Location, location, location. Ask a real estate agent what determines the value of a home and this is the answer. In fact, he is saying that it is mainly the land under a house that determines the value and price increase, argues journalist Maaike Schoon (42). And that raises the question to whom these increases accrue: only to the one owner or also to society?
Schoon recently published the book Why you can’t afford a house. In it, she explains why house prices have risen so rapidly in recent decades, tries to map the consequences of that increase and advocates skimming off that increase in value for the benefit of society.
This is necessary because prices have risen far too far, she argues. “Very high house prices are ultimately very bad for all of us. It is an advantage for a group of people who own a house, which means that an increasing minority is excluded. You now need an annual income of 120,000 euros to buy an average home.” According to Statistics Netherlands, the income of an average couple in 2024 was 69,500 euros.
Insider on the housing market
Schoon has been fascinated by the housing market for years. It goes back to the beginning of her career in 2008 when she was a starting journalist at Het Parool had to deal with the consequences of the financial crisis that originated in the American housing market. “That was a period of many reorganizations and dismissals, also in journalism. It was formative for me, because the news at that time talked endlessly about houses that were under water.” There was hardly any mention of young people losing their jobs, which felt unfair to her.
Due to a reorganization at Het Parool she switched to To the side. In 2011 she bought a house in Amsterdam that she was able to sell in 2018 with a significant surplus value. She put this profit into the purchase of a new-build home with a low mortgage and low housing costs. This is how she became an insider herself. At the same time, her interest in the housing market grew.
In 2019, she came into contact with housing market economist Matthijs Korevaar and a penny dropped. “He said that throughout history the influence of low interest rates is very clearly visible. When there were low interest rates, there were high house prices. I then realized that this phenomenon was not something of the last forty years. Then I came across research by DNB economists who showed that it is not the stones, but the ground under the stones, that causes those very high peaks and valleys,” says Schoon.
Behind this lies the principle that land is now a financial product. This means that individuals can have ownership rights over a piece of land and that they can buy or sell these types of rights.
Individual ownership of land has not always existed: land once belonged to the church or to a feudal ruler. Schoon wanted to know when this changed in the Netherlands. Her search took her to the eleventh century. “I show that because the Dutch and Frisians had been cultivating the land for centuries and creating divisions, for example via ditches, the land was effectively theirs.”
Land value increase
If it is possible to invest in land or speculate with it, people will do so on a large scale when there is a lot of capital available in the economy. This then leads to land value increases. This happened in the golden age when wealthy Amsterdam merchants invested in draining polders. It also happened while home ownership doubled in more than half a century from 1960 to approximately 60 percent.
The latter development was largely the result of government stimulation, in the form of mortgage interest deduction and expansion of borrowing options. If people can borrow more, they can pay more to purchase a house and that leads to higher prices, according to research by De Nederlandsche Bank.
This means that many homeowners have assets to which they have barely contributed. Just like the principle that land is a financial product, this insight is centuries old, says Schoon. “Adam Smith said that landowners reap where they did not sow. He already saw that when the economy grows, land values rise, especially in desirable locations, while landowners have actually done very little to achieve this.”
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Nowadays it is not what the land yields in agricultural products, but it is purely the location that determines the value. And then it is not fair that all increase in value goes to the owner. “The increase in the value of the land is never actually the result of anything the owner has added. My house in Amsterdam has increased enormously in value in recent years, but that is not because I have installed a lot of solar panels on my roof. The best example is the North-South line in Amsterdam. It is an international phenomenon that if infrastructure is built somewhere, house prices in the area can rise. In Amsterdam-Noord, for example, you now see that the houses on the Nieuwendammerdijk are just as expensive as those on the Vondelpark.”
A frequently heard solution to the tight housing market and high prices is to build more. However, because it is the land price that determines the value, building alone will have little effect, says Schoon. “You cannot expect that house prices will fall or that the housing crisis will be solved immediately. More is really needed for that. It is the solution that will least hurt the people who already have a home. Because we do not have to give up anything for that.”
Mill builder Jan Leeghwater, here on a print from 1870, was responsible for the reclamation of the Beemsterpolder in the seventeenth century.
Photo Print Collector/Getty Images
Redistribution
Ultimately, what is needed more is to scale back stimulus measures and redistribute surplus value, Schoon argues. This involves abolishing mortgage interest deduction and introducing a tax on capital gains. The proceeds could partly flow back to young people who do not yet have a home through labor taxes.
Another approach that municipalities have been trying since the nineteenth century is leasing land. The municipality then remains the owner and the homeowner is the tenant. Schoon himself lives on a leasehold, just like many homeowners in Amsterdam and other major cities. In practice, it seems to have little effect, Schoon notes. “In fact, houses on leasehold land should be much cheaper than they are. So you see that in a strange way it is not properly priced by the market.
A problem that many homeowners have with leasehold is that they may suddenly be faced with a significant increase in the ground rent. This is often determined for a period of fifty years based on the land value. When that period is over, the municipality will look at the land value again. If this has risen significantly, the ground rent may be increased, which could lead to payment problems for homeowners. “It is extremely unpopular, people hate leasehold. Citizens prefer to live on their own land.”
This fierce reaction is comparable to the reaction to other proposals for skimming excess value, even though this may be better for society as a whole, Schoon sees. “People really believe that they are entitled to the surplus value. That is more or less what they were told. In the 1960s, the government’s message was that it is good for you to buy a house, because then you build up capital. If the same government were to now say that the surplus value is a problem, then I understand that this is not really a pleasant message for many people.”
Nevertheless, she sees movement. “Some homeowners also understand that their advantage may be very much to the disadvantage of someone else and that this is not what they want in the longer term. A lot of people have children and they will soon not be able to pay for a house independently. I can help mine, because I have equity, but what if your parents were in social housing, they have no ability to help. Ultimately, that is not the promise we as a democracy want to make.”
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