IMF urges Netherlands to overhaul rent rules to ease housing crisis

The International Monetary Fund said the Netherlands needs tougher housing reforms, including changes to rental market regulation, warning that supply constraints and high home prices are worsening the country’s housing shortage.

In its annual assessment of the Dutch economy published Wednesday, the IMF said housing remains one of several “binding capacity constraints” weighing on growth, alongside problems in energy, labor and nitrogen policy. The organization said existing coalition plans contain “useful supply-side measures,” but argued broader reforms are still needed to address the housing crisis.

The IMF specifically called for “an overhaul of rental market regulation and stronger financial incentives (and higher profitability) for mid-segment private developers and investors” to “effectively and durably tackle the housing crunch.” It also said simplifying land-use rules, reducing fragmentation in local building regulations and limiting construction objections could materially increase housing supply.

The organization warned that unresolved nitrogen restrictions are continuing to delay investment and create uncertainty for housing projects. “Unresolved nitrogen-related constraints remain a key impediment to investment by sustaining permitting uncertainty across industry, infrastructure, and housing,” the IMF said.

The IMF also criticized Dutch housing finance policies, saying current borrowing rules are putting “undue upward pressure on house prices” and hurting affordability. It recommended lowering maximum loan-to-value limits to 90 percent and gradually phasing out mortgage-interest deductibility.

Fabian Bornhorst, the IMF mission chief for the Netherlands, separately criticized the Dutch mortgage-interest deduction in comments reported by NU.nl.

“That is an expensive measure,” Bornhorst said. “Gradually phasing out mortgage-interest deductibility would increase revenues and resolve bottlenecks in the housing market.”

Bornhorst also said the Dutch government should focus first on structural bottlenecks “when it comes to the housing market or energy.”