Should we aid the owner-occupied housing market in The Netherlands, by making renting almost impossibly dear for starters and movers on the (social) rental market?! According to the building cooperatives and the Dutch government, the answer is an unambiguous “Yes”!

There is a war going on in The Netherlands; a silent war in which no shot is fired, but of which the outcome is definitely very intrusive for hundreds of thousands of people in this country. 

It is called “The war against (social) rental housing”.

This war is fought between the tenants of (social) rental houses – especially starters and movers, looking for a new rental house – at one side and the government, commercial landlords and the building cooperatives at the other side.

Already about one year ago, I discovered that the price increases on the market for (social) rental housing during the last 25 years had been outrageous, when compared to the official inflation rate:

Development of the average house rents in comparison
with the official inflation rates, during the last 25 years
Data courtesy of www.cbs.nl
Click to enlarge

Although the price development of rental houses differs per city and location, the average price development for rental houses has exceeded the official, annual inflation rate no less than 17 times, during the last 23 years!

Since the eighties and nineties, the subsequent Dutch cabinets have been on ‘war’ with the tenants of social rental housing and free sector rental houses, by allowing rent increases to be well above the inflation rates in most of the cases.

While these price-increases were supposed to be in synch with the vast price increases in the owner-occupied housing market, it led to rental houses that were generally much too expensive.

These excess prices for rental houses led to stagnation in the Dutch rental market, especially as some price increases would only be deployed upon the next inhabitant of a rental house and not on the current inhabitant. This meant in practice: staying in your current rental house is cheap, while moving to a new rental house is expensive.

The year 2014 was definitely not a trendbreaker, with respect to this alarming development. The rents for free sector rental houses and especially social housing exploded for starters and movers, with rent increases amounting to as much as 22.6%. These rent increases made it virtually impossible for many low-income starters and movers to acquire even the simplest (social) rental house.

The Dutch housing association “Woonbond” rang the alarm bell today:

Woonbond comes into action against rising rents

Tenants and starters on the rental housing market have a very hard time financially, due to the enormous rent increases, during the last two years. This was disclosed in an analysis from the Dutch Woonbond.

In 2014, the rents for vacant rental houses increased in average by 22.6%. For existing tenants, the rents increased by an average of 4.6% per year, during the last two years.

Increasing numbers of tenants have gotten into financial trouble, as this was the third year in a row that rents were allowed to increase by percentages far above the inflation rate.

Building cooperatives increased the rents with even higher numbers than commercial landlords. In 2014, the rents in the social sector rose by 4.7% among building cooperatives, against 3.8% among commercial landlords. 

In 2013, the reserves-available-for-housing-investments increased to €45.3 bln from €12.8 bln in 2012, especially due to a strong increase of rent cash flows. In spite of the ‘landlord levy’, a special tax to top off the profits of building cooperatives, the financial outlook of the building cooperatives improved dramatically. So there is enough leeway to not dramatically increase the rents in 2015.

The average price increase for a vacant rental house of 22.6% causes that the rent for such a house easily increases by €100 - €200 per month, in case of a tenant change. As a consequence, the amount of affordable rental houses is under fierce pressure and the new tenants get confronted with rents that have become skyhigh.

More and more tenants have a hard time to afford these excessive rents. This development is emphasized by the increasing numbers of house evictions, caused by defaulting tenants. With almost 7000 evictions, the number in 2013 was 8% higher, year-on-year.

The current situation in the Dutch housing market is extremely perverse: 

• People with lower incomes, who are very dependent upon affordable (social) housing, have been confronted with these outrageous rent increases from the building cooperatives and - to a lesser degree - the commercial landlords: especially when they are starters or movers on the rental market; 
• People with higher incomes, who can easily afford owner-occupied houses on the other hand, have been enjoying the lowest mortgage interest rates “in history”. On top of that, they received all kinds of other facilities and endorsements from the Dutch government lately. And these interest rates are even cut in half, due to the Mortgage Interest Deductability. 

The whole situation on the rental market is a mess. And I would even call the behaviour of the Dutch government, with respect to (social) rental houses and especially the recent rent increases, criminal negligence:

• First, the building cooperatives have been charged with litterally billions in ‘landlord levies’. The building cooperatives, on their behalf, charged these levies to their tenants, without further hesitation;
  
• Second, the building cooperatives could also charge the costs of their commercial catastrophes, as well as the financial debris of their derivative investments-going-berserk to their tenants, during the last few years, using the ‘heads, we win! Tails, you lose!”-scheme;
  
• With The Netherlands (close to) being in a deflationary period and with the mortgage interest rates at all-time lows, it is totally outrageous that commercial landlords, as well as the building cooperatives – with their special responsibility for social housing – could raise the rents with dozens of percent points, during the last few years.
  
• The Dutch Ministry of Housing, Spatial Planning and the Environment has blatantly neglected it supervisional role with respect to the building cooperatives. This enabled these semi-governmental bodies to operate like private kingdoms, of which the ‘kings’ had Euro-signs in their eyes and did not see any hazards of their actions at all.
  
  The gruesome story of Vestia, as written in the excellent book of ‘Financieel Dagblad’-journalist Hans Verbraeken, described perfectly how terribly things could co wrong when executives of building cooperatives had too much power, influence, self-confidence and pizazz, to listen to their critics. 

Still, one way or the other, the tenants are confronted with the consequences of all of this and must pay a dear price for it.