Council of State critical of points system for rental properties in the free sector: possibly shrinking supply

Due to the large shortage of rental properties, rents have risen sharply in recent years. In the social sector, rents are regulated, in the private sector prices are determined by supply and demand. To limit the price war, Minister Hugo de Jonge (CDA) wants to expand the points system from the social rental sector to part of the private rental sector. This should also limit rents there, to a maximum of 1,123 euros per month.

It is unclear whether the Affordable Rent Act helps home seekers and whether this law leads to sufficient affordable rental housing, according to the Council of State, the government’s most important advisor. According to the council, the government pays insufficient attention to the causes of this shortage in the bill. Too little attention has also been paid to the interaction between the social sector, the purchasing market and the private rental sector. For example, scarcity on the owner-occupied market also leads to greater demand for rental properties in the private sector.

Due to the proposed regulation, which will lead to rental restrictions for a large number of homes, owners of rental properties and investors are no longer willing to invest in the rental market, according to the Council of State. ‘That would lead to a shrinking supply of rental properties. This is detrimental to people looking for a rental home and to the flow in the housing market, which the government wants to stimulate with this bill.’

In response to the advice of the Council of State, Minister De Jonge states that investing in new rental properties ‘is still profitable’, even under the Affordable Rent Act. According to him, the changes he announced earlier this month address the concerns of the advisory body. For example, he slightly relaxed the rental restrictions for new construction. For a new-build home, not 5 percent, but 10 percent more rent may be charged than should be charged according to the points system. ‘This is how we maintain the willingness to invest.’

The Council of State writes that it has been informed of the announced relaxations, but has not been able to include them in its advice. If there are ‘major changes’, the advisory body wants to reassess the entire bill.

Housing investors have been saying for months that rent regulation will lead to a sell-off of rental properties and less new construction. The message is that vacant rental properties will be sold. As a result, the rental supply is shrinking and the purchasing market is growing. New construction plans are also being put on hold. The return would be too low.

Remedy against extortionate prices

Tenant organizations such as the Woonbond actually welcome the rent restriction, to protect tenants in the private sector from extortionate prices. The regulation should even apply to the entire free sector. In addition, housing associations should be given more scope to build rental homes for people with a middle income.

Trade unions Neprom and IVBN last week called for further adjustments to the bill. For example, they also insist on an increase in the annual maximum rental price increase and a reduction in the transfer tax (which was increased to 10.4 percent).