No Place Like Home

When I was planning to move to the Netherlands, I initially took a relaxed approach to housing. I thought I would arrive, spend a couple of weeks looking for an apartment I liked, and then bring my family to join me.

Yes, I can already hear Dutch readers marvel at how naïve I was.

In August, I spoke to the director of my master’s program and he nearly had a heart attack when I told him I had not looked for housing. He was especially appalled after I mentioned I planned to move with my wife and son. He told me, “I know you want to be a philosopher, but you don’t have to be like Diogenes,” the ancient Greek philosopher famous for, among other things, being homeless.

This was unexpected. “After all,” I thought, “I come from Venezuela, a socialist nightmare, and it really didn’t take me so long to rent an apartment, so how hard can it be in the Netherlands?”

Very hard, Edgar.

The Netherlands has a housing shortage of more than 300,000 homes and growing. Some forecasts indicate that the deficit could reach a million by 2035. The homeless population has grown by 70% in a decade, and in about a quarter of Dutch municipalities, social housing has seven-year waiting lists. In Amsterdam, it is almost 14 years.

What is social housing? It is simply housing with more stringent government regulations (for example, the maximum rent increase allowed in 2023 is 3.1%) where, under certain conditions, a tenant might be able to receive a government subsidy. In 2023, all rents under €808 are considered social housing. The main condition to receive the subsidy is that your income must be under the threshold of €44,000. For example, a person earning minimum wage and paying €800 in rent per month may receive a subsidy of close to €400 per month.

When my professor told me I could end up homeless, he was not kidding. In past years, and especially in 2021, many universities had to install tents on campus so international students had a temporary place to stay. In some instances, they were charged as much as €450 per month to stay in the tents temporarily. In 2022, many of these universities did not allow students to enroll unless they already had a rental contract.

What is fueling this crisis? Opinions differ. However, one thing is clear: the problem stems from poor policy, and the government (both national and local) is only making things worse.

The crisis also has a social aspect. Only 1 in 10 people lived alone 50 years ago; now almost 1 in 5 do. Three million of the 8 million households in the Netherlands consist of a single person.

Housing in the Netherlands has been complicated since WWII when whole cities and towns were destroyed. But things got dramatic after the economic crisis in 2008. Virtually no one was building, exports were disrupted, and mortgage debts increased while the government made obtaining credit much harder. Thus, around 40% of construction workers left their jobs, which meant that there were fewer construction projects, while the existing ones were more costly. There were 483,000 construction workers in the Netherlands in 2008. The number had plummeted to 251,000 by 2016.

In 2013, the government introduced a tax for housing corporations, which build most of the social housing in the Netherlands. It also required housing corporations to start paying corporate tax. After a rocky period over the past few years, the corporations could hardly afford to pay the taxes, which meant that even more stopped building, and others transferred the tax cost to the rent. That led to a nearly 30% increase in rent. Add building regulations, such as sustainability requirements and noise pollution regulations, and the result is that social housing construction was reduced by half while the buildings that were completed became far more expensive to rent.

The crisis also has a social aspect. Only 1 in 10 people lived alone 50 years ago; now almost 1 in 5 do. Three million of the 8 million households in the Netherlands consist of a single person. People are getting married later (if they do at all) and divorce is more common, meaning that more people are living alone, or in smaller groups, which means more houses for more people. If more Dutch people lived together, that would help ease the situation. However, policy also plays a factor in this dimension of the crisis. For example, when retirees move in together (perhaps because they remarry at an old age, or because siblings choose to move in together after retiring) they lose a third of their combined pension. The result is clear: one-third of single-person households are retirees. Also, when children reach 21, parents on welfare lose some of the benefits. Some cities such as Amsterdam (which accounts for about 20% of the housing deficit by itself) require permits for sharing a property with three or more people.

Not all these rules are necessarily wrong. It is only logical that parents lose welfare benefits after their children reach a certain age and are still living at home. Property-sharing permits were enacted after it was found that some landlords were crowding working-class migrants into small apartments. However, they are a significant part of the crisis. 

