The papers are full of news about house price movements, new political drives and house building plans. Senay Boztas finds out what it all means for young people searching for a home in the Netherlands.
Djuri van Leeuwen has just moved out of his parents’ house for a second time.
The 31-year-old council financial adviser from Utrecht had to move back in with his family for three years after his studies because he couldn’t find a place he could afford.
‘I found my first job at an accountancy in 2019, had to leave student lodgings and started to look for a home with my average salary,’ he says. ‘I quickly discovered that I couldn’t borrow enough to buy a house, I didn’t qualify for social housing and in the rental free market I was one of 50 who responded to a housing advert. I didn’t have a chance.’
He believes he is fairly typical of the younger people in the Netherlands, facing a serious social problem. Among first-time buyers, only 3.4% can afford a mortgage at the current house prices. From 2015 to 2021, average household disposable income increased by 25% but house prices rocketed by 63%. By the peak of the market last July, the average property cost was 89% more than it did in 2015.
Thanks to a tax perk allowing parents to give children around €105,000 tax free until last year (instead of paying 10% tax), those with moneyed parents rushed to buy. First-time buyers made up 40% of autumn sales, according to the land registry. For those still renting, in the biggest cities, free market rents have increased (while the average waiting list for social homes in most municipalities is at least 10 years).
‘We are brushing aside a whole generation,’ says Van Leeuwen. ‘Moving back to my parents, I became dependent, your privacy disappears, and if I look at people of my age, they are putting off children because they can’t find a suitable home. People with rich parents see their lives flourish compared to people who are still looking – on all levels, their relationships, children, their careers. We can’t carry on like this.’
The Economist recently identified The Netherlands as one of the world’s most vulnerable developed countries in terms of a housing crash because of the gap between incomes and house prices, ‘hysterical’ recent rises, and relatively high mortgage borrowing.
Delft university housing systems professor Peter Boelhouwer calls it a ‘wicked’ market, where first time buyers and those on mid-level incomes get stuck in ‘a big poverty gap/trap.’ By 2022, he says, a two-income couple on an average income needed savings of €280,000 to buy a house: in 2013, it was €50,000. A quarter of tenants can’t even pay their bills.
‘People who don’t yet have a foot in the housing market are the ones who fall out of the boat,’ says Lennart Rhee, house market expert at property valuation company Calcasa, who was shocked to quantify how few starters can afford to buy .
‘It’s very difficult to get in if you don’t have a house already. House prices have doubled on average since 2013 – which is not a very healthy development and historically has never happened before. There was no better job than just having a house in the last 10 years!’
The primary cause is a shortage of housing, and of suitable housing. The Netherlands has more people, more people live in smaller households and the country is an estimated 390,000 homes short. At the same time, over the past decade, the country has simply not built enough. In a new national housing drive to build 100,000 homes a year, high building and material costs plus hefty regulations are already causing delays.
Meanwhile, a younger generation is stuck. Homeowners association Eigen Huis is calling for 10,000 starter homes to be built a year, and organizing a demonstration of young people and tents in The Hague on March 10.
‘The right to live in suitable housing, to rent or to buy somewhere to call home is a human right, something that is enshrined in our constitution,’ said a spokeswoman. ‘A whole generation of young people has no chance of buying a home…and we find that unacceptable. The government thinks homes at €355,000 are affordable but this is really out of reach for these young people.’
The problems are most acute in Amsterdam, where half of all house seekers say they want to live. ‘In recent years we have seen certain groups leaving the city more often, especially young families,’ says local VVD councilor Myron von Gerhardt. ‘This exodus has to stop. In addition, young people and students have huge problems finding housing in the city, which is not only unjust but also bad for Amsterdam’s development as a center of knowledge.’
The situation has multiple causes: too little house building so supply no longer meets demand is number one. Buyers could borrow more thanks to extremely low mortgage rates in recent years, as banks worldwide reduced the cost of lending to stimulate the Covid economy. This pumped what buyers could afford to bid, in a competitive market. The Dutch government has also stimulated investment in property to live in or let out, with Europe’s most generous mortgage interest relief tax break and a beneficial tax regime for investors.
‘The primary function of a house should be for living in, but you see it has become far more an investment object,’ says Rhee. ‘We had ministers who went on foreign television shows asking people to please invest in Dutch property: we consciously attracted foreign investors. Now you can ask yourself whether that was a good development.’
There has also been a common assumption that house prices rise are good for everyone, since economic consumption apparently rises when homeowners feel richer (even if their housing taxes rise too). ‘The central bank calculated that in the past a substantial rise in house prices could lead to economic growth of 0.75 to 1%,’ says Boulhouwer. He and other experts believe we should consider the perception that price rises are always good, and falls are always bad.
