Luxembourg is not alone: after years of market liberalisation, faced with a housing shortage that is forcing a review of strategy--or the lack of it--the Netherlands has taken the residential rental market back into its own hands. This summer, the government even tightened the screws on rent controls, a system that is slightly different from the one used in Luxembourg.

How can you find out? Luxembourg offers an online tool for calculating the maximum rent a tenant should pay [], but the Netherlands couldn’t do the same, even though their legislation initially seems more advanced than ours. It incorporates, for example, heating or energy considerations or reductions for adaptations to enable disabled people to rent.

Luxembourg calculates the capital invested and then sets the maximum rent at 5% of the capital invested; the Netherlands calculates the value of the property by a certain number of points and has set two threshold limits, €879.67 per month up to 143 points, between €879.67 and €1,157.95 from 144 to 186 points, while properties above 186 points remain in the free market.

Four points for a shower, seven for a large kitchen

There are nine criteria in the Netherlands, ranging from surface area (1 point per m2 of living space) to the presence of a toilet (3 points) or shower (4 points), the year of construction (from 0 points before 1976 to 36 points since 2022), the energy rating (from 0 for class G to 52 for class A++) or the presence of a work surface (the best sign of the existence of a kitchen, which is worth 4 points up to two metres and 7 above that). The final criterion, the Woz, relates the property to its value in the town and district where it is located, based on the Dutch land register, and scores between 40 and 46 points, with two exceptions that are not worth detailing here.

The ‘trap’--for investors--closes at the next stage. Of the eight million dwellings in the Netherlands, three million are on the rental market and three-quarters belong to cooperatives that provide social housing. They are obliged to let 92.5% of their vacant social housing to people on incomes of up to €47,699 (single person) or €52,671 (multi-person household) and no more than 7.5% to people on incomes of more than €47,699 and €52,671. The shortage is such that an initial cut has been made to the contract, allowing up to 15% of the stock to be sold in certain cases.

Raising the number of points increases the number of homes whose price is controlled by the state to 96% of the three million, making competition even fiercer for those who can afford a higher price, often better paid because they have the talent the country needs, and discouraging some landlords who, from 1 January 2025, will no longer be able to rent at the price they have been paying until now, despite a permitted rent increase of 5.9%, and who are starting to get rid of their property.

Average housing difficult to finance

With 53% of rented housing having an energy label of C or higher, even though this represents 69% of the total supply of housing--housing owned by investors with fewer than 500 units--according to ABN Amro, there is only one solution for the others: to carry out renovation work, hoping that the state will not move the other sliders so that their profitability does not fall after investment. The professional association of institutional and professional property investors had called for four other changes, including more points for category C and D homes. A little research, purely for informational purposes, seems to show that more than 16,000 of the 66,669 advertisements on Funda, one of the trendiest property rental companies in the Netherlands, have been placed online since the legislative change, 44% of which have a ‘bad’ energy score, compared with only 33% of the total sample.

“Between 2018 and 2022, 75,000 (cheaper) properties were bought by investors to let. People on average incomes didn’t stand a chance,” said Martin Van Rijn, president of the Dutch association of housing corporations (Aedes), in an interview with HousingEurope before the law was finalised. “We expect some of these 75,000 properties to be sold again as a result of the new measures in the law. This will benefit new entrants, such as middle-income earners, to the housing market.” In his view, the new law gives greater scope for building homes in the intermediate sector, rather than just the social sector. “Social housing associations are also prepared to build them, but are finding it difficult to finance them. This is why we believe that the European rules on state aid should be amended so that housing associations can build housing in the intermediate segment as an SGEI. We also want the tax burden on investors and associations to be reduced so that construction can be accelerated, to increase the availability of affordable housing for middle-income earners.”

In his view, while these “cooperatives” only charge 70% of the maximum rent in the social housing sector, the percentage rises to 100% in the intermediate segment. “So there is room for a decent return on investment,” he said.

It’s not so clear, according to ING, at a time when the Netherlands needs to build a million homes over the next ten years to bring the housing shortage down to 2%. These “average” homes that no longer bring in as much for investors and developers are less likely to be built, which could worsen the situation beyond the fact that more people benefit from social rents for a time. This analysis was shared by the Dutch Central Bank as early as 2022, except that it anticipated far greater effects in Amsterdam than in the country’s other cities.

For Stefan Groot, Rabobank’s senior housing economist, this policy encourages the construction of ‘low-end’ housing, which locks in those who would like to move to a more spacious, better-located or better-equipped home every time, and does not necessarily encourage young working people still living with their parents to become independent.

This article was originally published in .