Cabinet plans to limit price increase in private housing sector due to high inflation

The Cabinet is working on a new housing proposal that would prevent tenants in the private sector from paying significantly higher rent due to rising inflation.

An initiative first proposed by the Labour Party (PvdA), called for a maximum rent increase for three years - until mid-2024 - that is limited to the official inflation rate plus one percent. This was meant to counteract large rent increases. The issue has since developed further because of the soaring inflation rate in the Netherlands. In the past, the rental price increase in the free sector was uncapped, but the impact of this decision is now being felt with the effects of high inflation.

Housing Minister Hugo de Jonge now wants to regulate the rent increase for this sector, where rent is above 750 euros per month. He wants to tackle the issue with a ministerial regulation in 2023 where he would be able to set a lower ceiling on the maximum rental increase. A proposal to this effect was offered for consultation on Monday so that stakeholders could have the opportunity to react to it. It would bring a cap on free market rent increases that is more in line with that of the social housing sector.

Inflation started to rise sharply after November 2021, reaching 5.4 percent after adjustment, according to De Jonge. That is already an increase of three percentage points in four months and it will increase further if inflation remains high this year, he warned. The minister also pointed to the sharp rise in energy prices this year, which further reduces purchasing power.

De Jonge is considering, "possibly equating the permitted rent increase with inflation or, if necessary, even using a measure other than the inflation percentage as the basis for the permitted rent increase percentage.”

The housing association, De Woonbond, is also in favor of decoupling inflation from rent increases. While this link was once intended to protect tenants, the interest group thinks the Cabinet’s plans do not go far enough. They warn that a rental price explosion could be imminent. This is particularly likely as inflation already amounted to 11.9 percent in March and is at the highest it has been in decades.

The result could be home rental prices that rise by 7 or even 8 percent, according to the union, equating to dozens of euros in rent increases per month in the social sector, but up to 100 euros more in the free sector.

The union already argued for freezing rental prices in 2022, but now also wants that to stay in place in 2023 and 2024. Social housing rental price increases were disallowed from mid-2021 through the end of the second quarter this year. The financial measure was meant to help mitigate the impact of the coronavirus pandemic. In addition, people in poorly insulated homes should receive a rent reduction, according to De Woonbond.