New housing slows, construction growth stalls amid emissions crisis

Construction production in the Netherlands increased last year, but that growth will stall in 2020 and 2021 as a result of the nitrogen emission problem. The construction of new houses and infrastructure projects will be particularly affected, according to projections published by the economic institute for construction EIB on Wednesday, NU.nl and RTL Nieuws report.

According to the institute, the total production in the non-residential building sector increased by more than 7 percent last year, driven by the construction of new homes. In 2019 a total of 63 thousand new homes were completed and ready for living in. Work capacity in the sector was also expanded for the third consecutive year.

But the coming two years will be less rosy for the construction sector. Growth will come to a complete halt. In the first months of 2019, fewer permits were issued for the construction of new homes, and this was reinforced in the second half of the year due to the nitrogen crisis.

The abolition of the Nitrogen Approach Program by the Supreme Court last year means that the government can no longer compensate for nitrogen emissions caused by new projects at a later date, but first has to reduce nitrogen emissions before the new project can start. This ruling brought many construction projects to a halt as the government scrambled for measures to reduce emissions.

The EIB therefore expects that the construction of new homes will decrease by around 5 percent in both 2020 and 2021. That is 60 thousand new homes finished in 2020, and around 55 thousand in 2021, according to RTL Nieuws. Well below the government's target of 75 thousand new homes a year. Which means that the shortages on the housing market will likely only increase.

In the period 2022-2024, the EIB expects that construction production will start to increase again. New homes production is expected to grow by an average of 7 percent in these years, to 70 thousand new homes in 2024. That is still below the target of 75 thousand new homes a year. Statistics Netherlands also expects that the number of households looking for a home will be well above the number of available homes every year.

The stalling of growth will also affect employment opportunities in the sector. After three consecutive years of employment growth, employment is expected to fall gradually over the course of 2020 and will on average end up just above the level of 2019, the EIB expects. In 2021, employment will fall by 1.5 percent. According to the institute, the inflow from the training programs is sufficient in the coming two years to meet the demand, and there will be no sudden large unemployment.