Law to help vulnerable districts is damaging their image & lowering home prices instead

A controversial law intended to protect vulnerable neighborhoods from further deterioration instead saddled them with a negative image and lower house prices. Home prices in affected neighborhoods dropped by 3 to 5 percent compared to the neighborhoods around them, Trouw reports based on a study by two professors at the VU University Amsterdam.

The Special Measures for Metropolitan Problems Act, nicknamed the Rotterdam Act, was introduced in 2006. It allows municipalities to designate neighborhoods where unemployed homeseekers are not allowed to live. The intention is to not burden already vulnerable neighborhoods with more disadvantaged residents. The law was first applied in five Rotterdam neighborhoods, and nine other municipalities followed later.

Professor Hans Koster, a real estate economist, and Jos van Ommeren, professor of urban economics, studied figures from the past 20 years to see how the law worked in practice and found only “bad news,” Koster told Trouw. “That law does not work and also creates a stigma for the neighborhoods where it is applied,” the researcher said.

The law creates extra barriers for struggling people who can hardly find a home outside the neighborhoods, the professors found. Successive evaluation reports showed that the law had no demonstrable effect on the quality of life in the neighborhoods, and the average income of residents did not change much, if at all. The only thing that the law has achieved is no more than a “mechanical effect,” Koster said. The law keeps unemployed people out, so logically, unemployment fell slightly in the affected neighborhoods.

An official label as a vulnerable neighborhood also created a stigma. The professors collected data on over 230,000 home sales between 2000 and 2019. Home prices in neighborhoods covered by the Rotterdam Act clearly lagged behind those of homes just outside the designated district.

If the law had worked as intended, home prices would have risen, the professors said. The fact that the opposite happened shows that these neighborhoods are considered less attractive as a result of the law. “Not surprising because those neighborhoods often received extensive media attention when they were designated,” Koster said.