Utrecht buy-to-let housing ban led to a strong increase in first-time home buyers

A law implemented by Utrecht to cut down on the number of buy-to-rent real estate purchases has led to improvements in the housing situation in that city, according to a letter written by the mayor and aldermen and sent to the full City Council. The city said that the results of the first two years have been crystal clear: The proportion of homes which are owner-occupied has increased against a decrease in investor-owned property, the volume of housing units acquired by investors has fallen, and first-time buyers now account for more than half of all home purchases in the city.

When the law was introduced at the start of 2022, it effectively banned people or organizations from buying homes with an official valuation of 440,000 euros or less unless either they would occupy the home, or allow an immediate family member to live there. The city granted 85 exemptions in total, and handed out two fines for violating the ban. The value limit was initially set with a goal of making 60 percent of the homes in Utrecht owner-occupied. That threshold has increased since then, and has stood at 587,000 euros since July 1 of this year.

“From the first results, the introduction of purchase protection appears to be extremely effective and first-time buyers are reaping the benefits. In addition, the increases in transfer tax from 2021 may also play a role in the improved position of first-time buyers in Utrecht,” the letter sent on Friday stated.

Utrecht residential real estate sold over the last two years was purchased by an intended resident 78 percent of times, while investors only managed to snap up 11 percent of homes put on the market. Those living at their property accounted for 67 percent of homes put on the market, while investors represented 19 percent of properties sold, according to the city’s analysis, which used data from the Dutch Land Registry.

This represented a significant improvement compared to the three-year period before the introduction of the law. “In the period from the first half of 2018 to the first half of 2021, the share of homes purchased by investors was approximately the same as the share sold by investors. In the first half of 2018, 13% of all residential transactions sold by owner-occupiers were buy-to-let transactions, while this share has decreased to 2% in the first half of 2023,” the city wrote. Investor purchases even fell by half in the last six months of 2022, from 6 percent to 3 percent, and then down to 2 percent during the first two quarters of 2023.

Investors were especially squeezed out of the market regarding homes in the lower price ranges, to the benefit of newcomers to the real estate market. First-time buyers bought 46 percent of homes sold in the last six months of 2021, which rose to 53 percent during the last six months of 2023. “The share of first-time buyers is largest in the relatively less expensive price ranges. This is in line with expectations, since first-time buyers often have more limited income and assets, on average, which means they will also purchase relatively cheaper homes than those moving on.”

The city said homes valued at under 366,250 were sold to investors just 5 percent of the time in the first half of this year. During the same period, first-time buyers bought 62 percent of properties valued below 550,000 euros. That was up from 41 percent in 2020.

Utrecht has been considering an expansion of their buy-to-let ban, so that it covers 80 percent of homes instead of 60 percent of homes, based on valuation. That would protect housing valued up to 716,000 euros, the city leadership said. Thus far, there has not been a legal justification that could demonstrate such a move would improve the housing situation in that city, but the mayor and aldermen proposed further analysis in the coming three years.