Why is there a housing shortage in the Netherlands?

November 4, 2021

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There is a dire housing crisis in the Netherlands, and in the major cities, such as Amsterdam and Utrecht, finding a place to live is expensive and difficult. Especially for people who want to buy their first homes, the housing market has become a nightmare over the last ten years. A combination of regulation, the economy and population growth have left the Netherlands with fewer properties than it needs.

The impact of the housing crisis is also serious. With rising prices, it is becoming impossible for first-time buyers to enter the housing market. While the housing problem is nationwide, the major Randstad cities are mainly under pressure, with of course Amsterdam leading the way.

The nitrogen crisis

Hm… what does the nitrogen crisis have to do with the Dutch housing market? Well, the Netherlands has been struggling with too many nitrates. In 2019 farmers and of course their tractors were out on the Dutch streets, but so were construction workers a few times. But why the construction workers? The reason behind the construction workers’ protest were the new nitrogen regulations imposed by the Dutch government. The problem with these nitrogen regulations was that they slowed construction to a standstill. This is not a propitious development when the country needs more and more houses.

Airbnbs and tourism

In many cities across the world, the increasing popularity of Airbnb has caused housing shortages where there were none before the rise of the sharing economy. Naturally, in Amsterdam, Airbnbs created a particularly serious obstacle for local people finding a place to live. Thankfully, three months ago, the Dutch government implemented a ban on Airbnb rentals in three districts of Amsterdam. Moreover, renting out a property as a holiday rental in the rest of the city is only possible with municipal permission, and is not permitted more than 30 days per year.

Increasing population

It makes sense, with growing populations, there is growing demand for housing. There are two main reasons why the populations are increasing in the Netherlands: natural population growth and immigration. Although immigration may have dropped during the COVID-19-crisis, it is steadily increasing again. Furthermore, the Netherlands has become very popular for international students and expats over the past decade. For instance, 6,000 international freshmen students will visit the Netherlands for their degrees per year. Expats congregate around the Randstad because most international companies are settled there.

Tighter lending regulations

Besides the above problems, there are also some tighter lending regulations at play. For example, Dutch banks are only allowed to lend buyers in mortgages the housing value they buy, which is a sensible if depressing policy for buyers. Why is it sensible? Well, buyers incur extra costs in housing transactions, andl need a certain amount of equity to afford a house. Some few years ago, Dutch banks also included the extra costs in mortgages, so buyers needed little equity to afford their properties. Nowadays, people need to save money for a long time before they have the ability to buy a house. This results in people renting for longer than they would like, creating a stressed and unwilling class of renters.

Solutions to the Dutch housing problem

Of course, the main solution is to build more houses. However, such a building process is very complex. The Dutch government does not build houses itself. Municipalities give out construction permits to developers. Given the amount of control municipalities currently have, transferring some to the central government has the potential to alleviate the housing crisis. The reason for this is that the central government will have more control over it.

Another solution could be to build more family homes and smaller apartments. These days, people want to buy single family homes, rather than apartments, and also want a place with a small garden. However, that is not what is often being built; apartments are more often built cost less in land and construction than a house with a garden. Another solution to the Netherlands’ housing crisis might be to build tiny houses. This is a concept that began to catch on in the United States of America a few years ago.

Moreover, real estate investors can also help to solve the housing crisis in the Netherlands. Many people will directly think that the housing problem is directly tied to real estate investors. Well, a great percentage of the housing stock indeed belongs to real estate investors. But without investors and their capital there would be fewer houses in the Netherlands. For instance, real estate investors have transformed vacant office buildings into apartments, increasing the Dutch housing stock. However, the municipalities have been strict about lending licences to real estate investors to implement such plans. If the municipalities loosen the reins, more vacant buildings can be transformed into houses. This is also more sustainable, since such a vacant building is more quickly transformed into a house than a tear-down or empty parcel.

Hopefully, in time, capital and creative regulation together will bridge the supply-demand gap that exists in the Dutch housing sector!

This article is written by Moesen Tajik

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