Over half of homeowners want to keep or increase mortgage interest tax deduction
Over half of homeowners surveyed said they want to continue to receive the income tax deduction they can access for interest paid to their mortgage lender. Some 55 percent said they are in favor of keeping the tax break or making it even more beneficial, while 38 percent want to either reduce it or get rid of it.
The deduction can be utilized for up to 30 years. The Dutch Central Bank wrote a statement in 2021 arguing the benefit is one which causes inequality in the Dutch housing market, also because homeowners do not pay a wealth tax on the value of the home. The issue has been controversial as it is sometimes seen as benefitting wealthier households who find a path to homeownership, as opposed to those who remain renters.
With a new Cabinet in office, Dutch homeowners association VEH surveyed homeowners on the matter. Around 41 percent of the people asked said they want the mortgage interest deduction to remain the same with no further limitations. Around 14 percent feel it is already too limited and want it increased further.
A small group of seven percent feel the mortgage interest deduction should be abolished as soon as possible, with 31 percent saying it should be limited further, step by step. Roughly eight percent were undecided on the matter.
The tax break may contribute to making the existing housing shortage in the Netherlands worse, because the increasing value of homes only lead to higher taxes when the asset is sold. Meanwhile, "the financing costs are deductible," argued economists Stefan Groot and Carola de Groot from Rabobank analysis arm RaboResearch.
One solution could be to keep the interest rate deduction, while taxing fictive gains on the home's value, they wrote in July. This has a dampening effect on interest rate fluctuations.
Last week, ING analysts also argued for limiting the mortgage interest deduction. They said it causes housing prices to be more erratic, and the uncertainty can delay new construction projects from getting off the ground.
The VEH survey also showed that there is strong resistance to the idea of more heavily taxing a home which transferred ownership due to an inheritance. This has been considered as an option to then reduce the property transfer tax elsewhere. Almost two-thirds were against this, with an overrepresentation of those aged 40 to 60 years old.
