Renters pay too much on open market to build up savings: Report

Dutch between the ages of 20 and 45 who rent a home in the free sector, pay so much on housing costs that they can't afford to build up savings, Rabobank researchers Nic Vrieselaar and Carlijn Prins concluded after surveying over 10 thousand customers that fall in this group, AD reports.

This involves people who earn too much for social housing, but can't or won't buy a house. People in this group are twice as likely to have little to no savings, less than 2,500 euros, than homeowners of the same age. They are therefore less able to absorb financial setbacks. And they lack the tax advantage that social tenants - housing allowance - and homeowners - mortgage interest deduction - have.

"It was known that the difference in housing costs between homeowners and tenants was large. But we looked at the saving behavior. And then it appears that tenants actually have more trouble saving", Rabobank economist Vrieselaar said to AD. "The distinction between tenants and buyers remain if you remove differences in age, income, provinces and attitudes about saving." 

According to the economists, this indicates that the fixed costs of tenants in the free sector are too high for them to build up a financial buffer. "That reinforces capital inequality. Tenants do not build up assets while buyers do and they hardly save. People who can buy, thanks to the surplus value of their previous house or parents who donate, therefore have a long-term advantage. While the income may be the same."

This is worrying if the standard desire of financial independence and at some point your own home remains in place, Vrieselaar said. "Thanks to rising house prices and strict mortgage conditions, this will only become more difficult and it will not help that today's students will soon have study debt. An owner-occupied home may not be the best for everyone, but the alternative is so expensive that this is not perceived by tenants as feasible."