How does that work with the rent point count if you want to rent out a property in the free sector?
We’ll start with the basics for a moment. In the Netherlands you have freedom of contract. Basically, if you offer something, you may charge any price you want. When renting out a property, however, this is not the case. In the Netherlands, the “Rental Prices for Housing Decree” (BHW) applies. This includes the so-called rental point system. This system includes a provision that for properties with a certain rating – i.e., rent points – you may NOT charge whatever you want. In it, the government specifies a maximum bare rent. They do this through the housing valuation system. There are two variants of this:
- The first variant is for self-contained housing (in short, own kitchen, own entrance, own sanitary facilities).
- The second variant is for non-independent living spaces (for example: you share a kitchen and/or a bathroom).
The housing valuation system looks at how many points you get for that property in different areas.
What is the liberalization threshold/when is rental free sector?
There is a schedule of maximum rents in a given year. See here that schedule of the year 2021. As you can see, each number of rent points is associated with a maximum rent. However, as a landlord you are only bound by the maximum rent up to the ‘liberalization threshold’. This is the limit set annually above which landlords are allowed to set their own rent. Currently (in 2021) it is € 752.33 for independent housing. From 143 rent points in 2021 (= €755.18 according to the schedule) rent is in the free sector and you can ask what you want. So the number of points above which you are in the free sector can vary from year to year depending on how high the liberalization threshold of that year is.
In this case, therefore, you need a minimum of about 143 rent points to be able to mark a property as rented above the liberalization threshold/rented in the ‘free sector’. From 143 rent points, you may charge any rent you want as a landlord. Under 143 rent points, this is NOT allowed! Note: Do not sit exactly at 143 points either. Make sure you are above this by a safe margin of at least a few points.
Are you already in the free sector, already have tenants and want to increase the rent? Please note that starting in 2021, the annual rent increase is limited to a maximum of inflation + 1%. In price terms.
Rent points vs. housing
You get the most points for the rooms in the house. Think about: how big is the living room, how big is the bedroom, bathroom, kitchen, etc. So you get points for this. For residential space, you get one point per square foot.
However, you don’t get these points for all the rooms in your home. For example, you don’t get living space points for the toilet, the hallway, closets if they are in the hallway, and the meter closet. For example, a house with 70m2 of living space may only give you 50 rent points. A cellar box or bike shed yields 0.75 rent point per square foot.
Other things being looked at:
- Which rooms are heated
- Do you have an intercom with a video in it
- What kind of appliances are in your kitchen
- The shape and luxury of your sanitation facilities
- Length of your countertop
- Type of faucets (simple faucet or one-handed), toilet (normal or suspended) and sink (single or double)
WOZ value and rental points
What counts heavily is the WOZ value. The higher it is, the more rent points. High WOZ values now ensure that even small homes in a city like Amsterdam are above the liberalization threshold. However, as of January 1, 2021, weighting of the WOZ value is (probably) limited to a maximum of 33% of the total number of rental points. This is called the “WOZ cap. This will affect these very small homes in a city like Amsterdam. For homes that (would) fall into the free sector until 1-1-2021, this need not be the case after that date. Therefore, it is important to accommodate this with a better BENG label. Please note that as of 1-1-2021, the BENG label is less heavily no counting in the rent point count (compared to its predecessor ‘the energy index’).
Submit rental disputes to the rent commission
In addition to the rent point system, there is the rent commission. This is a government advisory body where tenants can come forward if they think they are paying too much. Here tenants can challenge their current rent. If they are found to be in the right by the Rent Commission, then the rent will be reduced retroactively to the amount set by the government.
Housing to the free sector get
The energy performance and sustainability of a home are a very important component in the housing valuation system.
For upgrading a property to the free sector/above the liberalization threshold, in practice insulating is the best approach. Often one does this by making it:
- Cladding of facades on the inside (pre-walls or insulation panels)
- Installation of a good boiler with the highest efficiency (HR 107 boiler)
- Apply floor insulation
- Apply roof insulation
- installing solar panels
- application of 3M glass film on single glass (giving it the value of double glazing)
- Application of 3M glass film on double pane (giving it the value of HR glass)
- cutting out rebates and fixing HR glass
Insulating can get you about 40% of the number of rent points you need to get your property into the free sector.
The kitchen and plumbing can also score a lot of points. A kitchen with a countertop of at least 2 meters and sufficient built-in appliances already provides 14 rental points. A hanging toilet with concealed cistern, double sink, lighting in the bathroom cabinet, etc. It all adds up to points.
