Gov't interference in rental market will stall housing construction: ING

The government’s plans to regulate many rental properties in the private sector will probably stall new housing construction, ING economists warn. “The fact that a group of private sector tenants benefits from lower rents in the short term due to rent regulation is probably insufficient to compensate for these negative side effects,” they argue.

The government has devised several new rules that should take effect next year to make rental housing cheaper. But according to the experts at ING, these will probably have the opposite effect if the housing supply ultimately shrinks as a result. The bank expects the new rules will delay the implementation of housing projects.

Project developers may also cancel some of their projects or postpone them indefinitely if it is impossible to close the business case through renegotiation. As a result, the housing shortage in the Netherlands will likely last longer. This, in turn, fuels further rent increases in the unregulated part of the rental market, which would only reduce the affordability of homes.

“Rent regulation, therefore, does not help to tackle the housing shortage,” the ING economists said. They argue that the government would do better to stimulate new construction even more, for example, through a planning benefit levy - a levy on the increase in land value if the municipality allows construction on it.

Earlier this week, the real estate agents’ association NVM also expressed concerns about “all regulatory measures” currently being fired at home landlords in the free sector. The NVM called the measures taken by Housing Minister Hugo de Jonge “disastrous” for the entire Dutch housing market. According to the NVM, renting is threatening to become unprofitable for landlords, which will decrease the supply of rental homes. “Combined with the rise in interest rates, it is now more profitable for the landlords of almost all mid-rental properties to sell than to re-let at the end of the lease,” the realtors said.