Dutch plan to regulate mid-market home leases will lower rent, but also supply: expert

Outgoing Housing Minister Hugo de Jonge wants to fight excessive rents by regulating mid-segment rentals up to 1,100 euros. Lessons from abroad show that regulation will indeed result in lower rents but also much less supply, the Telegraaf reports based on figures from real estate adviser JLL.

According to JLL, similar measures in Berlin and Catalonia resulted in rents dropping by 10 and 5 percent, respectively. But at the same time, supply fell drastically because investors no longer saw profit in tenants. “In Berlin, the decline in available rental properties was as much as 51.8 percent. In Catalonia, 10 percent,” JLL said. Rent regulation also caused long waiting lists and price distortions in Sweden and Austria.

JLL director Pieter Hendrikse called De Jonge’s plans unwise. “Investors are running away. The regulation is disastrous for investments in rental properties. It has been proven in other countries that if you take measures in the existing stock, there will be even less supply. And what then?” Hendrikse said to the Telegraaf. The Dutch government already “changed the rules during the game” on investors by increasing transfer tax from 2 to 10.4 percent, he said.

The government is on the wrong path by focusing mainly on measures within the existing rental housing stock. “It is a matter of supply and demand. Forty years ago, we had 14 million people in the Netherlands. Now we are at 20 million. These people are not helped with the same supply. Then prices rise. It applies to both the owner-occupied housing market and the rental market.”

According to Hendrikse, the government should instead focus on creating more homes. “You can simply solve the housing shortage by stimulating housing construction like in the 1970s. Then the rent will work itself out,” he said. And there is room to build, Hendrikse added. “Everyone says there is no room. But, 50 percent of the Netherlands is used for agriculture, and only 7 percent has buildings. Does agriculture still have the function it used to have?”