the government has signed a deal with the municipalities whereby municipalities receive money to make the construction of additional, new, temporary social rental homes profitable. These homes are especially intended for emergency seekers. Who exactly is an 'emergency seeker' has not been recorded; this includes status holders, divorced people and people who have to live in the city because of their profession (Rijksoverheid 2022e).

 

6. Improving affordability

A number of measures are being introduced to improve housing affordability:
The first is the abolition of the landlord levy from 2023.
    Secondly, the WOZ value is given less weight in the rental points (the so-called home valuation system). As of 1 May 2022, the WOZ share in the rental points has been capped at 33%. This is called the WOZ cap in jargon. As a result, homes in Amsterdam in particular will remain within the social rental sector and homes in the free sector will also end up (again) in the social rental sector (Volkshuisvesting Nederland 2022).
    Thirdly, now that the rental point system is about to be revised again (because of rent regulation as described under point 2), the minister proposes to share in rental points.

This would (partially) negate the effect of the regulation. This has consequences for groups that depend on the medium-priced rent, such as people from key professions.
    Finally, rent moderation is a fourth way to stimulate affordability. This is done in three ways:


    First, the annual rent increase in the social housing sector in 2022 was 2.3%. This is lower than the rent increase should have been based on the 2021 increase.
     Secondly, tenants with low incomes (up to 120% social minimum) will receive July 1, 2023 a rent reduction to 575 euros/month (central government 2022g).
     Thirdly, rents in the free sector may no longer rise in line with inflation from 2023 , but they rise along with wage developments (Government 2022f). The minister also wants to improve affordability in the owner-occupied sector through more affordable owner-occupied homes. The measures against buy to let as described under point 1 are an example of this. In addition, the transfer tax for people who are going to live in the owner-occupied home has been reduced from 6% to 2%. For young people up to the age of 35 and a purchase price of up to 4 tons (price 2022), an exemption from transfer tax applies (Consumentenbond 2022). Finally, the NHG limit will be raised to €405,000 from 2023.

With the National Mortgage Guarantee you can get a more favorable mortgage loan.


However, the higher mortgage interest rate (from less than 2% at the beginning of 2022 to 4.5% in November 2022) makes it more difficult - despite these measures - for people with a middle income to finance an owner-occupied home.


7. Legislative Proposal for Fixed Lease Contracts - Abolish temporary letting in the private rented sector

In May 2023, the House of Representatives approved an initiative proposal from the ChristenUnie (CU) and the Labor Party (PvdA) to (again) abolish temporary rental in the private sector. Consideration in the Senate is expected after the summer holidays 2023. This will have major consequences for the Amsterdam housing market, because temporary letting has taken off in the large private rental sector. Up to half of these homes are rented out temporarily, ie for a maximum of 2 years.

 


Conclusion on the basis of the proposed government policy

The proposed government policy is now, June 2023, taking shape step by step, law by law. The first laws have been passed and are now in force. The intended goal, more affordable housing, is clear.

There is considerable opposition to it, especially from investors, banks, real estate agents, project developers and real estate companies.

The debate in the House of Representatives on the Affordable Rent Act, the core of all legislative proposals, will be particularly exciting in the autumn of 2023.

 

 

Jaap Draaisma, June 2023
 

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