For years, the European Commission has asked the Dutch to scrap a tax break for homeowners, the hypotheekrenteaftrek. This is a mortgage interest rate softener that most EU countries have reformed, but in the Netherlands is a vote-winner that has cost the state €117 billion in a decade.
It is being steadily reduced because if it was scrapped straight away, some people could not afford their mortgage repayments. “People who buy think the tax deduction is a good thing to make things affordable,” points out Van Leeuwen. ‘But I’m renting and I wonder why they are getting a discount on their own home, when each month they are effectively saving [by repaying some of the mortgage]. Why don’t we get a discount on our rent?’
Mortgage rates have trebled since last year and house prices began to tumble in the past five months. But the unprecedented rise of the Covid period has not been corrected.
The free-market tone in government is also changing, to the anger of estate agents and the concerns of large and small investors. Provinces have signed up to a push for 900,000 new homes by 2030, and there are plans to speed up planning processes, make at least 30% of housing stock affordable and regulate rents for more houses in the ‘middle’ segment.
Rotterdam is creating more student housing, while Amsterdam last week announced plans to increase the number of mid-level homes for rent, make it easier to house share, and ‘stimulate’ older people to free up family houses by moving to granny flats.
‘Individual investors who rented out a house for €1,800 and will have to rent it for €1,000 are not the group that we need to stand up for,’ says Amsterdam head of house building Reinier van Dantzig. ‘If they sell to someone who is looking for a home, that sounds like very good news to me. A house is really for living in, not an investment object. It’s a bit tricky if working hard your whole life earns you less than renting out five buildings for an exorbitant price.’
Instead, house building is top of the municipality’s priority list, he says: ‘Ten thousand new residents move to Amsterdam each year so the only thing we can do is ensure enough homes are built.’
Zita Pels, Amsterdam public housing chief stressed that housing the population is a political priority nowadays, not facilitating a free market. ‘The housing crisis isn’t a natural phenomenon but the effect of national government policy is centered on the housing market rather than on public housing,’ she says. ‘In our approach, we are returning to the idea of public housing so that we can help as many people as possible in vulnerable positions.’
The emphasis is on encouraging people to move to suitable housing, options for mid-level incomes and more protected rental prices ‘for everyone, including expats’ in policy plans that are currently open for public response. She adds: ‘Our approach is focused on people moving through the system, ensuring that older people can get a suitable home and can move from the family homes where they are, so families can move there from the starter homes which are too small for them , and the starter homes are freed up so young people can go there.’
There’s some debate about whether all these political measures could have an unwanted effect, driving small buy-to-let landlords to sell, leaving less rental stock and even higher prices in the unregulated ‘free market’. They could mean landlords doing all they can to get more ‘points’ on their stock to keep their investments viable and unregulated. Older people might not want to move, and if they did, an exodus would change communities.
The new approach also comes too late for young people who have just managed to get a house at a top price – and should try to avoid moving in the next few years if they don’t want a loss. The Eigen Huis spokeswoman points out that as prices fall, there is a risk for recent buyers and the young most of all. ‘We are also concerned about the financially vulnerable position of recent first time buyers: if for unexpected reasons they have to sell up in a hurry, there’s a high chance that they will get a lower price than they paid,’ she says.
But Dutch News reader Yash Shah, 30, and from India, is still very happy to have secured a 75 m2 new build in Amsterdam Osdorp that he and his wife Elena will move into later this year.
‘We felt the rent was just exorbitant for the space we had and the location, and thought this couldn’t continue,’ he says. ‘We got a real estate agent, bid on 10 properties but could not win a single bid. We don’t have too much in savings so we couldn’t afford to overbid.
‘We sort of lucked out: for a newly constructed building one person couldn’t sort out a mortgage, we were on the waiting list, they called us and we secured the apartment. The mortgage we will be paying is exactly the same as for our rental property right now.’
Boelhouwer points out that the possibility for a 100% loan in the Netherlands – something that not every country allows – is in the interests of first time buyers. Eigen Huis hopes that a series of housing panels and its protest next month will raise awareness of the deep issues that can’t be fixed with a starters’ fund.
But the fact of the matter is that young people like Van Leeuwen see that their parents, with a normal salary, could buy an affordable house at some 100,000 guilders…and they just can’t.
‘Housing is a fundamental right,’ says Van Dantzig. ‘It’s not just an economic good – it’s the center of your life, it’s your home, and homes need to be affordable. People with the fattest wallet always have the most choice but, regardless of your income, you need to have a chance.’