The Affordable Housing Programme, announced in May 2022 by the Minister of Housing and Spatial Planning, focuses on the need for the housing market to become as affordable and sustainable as possible for Dutch households - as quickly as possible. Most measures within the programme are specifically aimed at the Dutch rental sector. For example, the expansion of the regulated rental market by setting the medium-price rent limit based on the home evaluation (WWS) points system aims to increase the number of homes rented out in the regulated segment.

The attached map shows where the impact of the expansion of the WWS system is expected to have the greatest effect, namely the most urban areas of the Netherlands. This is because above-average Valuation of Immovable Property Act (Wet Waardering Onroerende Zaken, or WOZ) values, an above-average proportion of rental homes and a below-average floor area of ​​homes, lead to a major negative correction of the WWS points and thus of the rent.

In particular, the effect of the WOZ cap of 33% is that rents fall sharply on re-letting. As a result, homes within the new regulated segment are closer together nationally for comparable homes. This could also lead to more people moving back to urban areas, resulting in increasing demand.

Bas Wilberts, Head of Residential Investment at Savills in the Netherlands, says: “In practice, we expect that further regulation of rents will not improve the search for rental accommodation. Because the greatest effect in terms of a drop in rents will be particularly noticeable in the highly sought-after large cities, the demand from households for the cheaper homes will increase. After all, more households are eligible for these homes. The result: longer waiting times and less market activity; once you're in an affordable home, you won't be leaving anytime soon. Further skewed growth is looming.”

At the same time, Savills believes that the sharp increase in construction costs and high land prices mean that new construction has become less attractive for developers and investors. As a result, construction projects are more likely to come to a standstill, which is reflected in the number of building permits issued in the first half of 2022. The result of the expansion of rent regulation is that certain projects no longer meet investor return requirements. The expected increase in demand and the stagnating supply easing will most likely ensure that instead of having the problem of a lower quality home for a higher price, the problem will arise of a significant waiting period, or perhaps even no home at all.

Ronald Koemans, Director Residential Investment at Savills in the Netherlands, adds: “Our research shows that, the model could theoretically lead to lower rents, but the Programme ignores the most important aspect of real estate practice; the historical location theories. Location, encrypted in the WOZ value, is now only a limited part of the points system.

“This ensures that the rent for a property in Amsterdam and rural Dronten may become similar, but also that the price difference between a house in central Amsterdam and Nieuw-West disappears. This creates over-demand for the already most sought-after homes which will therefore not become more accessible, especially because the landlord can still decide who to rent to.”

About the research

Savills has calculated a total score based on Z-scores per indicator based on three indicators, the WOZ value per m², the average floor area and the percentage of rental properties at district level. A Z-score indicates the extent to which a value deviates from the mean. The WOZ value per m² and the share of rental housing yield a higher score as soon as a neighbourhood scores above average, while a below average area at district level leads to a higher score.