Everyone Thinks the Netherlands’ Rental Reforms Are Nuts
Banks, investors, pension funds, the OECD… nobody believes the Dutch are getting this right.
The Netherlands is becoming a case study in how not to regulate rents. An expansion of rent control is driving investors and landlords to despair. Appeals by banks, pension funds, the International Monetary Fund (IMF) and Organization for Economic Cooperation and Development (OECD) are falling on deaf ears in The Hague.
The European Commission is the latest international body to urge the Dutch government to reconsider. In its annual policy recommendations to member states, it cautions the Netherlands that its “policies regarding the private rental market risk undermining its development.”
[T]he private rental market is relatively small, which results in a limited supply of affordable and available alternatives to buying a house. The lack of affordable rental housing also undermines labor mobility.
There are 440,000 job openings. 360,000 Dutch people are still unemployed. A shortage of affordable housing, especially in major cities, is a factor. The average waiting time for a nonprofit social-housing apartment in Amsterdam is thirteen years. Yet the government would make it less lucrative to rent out homes for profit.
Landlords are selling rental homes
Investment in rental properties fell 51 percent in the first quarter of this year, according to real-estate services firm Capital Value. Rising interest rates and high construction costs are only partly to blame:
Investors are also waiting to see how the regulation of the middle rental market and announced increase in real-estate transfer tax will pan out.
Many landlords aren’t waiting. 92 percent told the trade group Vastgoed Belang that they are selling, or considering selling, their properties.
Pararius, a popular housing platform, already sees landlords selling vacant apartments “out of precaution”.
The number of available free-sector rental homes is falling drastically. Demand for rental housing remains high.
CBRE, another real-estate services firm, expects that between 50,000 and 100,000 rental properties will be sold this year.
The remaining rental homes are becoming more expensive.
Pararius found that rents are up 6 percent in Amsterdam and 5 percent in Rotterdam from last year. Compared to two years ago, rents in Amsterdam are 15 percent higher and in Rotterdam 12.5 percent.
The only good news is for buyers. After a decade of spiraling prices, homes became 4 percent cheaper in the first quarter of this year. ING, the largest Dutch bank, projects another 6 percent drop in value.
Consequences of rent control are well-known
This shouldn’t be surprising. As I wrote here in December, the consequences of rent control have been the same everywhere it has been tried:
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