Addressing high rents: the impact of the Netherlands' Affordable Rent Act on tenants and the housing market

Martin, the Dutch government seems determined to tackle the exuberant rents that so many households are paying.

In July 2023, the Netherlands entered into force the Good Landlordship Act, creating seven rules that defined a landlord as a fair player for which we spoke with the International Union of Tenants and now, a new Affordable Rent Act was just passed in April with the ambition to determine maximum rents.

How will Dutch households feel the immediate effects, and when can they expect tangible changes in their rental costs?

With the new Affordable Rent Act rent control is extended to properties in the middle segment. In the Netherlands, rents in the regulated and social segment are capped based on the Home Valuation System (Dutch WWS). Based on quality indicators, a number of points are allocated to a dwelling, which corresponds to a maximum rent.

The new act introduces this system for the middle segment as well. Hereby protecting tenants against excessive rents.

The scarcity in the housing market has led to rents in the middle segment that are disproportionate to the quality of the homes, with rents way higher than €1.123, which would be the maximal rent under the Affordable Rent Act. The new Act makes the Home Valuation System compulsory, which means that the rent can’t be higher than the rent under the Home Valuation System.

This regulation of the middle segment only applies to new rental contracts. The government expects that for more than 300.000 homes, the rent will drop by an average of € 190 per month. Tenants in the regulated middle segment are also protected against large rent increases: the maximum rent increase is the average wage development +1%. The new act offers middle incomes more options for an affordable home close to their work and social life.

Critics argue that the new law might slow down home construction and discourage landlords from maintaining their properties. Do you believe that these measures will truly serve the interests of home seekers, and what challenges might they pose for the housing market?

We see the measures as one of the building blocks in the total approach for greater social security for tenants and liveable cities. Middle incomes, like teachers and police officers, now have a hard time to find affordable housing. Especially in the areas with a tight housing market, like the bigger cities. From 2018-2022 75.000 (cheaper) properties were bought up by investors to be rented out. Middle incomes didn’t have a chance. It is expected that a part of the 75.000 properties will be sold again due to the new measures of the Act. This will benefit starters, like middle incomes, in the housing market.

Another building block is the importance of accelerating the construction of houses in the middle segment. Project developers and investors have stated that the new Act gives them clarity to build more of these houses.

Also social housing associations are ready to build them, but have a hard time financing it. Therefore we argue that the European state aid rules should be changed so that housing associations can build homes in the middle segment as a SGEI.

We would also like to see that the tax burden of investors and associations is reduced to achieve the building acceleration, in order to increase the availability of affordable houses for middle incomes.

Besides, rent in the middle segment will still be higher than in social housing, social housing associations, on average, ask 70% of the maximum rent according to the Home Valuation System (WWS). In the middle segment this percentage is higher, up to 100%. So there is space for a decent return on investment.

One of three homes in the Netherlands is social housing. What are the implications of this law for social housing tenants and providers?

The impact on the social housing sector won’t be that big. The Home Valuation System already applies to our sector and social housing associations ask for an average of 70% of the maximum rent allowed under the Home Valuation System (WWS).

The Affordable Housing Act objectivizes and improves the WWS.  For new contracts – in social housing and the middle segment - it will become compulsory for providers to provide tenants a full counting of points, with the total number and the rental price that corresponds to it. This is an addition to the information obligation stated in the Good Landlordship Act. It makes it easier for tenants to check if the quality of their house fits the rental price.

The law also applies to existing contracts in the social segment. If the rent is above the maximum rental price based on the amount of points, it will need to be lowered instantly.  

What are the charges for those who do not comply and who would be in charge of monitoring that landlords play by the rules? Is this a temporary measure?

The municipality is given a supervisory task. If a landlord does not comply with the new norm, the municipality can issue a warning or fine and the rent must be reduced from that moment. If the tenant wants to check if the rental price at the start of the contract, he can go to the rental commission (Dutch: Huurcommissie) within 6 months. If the rent is too high, then the rent must be reduced with retroactivity.

All measures in the new Act are necessary because of the scarcity of affordable houses. The Act will be evaluated every five years, until the rental market is more balanced.

Speaking of affordable housing in the Netherlands, what is for AEDES the New Housing Paradigm that can change the way people live?

We believe that a transition has to be made from focusing on housing markets to, well…housing. The focus on markets that policymakers had did not lead to more homes, lower rents or a sustainable building stock. It led us straight into a housing crisis. Governments, including the European Commission, need to take responsibility again for decent housing policy. At the European level this, at the very least, require a task force led by one of the Vice President of the European Commission that is dedicated to finding European solutions to the housing crisis. One of the main solutions we recommend is that European State Aid rules should allow housing associations to build homes in the middle segment as an SGEI [Services of general economic interest].