Think tank: Cut tax breaks, raise rents for higher-income social homes to ease shortage

The Centraal Planbureau, a government-affiliated think tank, reported that the Netherlands should cut homeowner tax breaks and charge higher rents for higher-income social housing tenants to ease the housing shortage. The agency said these measures would be more effective than providing additional subsidies for people seeking to buy a home.

In a report, the CPB recommended reducing homeowner benefits by lowering mortgage interest tax relief and increasing the imputed rental value, the amount homeowners must add to their income for tax purposes based on their property’s WOZ valuation. The agency said this would improve mobility in a housing market it described as gridlocked.

The think tank also suggested that higher-income households in social housing pay more rent. “For households with a low income this is the purpose; for households with a higher income it is not,” the CPB said, noting that such households currently receive an implicit subsidy by paying below-market rents.

The CPB warned against introducing new subsidies for house hunters. “Additional support increases demand for scarce housing and raises pressure on the market,” it said. While first-time buyers could benefit from more generous borrowing standards, the agency cautioned this could push home prices higher. “To prevent a further increase in the housing shortage, flexibility in construction production is important,” the report said.

The agency also suggested that longer periods of shared housing in large cities could help reduce demand. “Then housing demand effectively decreases, so less new supply is needed,” it said, noting this is common practice in many major cities abroad.