Letter from Minister Ollongren to the House of Representatives with measures to improve the affordability of housing

26-5-2020 — 

On May 15 last Minister Ollongren has sent a letter to the House of Representatives with four measures she is taking to improve the affordability of housing for people with a middle income and starters and to tackle excesses in the housing market. It seems that the dreaded ‘temporary emergency button’ is off the table with this! It is now just a letter, which its civil servants will have to develop into a bill. These are her proposals:

A maximization of the annual rent increase in the free sector of inflation + 2.5%;
Ollongren: ‘I will therefore maximize the annual rent increase in the free sector at inflation + 2.5%, in line with the maximum in the social sector. This applies to all rental contracts in the private sector for a period of three years. I realize that this is a major measure. However, the current historical shortage on the housing market in combination with an expected economic crisis also calls for exceptional measures. ‘Based on the rent increases in the private sector in recent years, I expect landlords to take account of this maximization with the upcoming rent increase as well.  I also encourage landlords - especially during this exceptional period - to look closely at the rent increase that is really needed.’

Bring more transparency about the initial rents together with the sector;
Ollongren: ‘At the same time, I am also in consultation with the sector to create more transparency for tenants on how the initial rental price is determined. This allows landlords to better account for the amount of the rent. This will lead to an agreement with the sector. I expect to be able to share the covenant with the House of Representatives this autumn. The agreements of the covenant can then be anchored in legislation, so that they become binding for the entire sector.’

Comment: The minister announces that an agreement will be reached with landlord organizations, in which landlords ‘will be more accountable for the amount of the rent’. It does not exclude that this covenant will be laid down in legislation. In another way than the maligned temporary emergency button (=tijdelijke noodknop), this still resembles a form of further rental price regulation in the free sector. Unfortunately, the minister's letter is far too vague to say more about it at the moment.

Temporary rental agreements (model B) are made possible for three instead of two years;
Ollongren: ‘In addition to the emergency law that I have already presented to your House of Representatives, I want to improve the possibilities that temporary rental agreements offer in the longer term. In any case, I look at the possibilities for landlords and tenants to extend a temporary lease with a period. A regular temporary contract can now be concluded once for a maximum period of two years. This could include an extension by one year or two years to a maximum period of three years in total. This offers advantages for both the landlord and the tenant. This gives landlords more opportunities to offer customization and tenants may be able to stay in the home longer, for example if their new home becomes available later than expected. I will also consider whether it is possible to agree on a minimum period in which the tenant cannot terminate the contract in order to provide the landlord with certainty. I will prepare a bill for this. "

Comment: This seems to us to be a good proposal, because a tenant can now cancel from day 1 in the temporary contract for maximum 2 years (model B). A reason for us to avoid that contract as much as possible. Unfortunately, we have all too often seen that a tenant cancels well within the first year.

Municipalities will be given the option of introducing "buy-back protection" for affordable owner-occupied homes that would otherwise be rented out for too high rents through buy-to-let investors.
Ollongren: ‘In recent years, more and more owner-occupied homes have been bought by investors in desirable locations. Affordable owner-occupied homes that are suitable for starters and people with a middle income in the housing market are becoming increasingly scarce. In addition, the purchase of homes for rental in some neighbourhoods puts additional pressure on the quality of life. I want to give municipalities the opportunity to introduce buy-up protection for the neighbourhoods where this is really necessary. This prevents unwanted buying up of scarce cheap and medium expensive owner-occupied homes and subsequently renting them out expensive. When the buy-back protection is introduced, purchased owner-occupied homes can no longer simply be let. With this I implement the motion of Dik-Faber2 that asks how the legal obstacles for municipalities to protect these owner-occupied homes can be removed.

However, desirable forms of purchase for rental must remain possible. In the neighbourhoods where the purchase protection applies, a municipality will therefore continue to issue permits to bona fide landlords for desired forms of rental. This could include homes that are rented to family members, homes that are part of a retail, office or commercial property or incumbent buyers who move to another home and want to rent out their first home. I think it is important that these homes should then be rented in a neat manner. That is why requirements can be set for this permit with regard to good landlordship via the purchase protection.’

Comment: The buy-back protection is an extremely far reaching measure, which drastically limits the property right. It has never happened before that legislation in our country limits home owners to whom they can sell their home. It can have unpleasant consequences for those owners, such as a decrease in the value of their home. After all, this will reduce the group of prospective buyers. We therefore wonder whether this is justified.

You can download the whole letter from minister Ollongren in Dutch here.