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Tuesday, 22 November 2011

Dutch government presents ‘solution’ for locked-up housing market: making it easier for house-owners to put their house for rent.

The Dutch government is always willing to think of a wild solution for the locked-up housing market, as long as nobody touches their ‘estate aid’, the Mortgage Interest Deduction (MID).

The MID is actually a redistribution of tax money. It costs the Dutch taxpayers overall €12 bln of tax money per year. This money is redistributed to all houseowners, with the distinction that the most wealthy people in The Netherlands profit most, due to their very expensive houses and their high deduction rate of 52%; every euro of mortgage interest yields €0.52 less taxes, due to the MID.  This makes the MID an inverse Robin Hood-scheme: stealing money from the poor and handing it out to the rich.

Results: peak housing prices in 2007, a totally locked-up housing market for already more than 5 years, the highest mortgage-debt-to-GDP ratio in Europe and more and more people in financial trouble.

But the mantra of the cabinet Mark Rutte I (VVD/CDA) and a majority in Dutch parliament is: if we do nothing about the housing market and maintain the MID as if it were the holy grail, the people feel assured again, the banks will supply high mortgage loans again and the housing prices will rise again for eternity. Sweet dreams…

The next proposal of the Dutch parliament fits perfectly in this scheme: let´s make it easier for people to put their second-owned and currently unsaleable house for rent, so it can yield the proceeds for paying back the second mortgage. BNR Business Radio ( writes about this plan.

It should be easier for houseowners to put their old house for rent. The necessary allowance should be made more simple, or it should even disappear.

Houseowners that bought a new house, could put their former house for rent. But people often don’t do this, as the procedure for renting a house is too complicated. The Second Chamber of Parliament wants to change this.

The VVD (conservative-liberal party) and the Christenunie (progressive-Christian party) proposed to simplify the allowance, to enable a stronger and steady flow through in the Dutch housing market.

I want to explain why this is a ridiculous plan.

First, the people turn into landlords with all the activities and burdens that comes with it. Most people don’t want the hassle; they want to sell their house and pay back their second mortgage.

Second, this plan forces people to pay for two mortgages, instead of one. If the mortgage interest increases in the coming years (like it should in a healthy financial market), this causes extra financial trouble for the houseowners that can’t be charged out to their renters immediately.

Third, the tenants’ protection in The Netherlands is very strong. Once a tenant lives in a house, it is very hard to ask him to leave in order to sell the house. Result, the house gets even harder to sell than it already is.

Fourth, this plan leads only to more mortgages instead of less. The IMF warned already for the 120% mortgage-debt-to-GDP ratio in The Netherlands and this plan won´t make it better.

For these and many other reasons, this is a dramatic plan that seems only there for the government to kick the MID-can further down the road.

Let´s stop this nonsense and let´s make the Dutch mortgage market better by abolishing this market-disturbing MID. Mark Rutte, show that you are more than a yapper and totally abolish the MID within 5-10 years, using a transitional arrangement. Just to show that you really care about all Dutch citizens; not only the rich ones.

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