Landlords could repay €6.4 billion if higher courts scrap private sector rent increases

Landlords of private sector homes may have to repay tenants up to 6.4 billion euros if the higher courts confirm lower courts’ rulings to scrap rent increases. Several subdistrict courts ruled that private sector landlords have been charging too high rents for years and scrapped all rent increases - only the rent at the start of the contract remained, resulting in hundreds of euros lower rent in many cases, the Financieele Dagblad reports.

Real estate advisor CBRE calculated the potential payback for IVBN, the trade association of institutional investors. In addition, future rental income would fall by up to 34 percent, meaning that landlords will miss out on another 87.5 billion euros until 2040. The returns of real estate investors would also halve.

“With such a repayment obligation, there may be parties that experience liquidity problems,” IVBN chairman Wim Wensing told FD. “It will have consequences for home values, and debt levels may come under pressure. And this has consequences for our investment capacity in new homes and the sustainability measures we need to take in the existing stock. It affects society broadly.”

Since 2021, the government has limited private sector rent increases to either inflation or wage increases plus 1 percent. Before that, private sector landlords typically increased rents annually with inflation plus a surcharge. The surcharge differs per landlord but is often a maximum of between 3 and 5 percent of the monthly rent. That surcharge is optional, and it is that freedom of choice that leads to “arbitrariness” for tenants, several subdistrict courts ruled in recent years. They called the rent increase policy unfair and contrary to European consumer protection rules.

Landlords are pinning their hopes on various appeals and the Supreme Court. A judge asked the highest civil court to clarify whether the subdistrict courts correctly interpreted the European rules in their rulings. It is unknown whether the Supreme Court will answer.

Aedes, the umbrella organization for housing corporations, which own around 100,000 of the over 700,000 private sector rental homes, called it “inevitable” that landlords could face “several billions” of euros in damages. That is “very undesirable” for housing construction, a spokesperson told FD.