In this earlier article you already read why the Affordable Rent Act is not working.
But also in our article “The Deadly Injection of the Rental Market,” we already neatly outlined that.
In this article, I dish out a few ideas for solutions to solve the huge housing shortage of rental properties from my expertise as a real estate agent and also private landlord.
For a solution to the housing shortage for owner-occupied homes, I may write another article at some point.
But first, I will restrict myself here to the rental market.
More rental housing in a fair way
As a government, you must ensure that there is more rental housing.
You do this, of course, by cooperating as much as possible with the construction of new rental housing, especially social housing.
Make the transformation of commercial real estate easier (fewer rules) and ensure as a national government that a municipality, if necessary by means of an emergency law, is given much more freedom of movement to build and transform.
Set strict requirements for sustainability, of course, but also start thinking out of the box when it comes to thresholds you encounter.
Involve project developers and real estate investors much more in the search for solutions to the housing shortage in a municipality and let them actively contribute ideas and proposals.
Encourage rather than punish the good private real estate investor
There are (or at least ‘were’) many tens of thousands of private real estate investors in the Netherlands which were responsible for a significant part of the supply of rental housing in the Netherlands.
I’m talking about the rental housing in the free segment which should be the housing solution for anyone who cannot buy and earns too much for social housing (or has been on a waiting list for a long time).
Say the rental properties with a rent of roughly between €1000,- and €2000,- per month.
Due to the Affordable Rent Act, every private landlord is selling this type of rental property when the tenants cancel.
If you want to know why, just read back this and this blog.
This completely dries up the supply of this important segment of rental housing, leaving only social housing (of which there is a distressing shortage) as well as rental housing in the higher segment (>€2500,-) which is only affordable for a very small target group.
All these private real estate investors are enormously needed in the Netherlands to facilitate the necessary free sector housing.
And these private real estate investors are now pulling out en masse and investing his/her money in foreign real estate, among other things (which other countries are very happy with, by the way).
So what should you (continue to) do as a government and what should you stop doing immediately?
We put it super simple for you below:
Buyout Protection Act
Simple explanation: municipalities can designate properties with a certain WOZ value in a particular neighborhood that may not be purchased for rental. Generally an excellent law and a great tool with municipalities to control the ratio of rentals to rentals in a neighborhood. However, then also make sure that if in a neighborhood you can put buyout protection back on hold if rental properties in the neighborhood dry up.
Transfer tax 10.4%
Cut it out immediately. With this you make the threshold for investing in real estate unnecessarily high. The transfer tax for rentals was temporarily 6%. This is an excellent rate.
New rent point calculation 2024
Explanation: as of July 1, 2024, the way your rent points are calculated has been modernized. Thus, bad energy labels get minus points and you get extra rent points for good energy labels. Basically, this is (barring some odd things) a fine change that you can leave in as is.
Fixed Lease Law
Explanation: from 2016 through July 1, 2024, you could first offer the tenant a temporary contract.
This gave landlords the ability to still give a sort of trial period first to see if the tenant did not turn out to be a “rotten apple.
It also gave you the flexibility to still be able to sell the property without a tenant.
As of July 1, 2024, this party is over and you can only give indefinite contracts to tenants.
For private landlords, this is quite a barrier for 2 reasons:
Reason 1
What if the tenant turns out to be a rotten apple and neglects the property, smokes, sprays, causes nuisance or simply makes the landlord’s life miserable with harassment or otherwise? The only way to evict a tenant then is if he really does not pay his rent for at least 3 months, starts a hemp plantation or runs another illegal drug lab in the property. In all other cases, you can’t really evict your tenant.
Reason 2
Another reason is that you can never sell that property again if you want to because you are stuck with tenants. And a house in a rented state, simply does not bring you any peanuts. This often reduces the property value by roughly 30%.
Advice: get rid of the Fixed Term Rental Contracts Act.
If you as a government want to reduce turnover in the rental market, just give the landlord the option to make the fixed-term contract duration for max 48 months (instead of 24 months ).
Or make other similar ground rules.
And as a government, stop introducing these kinds of laws without involving us (the brokers, and the private real estate investors).
Involve tenants in this as well.
Do not just talk to our industry associations (NVM, VBO and VastgoedPro) because with all due respect: the lobbyists there usually do not have their feet in the clay and we do!
Affordable Rent Act
Let me be very clear.
This law is the big deathblow to the Dutch rental market and it must be struck through as quickly as possible.
It is good that there is a housing valuation system and it is also very good that there is a strict focus on sustainability, luxury and facilities in the home.
But don’t strike out as a government in attacking ownership.
The 187 rental points that this law now allows you to ask for a minimum to be able to charge a market rent as a landlord cuts off a vast majority of homes from the private rental market.
And these are precisely the homes that are desperately needed to provide housing for everyone who cannot yet buy or access social housing.
The market rents in this free segment regulate themselves.
But only if government and municipality ensure that there is and remains sufficient supply in that municipality.
What you have to do as a government is to make sure that you keep it interesting for people like me to invest their hard-earned money in Dutch bricks and also in a good and fair way.
If a government forces someone to ask a maximum of €900 for a house where he has to invest €350,000 to buy it, pay transfer tax, make it sustainable and renovate it nice rental ready, then of course no one is ever going to do that.
For heaven’s sake stop this madness and draw a line under this law!
Good Landlord Act
Simple explanation: this is a law enacted to deal with faulty landlords.
Good plan, bad execution!
I’m going to cover this law in another article, but I’ll give you 1 example.
If I put a property up for rent now as a real estate agent, I will probably get 300 applications (literally).
I can only rent the property to 1 person.
This law requires me to inform all the other 299 applicants in writing why they didn’t make it.
You understand that this is impossible to do.
This law was obviously not made with input and help from rental agents and (private) landlords.
I think you can leave the law in place for now, on the condition that arrangements are made to enforce it.
If the sole purpose of the law is to deal with faulty landlords and it is enforced, that’s fine.
But if for every rental transaction the landlord or his broker has to strictly follow all the rules on pain of a high fine, then this law is also a noose for the rental market.
Box 3 tax on rental property
Simple explanation.
You pay roughly 35% tax on the return you make on your investment property.
Like paying other taxes in the Netherlands, it is not a big deal if you have to, but where it goes wrong is that the government just assumes that everyone makes 6.17% return on his/her real estate.
I can tell you that that has all changed a bit now with all the regulations mentioned earlier.
The moment you only made a 3% return on your investment properties in a given year, your box 3 tax should be assessed on that 3% and not on a notional 6.17%.
After this year’s Supreme Court ruling, real estate investors are allowed to object to the Box 3 assessment.
You would then have to be able to prove what your actual return is and you would be taxed on that.
Practice will have to show whether this goes well, but assuming it does, I think you can leave this measure as it is.
After all: the rich have always benefited from virtually no tax on their real estate while the working class has always been taxed between 30% and 60%.
It does make it fairer that way.
Conclusion
Want to make the rental market in the Netherlands healthier again? Then make sure:
- Building and transforming becomes easier and also more encouraged
- Transfer tax for rental property is reduced from 10.4% to about 6% (works as an incentive to reinvest in rental properties)
- Scrap the Fixed Lease Law. Allow temporary rentals for a longer period (e.g., 48 months).
- Immediately repeal the Affordable Rent Act. This is really killing the rental market. For God’s sake, don’t wait for more suffering to occur.
- Enforce the Good Landlord Act only on faulty landlords
