26-7-2022 —
Two months ago, minister of Housing Hugo de Jonge presented his ‘affordable housing program', which includes a proposed regulation of about 90% of the Dutch rental housing market. A fairly radical and particularly counterproductive plan, of which anyone with any knowledge of the subject knows immediately it will not work.
The enthusiasm and energy that De Jonge is showing at his new ministry is in itself quite refreshing after all his soft-approach predecessors. But with his plans, which are far too radical, he is ensuring that investors will no longer be able to make a profit. And thus fewer new homes will be built than envisaged. This will only increase the scarcity and thus make rents more expensive. Effect: completely opposite to the goal.
The proposed regulation will only make rents more expensive
Earlier we wrote that the proposed regulations will actually have the opposite effect and will only push up rents. While De Jonge's goal is to lower the rents. This is a typical plan from someone who makes up ideas from behind a desk. Even though he has been warned about it from various sides. Even by parties who approach it from a tenant perspective. We therefore do not expect his plans to go ahead.
Does this mean that landlords will sell their properties or lower the rents?
Perhaps some landlords will now take the bull by the horns and sell their rental properties if they do not score enough points. In itself, this is good news for the selling market. But the rental market is getting smaller and smaller. And so the problems get bigger.
We do notice some doubt about this among some landlords, especially the smaller ones. But most of them are just continuing as before. Across the market we also see that no one really cares. There is currently not a single property advertised on Pararius for a social rental price. Not even the homes which, in terms of points, are guaranteed not to belong in the free sector. Nevertheless, you are taking a risk of course when you do this.
The consequences
On paper, De Jonge's plan should be able to work. It would ensure that a lot more houses are built, which would automatically lower the prices. If you then add a significant extra twist by regulating 90% of the rents, everyone should be happy. On paper, that is. The practice is more difficult. Because nobody starts a project where it is known in advance that it will be loss-making.
Supply of rental housing continues to decline, prices rise
The supply of rental homes on www.Pararius.com in Amsterdam is currently only 621 (!) homes and the number is steadily declining. To illustrate; before corona there were on average about 1850 homes for rent in Amsterdam. That means a drop in supply of about 66%. So rents will go up if you don't built new houses and don't curb the inflow.
Housing construction comes to a standstill
Housing construction has come to a standstill since Hugo de Jonge presented his plans. Pension funds and insurers are pulling out as investors for new construction projects. They simply can no longer make a return on investment. Everything is becoming more expensive; personnel, materials etc. But De Jonge feels that rents, which are used to recoup costs, should be lowered through drastic regulation. Moreover, the coalition agreement stated that only medium-priced rental houses would be regulated. Now Hugo de Jonge suddenly wants to include the free sector. And investors do not like the uncertainty about the return on investment (or even a guaranteed negative return), the constantly changing regulations and on top of that all the local obligations. They just take their money and go abroad, where this madness and vacillating policy does not exist. And so there will only be a few new homes in the Netherlands. It is already clear that the planned 100,000 new homes will definitely not be achieved. As a result of the plans, housing construction is in danger of falling back toward 50,000 homes per year instead of the targeted 100,000. In April of this year, 28 percent fewer building permits were issued than a year earlier.
Q2 investment volume in new residential property drops dramatically
Investment volume has fallen drastically since De Jonge announced his plans. In the second quarter, only € 282 million was invested in new residential property in the Netherlands. In the first quarter this was still € 777 million. While the long-term average is € 664 million. And without investment money, no new homes.
Foreign students without living space are better off staying at home
The new academic year starts again in September. For universities and colleges, foreign students are incredibly attractive; to Dutch and EU students they can charge the fixed tuition fee of €2,200. From students from outside the EU they can ask what they want. Bingo! And the Dutch government contributes a large part of this. So we are actually using tax money to subsidize the housing shortage in the Netherlands. Because all these foreign students will also need a place to live, while a Dutch student might be able to stay at home for a while.
By now the penny seems to have dropped and educational institutions are even asking politicians for ways to curb the large influx of foreign students. Universities and colleges are calling on students, who do not yet have a place to live, to simply stop coming altogether.
During this period we regularly have parents crying on the phone because their offspring cannot find a place to live and are camping in a tent. Very nice in the summer, but obviously no solution for the autumn.
When will there be more clarity?
After the summer there will be clarity on how the proposed rental price protection of medium sized rental properties will look like. But we expect that this will certainly not continue in this form. The resistance is simply too high. But Hugo de Jonge has proven in the corona crisis that he doesn't take the opinions of 'opponents' very seriously and just follows his own path, so we can't guarantee it.
And now?
In the meantime, the much maligned 'bad landlord' is the dark horse, as rents are once again rising sharply due to the low supply and high demand. Perhaps it's time for a little more realism and a little less populism and activism in today's politics.
In Amsterdam, there are even calls to reinstate housing sharing. Everyone understood that this would increase the housing shortage. Even the students, who according to the city council had to be protected from all those bad landlords, were demonstrating against the measure in front of the mayor's official residence in December 2019. But apparently, after 2 years, it has now dawned on the city hall that this is counterproductive policy.
Hopefully, in the case of Hugo de Jonge, it will be 'once bitten twice shy'.
We'll see after the summer.
Fully furnished
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