The Costs
On 13th March 2023, dozens of demonstrators in the Hague handed the housing minister Hugo de Jonge a petition with 102,621 signatures advocating for reasonable homes in the Netherlands. That happened so because many people had been unable to locate an economical home to purchase or rent as a result of the government policy that encouraged property ownership while leaving construction to the market.
The typical home costs €424,681, which is over ten times as much as the average income. Although the median family spending power climbed by 25% between 2015 and 2021, that did not help out as expected because house prices soared by 63% as a result of low loan rates and a nationwide scarcity of 390,000 dwellings. Moreover, houses in regions had surged by far more than 130% since the end of 2013 when the housing bubble peaked last year.
The most current data indicates a 6% annual decline in housing prices, and the central bank, De Nederlandsche Bank (DNB), Rabobank, and the IMF all forecast more declines—but not sufficient to reverse recent, sharp price increases in the Netherlands. Furthermore, the government wants to construct 900,000 houses by 2030, but there are already difficulties because of the expensive price of building supplies, rising financing expenses, and nitrogen pollution from construction.
The highest monthly rent of less than €800 is allowed in 2.6 million rent-controlled social dwellings, which make up about 60% of the 8 million households in the Netherlands. Yet, in the liberalized sector, rents have skyrocketed in major cities, and in contrast to the case of owner-occupied or public housing, there is no assistance from the state.
Although the property market had historically seen “hysterical” changes, according to Dutch economist Mathijs Bouman, the situation deteriorated during the epidemic when loan rates plummeted to approximately 1% as central banks slashed rates to boost the economy.
According to Dr. Cody Hochstenbach, an urban geographer at the University of Amsterdam, the housing situation is severe and has gotten worse recently. He claims “The number of homeless people has doubled, a quarter of renters have difficulty paying their bills, class gaps have been much more pronounced, and youth people are struggling, especially those with a limited wage, without affluent parents, or from challenging backgrounds.”
The apparent reason behind that is a lack of housing construction during the last ten years. Some people think that the free-market orientation of government, the sale of public housing, the elimination of a national housing ministry, investor-friendly policies, and Europe’s most generous mortgage interest tax relief—which resulted in one of the greatest levels of mortgage debt in the world—are additional causes.
According to Hochstenbach, “In the past 30 years, there has been a persistent set of policies centered on the concept of owning property, urging us all to purchase as strategic, calculated mini-capitalists. Individuals are urged to take out as much credit as they can. As a consequence, risks rise along with prices, keeping individuals in their properties if prices drop since they are unable to sell them without incurring debt. The Netherlands has a long history of providing public housing; it served as a model for cheap housing that is overseen by housing organizations across the world. Yet, politicians, particularly in the last ten years, have destroyed housing businesses.”
Tracing Its Causes
Real estate professionals believe that the government’s plans to govern rent for a larger portion of the Netherlands’ residential properties, or the “middle market,” could work against them by inducing stockholders to liquidate their holdings, driving up the cost of non-social rentals, and making home construction unprofitable. In addition to it, construction is allegedly being halted by regulation, including limitations on nitrogen emissions and energy efficiency standards.
For a long time, the Netherlands has struggled with an excessive amount of nitrates in the air. Both farmers and their tractors, as well as building workers occasionally, were seen protesting in the streets because the government-imposed PFAS standards designed to address the unacceptably high quantities of nitrogen being released were highly objectionable to them. Reuters accounts that these laws forced the construction sector to postpone 18,000 building projects due to them violating EU legislation.
As per Ipso’s opinion researcher Sjoerd van Heck, accommodation is crucial in the provincial elections. He observes that while leftist parties relate it to the agriculture industry decreasing its nitrogen emissions to create more capacity for construction, right-wing parties link it to immigration.
Henk Nijboer, Labour MP and housing spokesman, believes the key question is whether you view housing as a market or as a supply of government housing, with shelter as a constitutional right. According to ministry-commissioned research by the Land Registry and the University of Amsterdam, investors were capable of influencing the market in regions where they purchased over 20% of the newly listed homes to pay less per property than first-time purchasers or regular individuals relocating.
In the Netherlands, and notably in Amsterdam, which often experiences over-tourism, Airbnb generated a significant issue for the local population. Luckily, the Netherlands government has officially banned Airbnb rentals in three capital city areas from July 2020. In addition, renting out your home as a vacation rental throughout the remainder of the city requires permission and is no longer permitted for stays greater than 30 days per year.
Also, there are certain stricter lending rules in effect. They don’t imply that fewer homes are created, but they do indicate that absent new home construction, prospective purchasers are in a far worse situation. It seems sensible that Dutch banks can only mortgage purchasers the value of the home they are purchasing. The issue with it, though, is the added expenses involved in purchasing a home. Such are significant expenses to bear for first-time buyers making a middle-class salary of between €30,000 and €40,000 annually.
Solutions
Switching some of the authority now held by municipalities to the federal government may be a component of the solution, given the number of controls they currently have (and their failure to address the housing problem).
Another answer to the housing crisis may be tiny dwellings, albeit this is far from being a strategy that upholds the status quo. Tiny dwellings, which are currently popular in the Netherlands, appeal to minimalists and people looking for a simple way of life. Furthermore, Dutch inventiveness seldom disappoints us, and the housing crisis is no exception. In September 2019, a business by the name of Dun Agro built the first prefab home made from hemp.
According to the building business, it would be feasible to build up to 500 of these hemp homes per year in the Netherlands, given the number of hemp fields that are currently there. In addition to that, major modifications to the Dutch agricultural system have also been suggested as alternatives.
Finally, while doing so would not increase the supply of property on the market, there are tax policies that might be implemented to make it simpler for people to purchase a residence for the first time. The administration has already made some progress; beginning on January 1, 2021, purchasers between the ages of 18 and 35 will no longer be subject to the 2% transfer tax.
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