Chaos in the housing market. Today there's a vote on the Wet Betaalbare Huur (the Affordable Rent Act). Or is it the (Un)affordable Rent Act? Where is this heading? Victor van Bommel, a big name in the property world, recently voiced serious concern about the ridiculous rises we can expect in house prices. But where does all this come from, and what lies ahead for us?
Contents
- The drama of regulation
- Deregulation could be the solution
- The harsh reality
- Rent regulation: a good idea?
- Utrecht is introducing permits
- We've been spoilt
The drama of regulation
One of the big culprits here is the government, which has regulated things too tightly. Van Bommel does have a point there. All those rules have only made the housing shortage worse. And believe me, that shortage won't shrink any time soon. The consequences? An extreme rise in prices, and we're going to feel it hard in the coming years.
The Dutch housing market is under pressure because of ever-rising prices, especially in cities such as Amsterdam and Utrecht. Although regulation is seen as a possible solution, there are examples, such as the Berlin rent regulation experiment, that show it doesn't always have the desired effect.
In the Netherlands, rents have risen considerably, with an average rent of €1,595 in Utrecht in 2023, an increase of €195 compared with the previous year. This has led to a decrease in the number of available rental homes, which further increases the pressure on the market. Although the Netherlands has a high percentage of social rental housing, demand remains high and there is competition. This is mainly because people can't and won't move on. Social rental homes are let below cost price.
There are some misconceptions about rents, investors and taxes. Although some investors invest to build up their pension, others really are slum landlords who charge excessive rents. The tax burden on landlords is considerably higher than on owner-occupiers, at around 2% of the WOZ value via the box 3 levy for tenants/landlords compared with only 0.2% via the eigenwoningforfait for owner-occupiers.
Buying a home in the Netherlands is becoming more and more difficult because of rising prices and the fact that house prices are based on borrowing capacity. In other countries, such as Belgium and Spain, the financing options are different, with stricter rules on the percentage of the property value that can be financed. As a result, house prices there seem more favourable than in the Netherlands. But we Dutch finance everything to the hilt. Because we're allowed to borrow 100% of the property value, our house prices are also hugely dependent on interest rates and lending standards.
Finding a balance between dreams and reality in the housing market is crucial. Taking intermediate steps, such as accepting a less-than-perfect home and improving it over time, can help you achieve your housing wishes.
Jasper de Groot of Pararius, the largest platform in the Netherlands, says about the Wet Betaalbare Huur: I predict that if the Wet Betaalbare Huur is actually introduced in its current form, the sell-off wave that is already under way will continue. This will happen quickly and steadily with every rental home that tenants vacate. It will take institutional investors decades to fill the gap that is created. With current demand, this means a long-term further rise in private-sector rents for the homes that remain in that segment. Along with a serious stagnation in the flow of people who need flexible housing.
I believe that, if some form of regulation is wanted after all, it should apply solely to homes that haven't been built yet. That way you keep a level playing field for existing investors, so you don't shrink the sector further and see rents rise even faster because of the high demand. For private investors, you can't change the rules mid-game. For homes yet to be built, you can. Investors who build can then use this new model in their calculations for homes still to be built.
Deregulation could be the solution
The response to all the regulation is investors leaving. Good move, right? Now all those first-time buyers can finally buy a home. But were all those homes really that expensive? Is everything really excessive? Weren't there also lots of perfectly affordable rental homes? Didn't those terrible investors provide extra rental homes? It always makes me think of Mrs Kruijf, our economics teacher. She showed the class a Mars bar. She named a price of €0.50 and asked how many people wanted to buy the Mars bar for that price. I think it was the whole class. She kept going up to around €8, and then there was only one person left who wanted to buy it. Then she handed out a whole bag of mini Mars bars, Snickers, Milky Ways and other bars. Were we still willing to pay that much? If you knew there was so much and there was a choice? That's how she tried to explain how supply and demand work. To show that if there was more choice, demand changed, and that scarcity made you willing to pay more. In the blog ‘Why are houses so expensive?’ I already explained that in the housing market we always create scarcity and in the office market we always create abundance. When there's lots of supply, the bad homes are hard to let and landlords automatically have to lower their prices or improve their homes.
I follow de Havermelkelite en de Huizenmarkt on Instagram. Their example was: if you ask a yuppie in De Pijp whether they want cheaper oat milk, of course they say yes. If you ask students whether they want free beer, everyone says yes. If you ask home-seekers whether they want a cheaper home, of course they say yes. But is that sustainable? Can we keep selling/letting below market value? Isn't that precisely what's unfair? Should a landlord, for whom it's their pension, pay large sums in tax every month and then also chip in for maintenance and the mortgage repayments?
The harsh reality
When housing experts sound the alarm, they get a lot of criticism thrown at them. The caretaker housing minister, Hugo de Jonge, is coming under more and more pressure to do something. But his answers? They look more and more like diversionary tactics. Criticism of his plans? He simply calls it the ‘property lobby’. But honestly? His defence is starting to show cracks. It's clear that something has to happen in our housing market. But that won't happen with illusions and confusing talk alone. We need action. Fewer rules, more investment. That's the only way we can really tackle the housing shortage and make our housing market healthy again. Time to wake up and face reality! Homes are being sold off en masse. And those homes are expensive.
