Affordable rent bill to House of Representatives | News item

News item | 06-02-2024 | 13:08

“Rents have risen so fast that they are often no longer affordable for people with an ordinary income. Due to the enormous scarcity, top prices can be charged for homes that are clearly not worth it. This puts tenants in a bind and affects people’s livelihoods. Tenants and home seekers deserve that politicians will consistently be on their side. That is why we restrict excessively high rents. And we do this in such a way that it is still profitable to let for bona fide landlords and that new construction still remains attractive. This is also in the interest of tenants, because you cannot live in an affordable rental home that cannot be built.“, says Minister Hugo de Jonge.

Rent that suits the quality of the home

The Affordable Rent Bill ensures that more people can obtain affordable rental housing with a rent that matches the quality of the home. This law extends regulated rent to rental properties in the middle segment up to and including 186 points, which will cost a maximum of 1,123 euros per month according to the Housing Valuation System (WWS). The regulation of mid-range rent will apply to new rental contracts as long as necessary and will be evaluated every five years. If we do nothing, more than 40 percent of tenants in the middle segment will pay more rent than is reasonable based on the quality of the home. The number of homes that end up in the mid-rental market after a change of residents is expected to decline further (these will become expensive rental properties). ) and prices continue to rise sharply when residents change.

Due to the combination of regulating the mid-range rent and making the WWS mandatory, it is estimated that the rent of more than 300,000 homes will be reduced by an average of 190 euros and that 113,000 rental homes will be added in the affordable segment.

More protection for tenants

Due to the tightness in the rental market, tenants are in an increasingly vulnerable position, which means that they often do not obtain their rights. That is why the bill also strengthens the legal position of tenants – both in social and mid-rental housing – by making the WWS mandatory. It is currently still the case that a tenant must go to the Rent Assessment Committee himself to enforce a maximum rent. However, we see that this does not provide sufficient relief: 50% of the private rental properties to which rental price protection already applies were rented too expensively in 2021. That is why tenants are given broader access to the Rent Assessment Committee and all landlords are obliged to submit a points count of the rental property to the tenant when entering into a new rental contract. Municipalities will monitor and can take enforcement action. If the WWS does not become mandatory, tenants will remain vulnerable to unfair practices, landlords can take the risk with impunity to charge whatever rent they want regardless of the quality of the home, and municipalities will not be able to take action against excessively high rents.

More affordable new construction

The government has taken numerous measures to: to stimulate the construction of new homes and the design of the law also expressly takes into account the importance of keeping investments in new rental homes profitable. An additional 981,000 homes must be built by 2030. Market parties and corporations want to jointly build 100,000 mid-range rental homes. There will be a new construction surcharge of 10% for mid-rental homes with construction starting before January 1, 2026, as a transitional measure. In addition, the home valuation system has been modernized so that the system is better aligned with the quality of homes that are currently being built. With more points for good energy labels, better appreciation of outdoor spaces, and the quality of sanitary facilities and kitchen plus room for an annual rental price increase of wage development plus 1%.

No sales wave, more rental properties available for purchase for middle incomes

Since 2015, the private rental segment has grown from 415,000 homes by more than 50 percent to 648,000 homes in 2021. The growth of the private rental segment has mainly led to an increase in expensive rental properties and a shift from the (affordable) purchase segment to the (expensive) rental segment. From 2018 to 2022, investors purchased approximately 75,000 owner-occupied homes for rental: the so-called buy-to-let. After a phase of high returns, returns have fallen due to increased interest rates and tax measures. The regulation of mid-priced rents can also influence returns, but this is now necessary to protect tenants and prevent a decline in returns from being passed on to them through even higher rents. There is a realistic expectation that some of these homes will be put up for sale. However, there is no question of a sales wave at the moment, as recent figures from the Land Registry show. The number of homes sold in 2023 is much lower than in previous years. Any sales will also be gradual because the regulation of the mid-range rent only applies to newly concluded contracts. Tenants have rental protection and any sale will wait until the tenant leaves. Moreover, the sale of some of the rental properties can be seen as a certain correction compared to recent years. Purchased homes that have been offered as (too expensive) rental properties in recent years become available as (affordable) owner-occupied homes for people with a middle income who would like to buy but had to rely on expensive rent due to a lack of affordable owner-occupied homes. About 75% of the homes sold by investors on the owner-occupied housing market in 2023 had a sales price below the NHG limit, the Land Registry figures show. And despite the fact that investors sold more than they purchased in the past year, their share of the housing stock increased to 9.4% due to new construction, house divisions and transformations, among other things.

Providing clarity to tenant and landlord

The advice of the Council of State has been incorporated into adjustments to the affordable rent bill, points of interest have been included or refuted and further substantiated in the Explanatory Memorandum to the bill. The design of the Affordable Rent bill has therefore struck a good balance between affordability and availability of rental housing. The Affordable Rent Act could come into effect from July 1 this year, providing clarity for tenants and market parties.

Changes to the bill

• The new construction surcharge has been increased from 5% to 10% and applies: for projects whose construction started before January 1, 2026 (instead of 2025). Homes that qualify for storage can use this make as long as the regulation applies (instead of a maximum of 10 years). The surcharge also applies to additions to homes (transformation, topping and extension).
• The annual maximum rental price increase in the middle segment has been set at Collective Labor Agreement + 1% (instead of collective labor agreement + 0.5%).
• WOZ cap Only applies from 187 points, instead of 142 points. In addition, a home falls to a maximum of 186 points.
• Further modernization of the WWS, so that the system is better aligned with the quality of mid-range rental housing:
  • Plus and minus points for energy labels
  • Better appreciation of private and shared outdoor space
  • Better rating of sanitary facilities and kitchen
  • Review of valuation of monuments

Read the Affordable Rent Bill Offer Letter here.