Corporations must build, make sustainable and lower the rent. Is that all possible?

The Dutch housing market “runs like a charm”, said then-minister Stef Blok in 2017. His portfolio, Housing, was abolished when the cabinet was formed that same year. Public housing was no longer necessary, was the thought.

A cabinet later, the same public housing is “back”, according to the new responsible minister Hugo de Jonge (CDA). And that also applies to the 279 Dutch housing associations, which were given a major role in the plans presented last year to implement the wishes of the cabinet. In short, they must simultaneously build, make sustainable and provide income support for poorer tenants – and if possible before 2030.

The targets were laid down last summer in the National Performance Agreements between, among others, the umbrella organization for housing corporations Aedes, the Dutch Association of Municipalities and De Jonge. But since then, construction costs and interest rates have risen, and sites to build are scarce. Experts doubt whether the goals are achievable.

The best-known and most ambitious plan is a major increase in the number of housing corporation homes, currently about 2.3 million. Of the 900,000 homes that must be completed by 2030, 300,000 will be the responsibility of the corporations. The largest part of this must become social housing, with 50,000 homes intended for the mid-market rent.

The corporations were also assigned a role in the area of ​​sustainability. Since the energy crisis, its importance has only grown: according to research agency TNO, 68 percent of people live there experiencing energy poverty in a housing association. To alleviate the worst needs, corporations must have upgraded the draftiest homes – with energy label E, F or G – to a better label by the end of 2028 at the latest. According to umbrella organization Aedes, there were about 250,000 last summer.

The institutions must also make an effort to insulate at least 675,000 homes to a ‘future-ready’ level by 2030. In other words: so well insulated that they can theoretically be heated without gas, for example with a heat pump. In the same year, 450,000 homes must be off gas. Because the corporations are largely dependent on municipalities and energy suppliers – for the construction of heat networks, for example – the feasibility of this goal will be reviewed in 2024. That seems difficult. The trade association of energy companies issued a warning on Sunday It Financial Daily that currently forty projects for district heating at a standstill or delayed because they would not be profitable. This concerns about 375,000 of the 500,000 planned connections.

Tenants in trouble

But there are also tenants who are already in trouble because of the increased food and energy prices. That is why Minister De Jonge announced a partial rent reduction in December. Half a million tenants with an income of up to 120 percent of the social minimum will pay 57 euros less per month than tenants with a higher wage.

In order to realize all this, the government has fulfilled a long-cherished wish of the corporations. As of January 1, the landlord levy has been abolished. This was an extra tax for housing associations, introduced in 2013, when they were plagued by (financial) scandals. According to Aedes, abolishing this levy will save a total of around 1.7 billion euros per year. Is this sufficient to achieve all objectives?

By way of comparison: the ‘investment task’ for the sector is approximately 120 billion euros between 2022 and 2030, according to calculations made by the cabinet last summer. About half of this is intended for new construction, about 46 billion euros for sustainability and the rest for rent reduction. A large part of the plans will therefore have to be paid for from existing income or loans.

The ministry concluded on the basis of a financial calculation that the plans were feasible at the time according to ‘the current forecasts’. But those circumstances have changed. The housing and construction sector as a whole has been hit by rising construction costs, further labor shortages and rising interest rates.

Randstad corporations the weakest

Although the annual calculation of housing association finances is not expected until the summer, Frans Schilder, a researcher affiliated with the Netherlands Environmental Assessment Agency (PBL), wonders whether all targets will be achieved. “The answer is probably no. I think anything is possible. But not at the same time, and not quickly.”

The rent reduction in particular, says Schilder, “has a huge impact” on the clout of corporations in the future. “New construction pays off in the long run, but rent reductions are directly at the expense of the investment capacity of corporations,” he says. “This is not a one-time cost item. This measure will also result in less income in ten years’ time.”

Johan Conijn, emeritus professor of the housing market, and director Berry Blijie of research agency ABF Research also think that corporations will have a ‘difficult’ time. However, Conijn emphasizes that these organizations differ greatly from each other – in terms of finances, but also in terms of their individual assignment. How many poor energy labels a housing association has, or what the building objectives are in its own region, makes a significant difference to the feasibility of the plans.

Broad lines can be discerned, says Conijn. This makes the implementation of the plans difficult in the Randstad conurbation, particularly in the Rotterdam-Haaglanden region. Conijn: “The financial position of these corporations is the weakest.” Relatively much has to be built and these cities have many old houses, mostly built before the Second World War.

“Making those old buildings more sustainable can be very expensive,” adds Blijie. This is often done when a house is scheduled for a major renovation, usually some twenty or thirty years after construction. “It is therefore difficult to separate how much money goes to sustainability and how much to renovation. But the amounts for the total job can vary from 50,000 to 150,000 euros per home.”

“Abolishing the landlord levy does give some scope,” says Gijsbert van Herk, chairman of the board of the Staedion corporation, which owns about 44,000 homes in and around The Hague. “But you see a lot of that money already flowing away to the rent reduction and sustainability.”

According to Van Herk, building sufficient houses is particularly difficult in his area. “In the Haaglanden region, 25,000 new homes must be built. If you add up all the plans that the corporations have here, you come to fifteen to seventeen thousand. Then there is a gap in the ambitions.” According to Van Herk, abolishing the landlord levy will therefore not lead to additional homes in his region.

Dilemma: where to build?

Moreover, in the area of ​​new construction, lack of money is not the only difficulty. Where to build is a dilemma for many project developers, land is scarce and expensive. For corporations, there is also the fact that they cannot recoup their investments through high rents.

In order to attract new social rental homes, municipalities sometimes demand that commercial project developers also involve corporations in their plans. For example, the ’40-40-20′ scheme has existed in Amsterdam for some time. Of every large new construction project, 40 percent must be social rent, 40 percent rent or buy in the middle segment and the rest may consist of expensive rent or purchase.

“Collaborating with those market parties is now sometimes also starting to form a limitation,” says Eric Nagengast, real estate director of the North Holland corporation Rochdale (38,000 homes). “We now see that market parties sometimes say: house prices are falling, the project can no longer go ahead. We’re putting the plan on hold for now.”

Lack of locations

Sometimes it also takes longer for developers to sell 70 percent of their homes to be built, says Henk Peter Kip, director of the housing corporation Woonin (35,000 homes) in Utrecht. That limit of 70 percent is necessary before construction actually starts. Both Nagengast and Kip think that the corporations will in any case not achieve the construction targets. “This is mainly due to the lack of promising locations,” says Nagengast. Kip: “There are simply not enough places.”

There is plenty of skepticism about the feasibility of the goals, but it is difficult to say which of them will not be achieved. PBL researcher Schilder: “Corporations and municipalities should ask themselves what they consider most important of all the plans.” The rent reduction is relatively easy to implement and will in any case continue. “It is not possible to paint a general picture of which task is lagging behind first,” says emeritus professor Conijn. “It’s a matter of priorities.”

ttn-32