Before buying a property for rent, it is wise to do a ‘quick scan’ of the feasibility of getting the property into the freehold sector yourself, or by a specialist company. Basically, you can do such a quick scan from the Funda ad. You know the square footage, see the insulation features, read about the installations, the type of heating and you see the floor plans with measurements.
The energy index of a home can be found at: www.ep-online.nl
Which properties are less suitable for rental free sector?
Properties where it is more difficult to get them in the free sector are those with a low WOZ value, those with a low square footage and/or those where it is difficult to improve the energy index (such as properties with block heating).
Which properties score well for renting in the free sector?
- Homes with district heating score very well in the energy index
- Properties with a high WOZ value (but keep in mind the WOZ cap we talked about earlier)
- Houses with more than 90m2 of living space
- Homes with a high energy index or good scoring ‘BENG label’
Changes 2021 vs. 2020
The changes that are coming:
- We had the energy index until 1-1-2021. As of January 1, 2021, it has been abolished again and replaced by the BENG label. This one has become a lot stricter. You would therefore have been smart to apply for another energy index before 31-12-2020.
- As of 1-1-2021, the proportion of points from your WOZ value is capped at 33% of the total number of rental points. Homes that (would) be in the free sector until 1-1-2021 may not be after this date. Therefore, it is important to accommodate this with a better energy index or a better BENG label.
The most common mistake: energy label versus rent points
You can use your energy label for rent points if it is from before January 1, 2015. If you have a younger label then the Rent Commission’s rent points calculation will award you points, but they are not valid. So you are thus caught off guard by the Rent Commission. You, as a landlord, like to think you have the minimum 143 rent points and can rent out your property in the free sector. Now your tenant is going to object to the Rent Commission and the Rent Commission is voiding your rent points because your label is from after January 1, 2015. In that case, the Rent Commission will not count your energy label and will look at a year of construction table. If your home is built before 1976 then you will receive zero points. Now the strange thing is that if in the same situation your label would be from 31-12-2014, there is nothing wrong!
The energy label and rental points
Please note that an energy label therefore has NO status for rent points. You really need to have an energy index from before January 1, 2021. If you do not yet have an energy index from before 1-1-2021, then you must request a BENG label as of that date. It is more expensive to apply for and will also count less heavily in the rent point count. If you don’t have a good label and if you are a landlord working only with an energy label, then you are at great risk. This is because the risk is that if the tenant objects to the rent at the Rent Commission, they will then fall back purely on the year of construction of the property. Energy performance then no longer counts at all. A home that might then normally earn ample points for the free sector may then suddenly fall into the social sector.
There are companies like Boomerang and RentFriendly that scan the Internet for homes for rent. Then they look to see if it has an energy index. They can also look at neighborhoods that have a lot of rentals. Then they will actively approach tenants through Push Marketing. In it, they offer their services to challenge the rent on a ‘no cure no pay’ basis for the tenant.
If you are renting out rooms to up to three people, it is not wise to start renting them out as non-self-contained units. If you do and start renting out according to the housing valuation system, the return you can get is usually very poor. This has to do with the fact that the housing valuation system for room rentals has not been adjusted since the 1960s. When renting out rooms, it is better to rent out one self-contained unit to three people at a time. So rent in that case to a ‘residential group’.
Finally, some helpful facts:
- A kitchen countertop without cabinets underneath does not count. The depth of the kitchen top is not important. You can also get a top from Ikea of 30 cm depth (€ 15) with 2 cabinets underneath.
- In the case of a protected cityscape, you often get a surcharge on your allowed rent of sometimes as much as 15%.
- The liberalization limit is an (in 2021) amount of €752.33. Above is liberalized. Regulated below. The point score is a tool to measure whether your value falls below or above the liberalization threshold. Always Google “liberalization limit” + the year you are in at that time.
- The table of maximum rent is adjusted twice a year: on January 1 and on July 1.
On January 1 you get fewer points, on July 1 you get more. If you are going to calculate the rental points, always keep in mind the first half of the year. The points between January 1 and July 1 vary around four points. Most important advice: don’t go exactly on the border of 143 points. Take sufficient margin. Better that you are at least at, say, 150 or 160 points. So you should try to have your rent liberalized in accordance with the rent points system of the first six months.
- Are you going to renovate? You can earn two points per €10,000 investment. This involves adding home quality, or home improvement. Not maintenance.
- Applying for a BENG label anywhere costs approx. €275,- incl. VAT.
- Want to know more about determining the liberalization threshold for the then current period? Then also read this blog.