With a buying client, I popped over to the neighbours of the property that was for sale. Their home was a bit smaller. But a nice, neat apartment. Rent €1,250 a month, all-in. The tenant said she'd love to buy. She thought the rent was very expensive. She asked what a home like that would cost. The home sold for €450,000. The gross monthly cost (without VvE charges) is €2,243. That's €1,708 net. Of that, you pay off €7,441 in a year. That means that, without the repayment, your costs are the same as for a rental home. But then you do have to pay for maintenance yourself, plus all the municipal charges. Is it still such a ridiculously high rent then? Or is the tenant actually lucky? She runs no risk of big maintenance costs or a fall in the market. And no, indeed, she doesn't benefit from a rise either. But it's precisely for the risk you take that you can be rewarded.
Last year, when interest rates rose enormously and house prices fell hard, where was everyone then? Our searchers said: no, this isn't the right moment. I don't want to build up debt. In the Netherlands, we see buying a home not so much as a right, but mainly as a right to build up wealth. Above all, I hear people say: I don't want to pay the landlord's mortgage, I don't want to throw money away. Haven't we started idealising buying a house too much?
Rent regulation: a good idea?
It could actually have been a good idea. Especially a few years ago. Because of the extremely low interest rate, house prices rose enormously. But because of the extremely low interest rate, lots of people also went looking for returns. As a result, house prices kept rising. If something had been done about this back when interest rates were extremely low, the price rise would have stayed limited and the investment would have stayed in proportion to a rent. Moderating rents seems like quite a good idea to me. But will we then distinguish between whether a home is in De Pijp or in Drenthe? The points system (which caps rents based on a home's features) is also hopelessly outdated. You get extra points for a single-lever mixer tap. But a boiling-water tap gets you no points. Shouldn't this system be much more extensive? High ceilings with ornamentation? You get nothing for that. For example, we have a home with a super large landing with a workspace. But that isn't even allowed to count in the points calculation. While the price of this home is much higher. On top of that, it's now mainly the stacking of measures. Based on the WOZ value, the government determines what your return should be. You pay tax on that. But then the points determine that the return must be muuuuuuuch lower. So the Belastingdienst (the Dutch tax authority) is allowed to levy tax on a realistic amount, so it considers it a realistic amount too. But according to the points, it isn't a realistic amount.
Our office is actually furnished as a home too, and you could let it out just like that. It has 156 points. It's renovated, with a good energy label, a large kitchen, etc. Only no outdoor space. You're allowed to charge €970.25 in rent for it. We pay around 1.5 times that in repayments and interest alone. Then we'd still have to maintain it and pay tax. Yes, it's true that we also pay off roughly this amount each month. But in cash-flow terms you're left with nothing; in fact you have to chip in around €1,000 a month. And that's before you've paid any tax. Then you still run the risk of tenants not paying, wearing out your home, the market collapsing and not being able to get at your money when you need it. Is that realistic? And take a really honest look at yourself. Would you do that? Chip in thousands of euros every month to provide someone else with a cheap home? If someone bought our property now to live in themselves, they could repay over 30 years. Then a buyer pays €1,677 gross now. Is it realistic, then, that someone should only pay €970.25 in rent? On top of that, you're no longer allowed to sign a fixed-term tenancy agreement. So you're immediately stuck with the tenant. You can't first see whether they're a pleasant tenant who pays neatly and looks after your home.
Utrecht is introducing permits
With housing permits for new-build homes, Utrecht wants to make sure the cheap homes end up with the middle class. Noble. They do sell their own land very expensively, and the processes take too long. But noble. But who's going to build these homes if there's no profit to be made and they even make a loss? The municipality doesn't build. So does it help? No. The solution lies in building. There are plenty of people with lots of money who now live in a smaller home. But who have enough resources for a large home and would like one too. There are plenty of older people who live in homes that are too big, but for whom no suitable single-level home with a large terrace is available. If these homes are built, other homes become available.
If not all new-build projects are obliged to include social rent and mid-rent, the other owner-occupied and private-sector homes can be built more cheaply. Then people start moving on. After all, we have the most social rental homes in the whole world. Even more than we need. Only, an awful lot of them are occupied by scheefhuurders (tenants whose income has outgrown social housing). Build homes and give scheefhuurders two years to find another home. Then the market starts moving. Building becomes possible, and we'll have a roof over our heads after all.
We've been spoilt
In the Netherlands, we live in homes that are too big. Every child needs their own bedroom. We also want workspaces for ourselves, a guest room and preferably a playroom for the children. More and more families don't stay together. Where we used to need one home for a family, we now need two. So our small country needs more and more space, and on top of that the population is growing too. When I see, in the villages I come from, how much space young couples, but also people on their own, live in… then we understand straight away that this is no longer sustainable. Yes, for years we could live like this. But there are too many of us. We'll have to give up this luxury.
On average, we spend 30% of our household income on our housing costs. That's a lot. And yes, I too know people who spend as much as 50% of their income on housing costs, but I also know plenty who have hardly any housing costs. Do I feel sorry for the people who pay a lot? Absolutely. Would it keep me up at night myself? Absolutely. But we can't solve this by selling or letting a small share of homes below cost price. That makes it even more unfair. Then it really comes down to luck. What we can do is make sure more gets built. Then I think of Mrs Kruijf and her mini mix bars again. If there's something to choose from, even if they're smaller, we don't have to pay so much anymore. So let's make sure more gets added and there's something to choose from. Otherwise all the capital to build with will soon be in Spain, Dubai and the rest of the world. And there'll be nothing left to choose from at all. But then we'll be forced to become economic refugees.
