Housing shortage: Dutch Cabinet needs to spend billions more per year to meet goals

A great deal more is required from the Cabinet to substantially reduce the housing shortage in the Netherlands, said ING Bank in an analysis published on Thursday about housing policy. One area mentioned is about allocating more money for housing construction, specifically around 3 to 5 billion euros per year instead of the the 1.5 billion euros that the Cabinet now wants to make available annually.

The analysts at ING Research arrived at that range based on the projections from construction companies, housing corporations and municipalities. The budget amount proposed by the government to realize 100,000 new homes annually does not take sufficient account of obstacles in new housing construction, such as staff shortages at the municipalities and the lack of available access to the electricity grid.

ING even expects the housing shortage to increase further in the short term, although the Cabinet cannot be entirely blamed for this. The bank considers the short term to be a period of two years, which is not enough time to stimulate new construction with new measures.

Most government plans will only have an effect in the medium term, between two and five years. But ING researchers consider the chance of achieving the goals to be small; more realistically, a longer term outlook of over five years is needed.

The Cabinet should look at how it can implement short term measures to make better use of the existing housing supply as one way to reduce the housing shortage. This can involve introducing a temporary rental contract for residents who who want to rent out a portion of their own home to a boarder. ING expects that these types of contracts will lower the regulatory burden for renting out a room.

But more structural reforms are needed, the bank argued, such as further limiting the mortgage interest deduction. This has the effect of making housing prices more erratic, which could delay new construction.

In order to also slow down rising house prices, the government could also consider a tax on the realized excess equity value once a home is sold. This would make it less attractive for people to continue making moves in the housing market.