‘Anyone who is here just to make a big return on rental properties will leave after this law’

‘Anyone who is here just to make a big return on rental properties will leave after this law’
‘Anyone who is here just to make a big return on rental properties will leave after this law’

The police officer, the teacher and the nurse: they will again regularly appear in debates about the housing market during this election campaign. It is the professions with incomes for which it is almost impossible to find rental housing, especially in the large cities, which makes the housing market an important election issue.

There is currently a shortage of 390,000 homes – both owner-occupied and rental. The outgoing government will focus on large-scale housing construction in the coming years to build more affordable rental and owner-occupied homes. The many middle-income home seekers who are currently looking cannot wait for it.

A representative survey by I&O Research, commissioned by housing association umbrella organization Aedes, showed last week that more than half of home seekers encounter problems when looking for a rental home. At least 55 percent indicated that there were too few or too expensive homes available. In addition, people who already have a home but want to move are postponing their search due to the situation on the housing market.

The gloomy conclusion is that the middle segment in The Hague almost no longer exists

With the Affordable Rent Act, outgoing Minister Hugo de Jonge (Public Housing, CDA) wants to make existing rental properties more affordable for people with a middle income. The bill is still before the Council of State and will be submitted to the new House of Representatives after the elections.

From 808.06 euros basic rent per month, a home now falls into the private sector. From this ‘liberalization limit’ up to 1,075 euros, there are mid-range rental properties.

The rent for homes in the private sector can be increased annually by a maximum percentage (4.1 percent in 2023), which can be exceeded if the landlord has improved the home or if a new tenant moves into the home.

Under the new law, mid-range rental properties up to 1,100 euros will fall under the housing valuation system, the points system that determines the maximum rent for social housing. Homes receive points for characteristics such as living space, the energy label and the presence of a garden or balcony. The more points, the higher the monthly rent may be.

By also applying the points system to homes in the mid-rental segment, rent increases are limited even more. For landlords and residential investors, the law means that their rent – and therefore the return on their homes – is suddenly capped.

While the bill awaits a new House of Representatives, policy discussions are still ongoing between De Jonge, institutional investors, municipalities and other parties. Martijn Balster (PvdA), the Hague councilor for Housing, sits at the table on behalf of the Association of Dutch Municipalities (VNG). The problem mainly occurs in large cities, but according to Balster it also occurs more and more often in smaller municipalities. In his own city, Balster is confronted every day with the tightness on the rental market. He therefore wants to intervene against exorbitant rents. In 2023, rents rose even faster in Amsterdam than in The Hague – and if you do not take into account the additional rent increase due to a change of residents, The Hague even comes first.

What is the situation with the average rent in your own municipality?

“We have to draw the gloomy conclusion that the middle segment almost no longer exists here. For those looking for a home with a monthly rent between 750 and 1,000 euros, it has become virtually impossible to find anything. Then there are the excesses; In some neighborhoods, a home of 60 to 70 square meters sells for 2,000 euros per month, with tenants bidding against each other. Of course, these are the outliers and there are also plenty of decent landlords, but this cannot continue in this way.”

Will regulating the average rent solve this problem?

“To a large extent, certainly. The points system has the most impact, which will soon also apply to the middle segment. This makes it clear how much rent you can charge for a particular home, and you prevent it from becoming a ‘whatever the crazy person gives’ market. But what we see and what we fear is that Minister De Jonge’s law now provides a new set of rules and that they will be nibbled at. Market parties have put an incredible amount of pressure to relax, which we believe makes the law less effective.”

What the market parties are asking for is a rent increase based on inflation plus a maximum of 1 percentage point, is that so unreasonable?

“You have seen how high inflation has been recently – that could still lead to enormous rental amounts. This law separates the wheat from the chaff. Anyone who is here just to make a big return on housing will leave. And I think there are more than enough investors, such as pension funds, left who want to meet the current housing needs. We as a municipality would like to do business with that.”

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While the prices of owner-occupied homes in large cities are falling, rental properties are becoming more expensive

In the meantime, many private investors are selling their rental properties, which means that there are fewer rental properties left?

“I don’t see that as a problem. In that case, homes with sky-high rents end up in the affordable purchase segment. In principle we welcome that, you get residents who want to commit to a neighborhood for a longer period of time, and I think that is only a gain. We should not focus on the returns of investors, but on the housing opportunities of our residents.”

Another problem: why would investors invest in the construction of new homes if they do not generate sufficient returns?

“There are many reasons why housing construction is stagnating. In addition to the high construction costs and interest rates, there is also the uncertainty surrounding the policy. While this uncertainty continues, international investors are leaving, so clarity is especially needed. You see that interest groups of project developers and institutional investors have also called for the legislation to be declared non-controversial, if only to provide clarity.”

Anyone who lives in a social rental home where the rent is incorrect according to the applicable number of points can go to the Rent Assessment Committee to raise a case. Under the new law, municipalities will also have the opportunity to intervene if landlords charge too high rents. Fines may follow, and in extreme cases a landlord may lose his permit.

What will the municipal role of enforcer look like?

“Many municipalities already have construction and housing supervision. In The Hague we have the ‘building brigade’, which checks the safety of homes. The law also allows us to take action against exorbitant rental prices. I am happy with that, because it allows us to help people who may find the threshold for the Rent Assessment Board too high. Above all, it will have a strong preventive effect; In the event of repeated violations, a landlord may lose his permit and may no longer rent out homes in a municipality at all.”

There are also election manifestos that express the idea of ​​giving the market more space. Are they so wrong?

“The market has had quite a bit of room in recent years, it has been a very interesting time for investors. That has really gone too far, we now need to return to a balance in which people looking for rental housing can get involved again and rent affordably. These measures are really part of that.”

The article is in Dutch

Tags: big return rental properties leave law


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