Dutch affordable rent law won’t necessarily help home seekers, says Council of State

It is unclear whether the government’s plan to regulate mid-market home rents will lead to more affordable rental housing, the Council of State said in its advice on the government’s Affordable Rent Act. According to the Council of State, there is a real risk that this law will result in landlords selling their properties and investors withdrawing from the rental market, increasing the shortage - a primary factor behind the high prices.

With the Affordable Rent Act, the government wants to regulate rental homes with monthly rents up to 1,123 euros. It also makes the housing valuation system - which determines the maximum rent based on what the home offers - mandatory for both the private sector and social housing sector. The goal is to lower the often sky-high rents in the free market and create more affordable rental housing for middle-income households.

The Council of State agrees that there are major problems in the rental market, and it understands the government’s desire to do something about this. However, it is uncertain whether the Affordable Rent Act will achieve the government’s goal of ensuring sufficient affordable rental housing.

“The current high rents are caused by a scarcity in the supply of rental properties, while the demand remains high,” the Council of State said. “A real risk is that the bill will lead to the sale of rental properties and fewer newly-built rental properties. In that case, the supply in the private rental sector will decrease rather than increase, which ultimately does not help people looking for rental housing.”

According to the Council of State, the government pays insufficient attention to the causes of scarcity and the interaction between the social sector, the purchasing market, and the private rental sector. “The Council recommends looking more deeply into these causes and the question of how this bill affects them.”

The Council of State also said that the government did not sufficiently justify how it would manage the risk of a shrinking rental housing supply. It also did not adequately show that the proposed regulation will effectively provide “not only affordable but also sufficient rental housing.”

The Ministry of Home Affairs, which covers Housing and Spatial Planning, acknowledged the Council of State’s advice and said it would incorporate it into its bill. The Ministry stressed the importance of fighting against too-high rents. “People with a middle income find it very difficult to find affordable rental housing in the current housing market.”

According to the Ministry, more than half of the private rental properties that the bill would cover are rented out too expensively. “And new residents regularly pay considerably more for the same rental property. In 2023, the new tenant for a private sector home pays, on average, 10.9 percent more than the previous resident,” the Ministry said. “The affordable rent bill puts an end to this. The proposed regulation of mid-price drents offers tenants better protection against excessively high rent.”