Investors are not without blame in the crisis. They buy houses at a cheap price, renovate them, and then go out and rent them, sometimes for a ludicrous amount of money. Not all of these investors represent large companies. Even individuals without much experience in the real estate market may choose to become landlords, because it was an excellent investment opportunity in the past, in light of simplified conditions and low mortgage prices. Again, there is nothing wrong with seeing a good investment possibility and taking it, but the economic incentives involved continue to make the situation worse, and the government’s response has made the problem bigger. The state increased the real estate transfer tax from 2% to 8% for investors, which, of course, did not lead to investors paying their “fair” share, but rather to them factoring these costs into the rents, making it even harder for working-class families, immigrants, retirees, and students (the people most affected by the crisis), to rent. Mortgages also went up in 2022, once again reducing the benefits of investing in housing. Thus, the transfer tax for investors and the increase in mortgages did mean that the number of investor buyers went down, and the number of first-time buyers went up.

The Netherlands has one of the most tightly regulated housing markets in Europe, and it is the European country that invests the most by far in social housing. Nevertheless, the Housing Minister, Hugo de Jonge said in May that “we have believed for too long that the market would solve [the housing crisis] by itself.” Thus, under his watch, regulation of the “free” sector (basically everything that is not under social housing) has increased. Until 2024, “free” rents can only be increased at the same rate as inflation plus 1%. Of course, maintenance and construction costs increase much faster than the overall inflation rate, which affects landlords and disincentivizes further investment. Plus, temporary leases are limited to two years max. After that, only permanent contracts are allowed, at which point it is almost impossible to evict a tenant unless they literally stop paying for many months.

All this means that it is more attractive to sell houses than rent them, and thus, there are fewer rental properties available, worsening the crisis.

Probably the largest news story from the Netherlands in the past two years was the farmers’ protests due to the nitrogen regulations that put their businesses at risk. These very same regulations affected the construction industry by halting 18,000 building projects that breached the EU nitrogen regulations.

For De Jonge, the fact that 1 in 3 homes in the Netherlands falls under the social housing sector—the largest in Europe by far—is not enough. He wants to bring all apartments with rents up to €1,000 under the social housing regime, increasing it by 400,000 properties.

On top of everything, there’s the issue of onerous building regulations. It takes an average of two years to get a building permit from a municipality. Since 2020, all buildings must be energy-neutral. This is good for the planet and also helps residents to save money on gas and electricity, but it makes developing and purchasing much more expensive. Probably the largest news story from the Netherlands in the past two years was the farmers’ protests due to the nitrogen regulations that put their businesses at risk. These very same regulations affected the construction industry by halting 18,000 building projects that breached the EU nitrogen regulations. The regulations were eventually suspended, but they still stopped these projects for a few months.

Lack of space doesn’t help either. The Netherlands is the second-most densely populated country in Europe after Malta (if you exclude microstates) and is the second-largest agricultural exporter in the world, which means it dedicates over 50% of its already-small territory to farming. 

Clearly, the challenges are great, but there are potential solutions worth considering. Some have proposed to centralize control over building permits. That would mean that municipalities that are dragging their feet in giving away building permits would lose that power and, thus, the permit process could be sped up. However, seeing the track record of the national government in dealing with the crisis, one can hardly believe that this will be an effective solution. Still, at least some sort of standardization of rules between municipalities might help.

Also, the larger swath of the deficit is in housing for working-class people. Thus, incentives should be created for companies willing to build such housing projects: speeding up permits, offering tax breaks, and more. The government has already exempted buyers between 18 and 35 from the property transfer tax, but eliminating it in general for first-time buyers would also help middle and working-class families trying to acquire a family home. Also, it is almost impossible to think that the carbon-neutral provisions will be eliminated or moderated, but that would certainly drive building prices down and speed projects up.

The government already pledged to build 900,000 homes by 2030 and allocated €11 billion to do so. Over half of it has been allotted to infrastructure in places where large projects are being planned. By September of last year, over 43,000 building permits had been issued; if that pace was maintained throughout 2022, it would be far below the expected 100,000. Throwing money at the problem is not a real solution. Without structural changes to the regulatory landscape in the housing market that incentivize private builders, the crisis will not come to an end.

Public policy mostly consists in choosing some problems over others, and Dutch policymakers seem to have chosen all kinds of problems over housing. They claim that they are trying to fix the housing crisis, but more clearly needs to be done.