Affordable Housing program: pay attention for real estate investors

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 Recently, Minister Hugo de Jonge published the Affordable Housing Programme. With this, the ministry wants to promote that people can better bear their housing costs and have access to a good quality home that suits their housing needs and stage of life.

The government wants to take control of the affordability of public housing. The program contains a variety of measures that will be taken in the near future, at least those that are intended to be taken by means of legislative amendments. In this blog I only pay attention to the measures that the ministry wants to take to improve the availability and affordability of the mid-market rent by regulating it.

For the sake of better availability, it is stated that approximately 40% of the 900,000 homes to be built before 2030 must be mid-term rent or affordable purchase (below NHG limit, in 2022: 355,000 euros).

The regulation of the mid-market rent is the measure in the program with the greatest influence on the affordability of (rental) homes.

In the Affordable Housing Program it has been decided to regulate the mid-market rent on the basis of the WWS. In short, the intention is to extend the points system to an upper limit to be determined for the average rent. That will be between 1,000 and 1,250 euros per month.

In addition, the WWS is made mandatory. With the “Good landlordship” bill, municipalities can introduce an area-oriented rental permit in which they stipulate that rents in the regulated segment must be let in accordance with the WWS. Municipalities will also be given the opportunity to enforce administrative law on this permit condition in specific areas, also in the form of fines. As a next step, it will be the national standard that landlords in the regulated sector respect the maximum rent of the WWS.

The challenge is to organize the regulation in such a way that the investment willingness of (institutional) investors does not decrease. After all, that would have a negative effect on the production of new construction in the middle segment. This is recognized in the program, but the question is whether this is taken into account in the right way. If the mid-market rent is regulated, this has a direct effect on the return of the investor/landlord. This applies to existing investments as well as to (the feasibility of) new construction projects. On the other hand, it is a good thing that the quality of the home is in proportion to the rent.

In the program, reference is made to the Housing Construction Program for incentives for (acceleration of) new construction. This contains the following financial incentives: 1. continuation of the housing impulse; 2. abolition of the Landlord levy and 3. create a basis for specific social housing benefits to municipalities.

Points 1 and 3 concern funds for municipalities for the faster realization of projects that stall due to, among other things, financial feasibility. This is already necessary to get certain projects off the ground. The question is whether these provisions compensate for the expected loss in rental exploitation due to regulation of the mid-market rent.

Point 2 is particularly advantageous for housing associations. The abolition of the landlord levy will undoubtedly have a positive effect on the investment capacity of housing associations. However, the investment need is for the most part in new construction and renovation of social housing. Whether there will also be room to invest (more) in mid-market rent remains to be seen, now that this must be financed from the non-SGEI branch without a guarantee. Legislation and regulations will therefore have to be amended in order to be able to partly use the advantage of the abolition of the landlord levy to realize more mid-rental homes.

It is important for real estate investors to keep an eye on these upcoming regulations and to take into account other (lower) returns on certain types of homes.

Barbara Schuijlenburg, 2 June 2022