‘Without the market, you cannot move forward with housing deals’

Publication, Area and Property Development

Provinces need to involve developers, investors and housing associations more in their housing construction plans if they want to move forward with the housing deals. ‘You cannot conclude a housing deal without involving the market and then wait and see what will come of it,’ says Peter Boelhouwer, professor of Housing Systems at TU Delft.

The idea of Hugo de Jonge, Minister of Housing and Spatial Planning (Ministry of the Interior and Kingdom Relations), to get the ball rolling and then see what happens, sounds plausible. On the principle that this will get parties moving. But the fact that he subsequently concludes housing development deals with provinces without inviting market parties makes no sense, according to Boelhouwer. ‘The goal is 900,000 homes by 2030. The housing deals specify for each province what the goals are. To give an example: by 2030, at least 42,300 homes will have to be built in Overijssel, and at least 13,864 in Drenthe.

But whether those numbers and the chosen locations are realistic, no one knows. After all, market parties are not, or only to a minimum, involved in the assessment process. Only in West Friesland, in the north of North Holland, government and market parties have gone through lists of locations and set priorities. They have put the easy locations at the front of the list. Other provinces should follow that example.’

A government’s affair
Alfred Bolks, chief executive officer of property developer VanWonen, agrees with Boelhouwer. ‘So far it seems to be predominantly an affair of governments among themselves. Of the state, province and municipalities. Up to now there has not been enough of a reality check in it. Which locations can realistically be used for the necessary acceleration and which cannot?’

Boelhouwer: ‘Because market parties are not involved or only minimally, the plans are weak and vague.’ While the average duration of housing projects has increased from seven to ten years, Bolks notes. ‘If you want to achieve the goals by 2030, that has already become a challenge.’

“Haven-Stad in Amsterdam is one such example of a non-realistic development site.”

Boelhouwer says that a perfect storm is currently brewing in the area of housing construction. “The increased interest rates, nitrogen emissions, rising construction costs, the government regulation of rental prices in the mid-market segment that is driving investors out of the market, and the fact that the supply does not match the demand. What people want is a ground-oriented house under five tons, suburban. What we are building are residential towers with apartments in inner cities.’

He points out the decline in building permits over the past six quarters. ‘Because of the perfect storm, the housing production is dropping further.’

In 2022, over 74,000 homes were built, according to Statistics Netherlands (CBS). It is expected that in 2023 we will end up with somewhere between 60,000 and 63,000 new homes, according to the housing market professor. He doesn’t think that downward trend will reverse anytime soon. Even though the ambition of adding 900,000 homes by 2030 is still there. ‘To achieve that, a miracle will have to happen.’

Regional and acceleration round tables
According to Boelhouwer, De Jonge sets goals without carefully considering whether they are realistic. ‘There are also no plans with intermediate goals that would allow you to work step by step toward the ultimate goal in 2030. Market parties are hardly involved, if at all.’

Nevertheless, things are still happening. Since January, the Ministry of the Interior and Kingdom Relations has been organizing so-called ‘acceleration round tables’ to bring market parties to the table. In response to the acceleration round tables organized by the ministry, NEPROM (association of Dutch property developers), has called on its members to delegate representatives per region on behalf of the sector. Boelhouwer: ‘I’m sure those tables will dovetail with each other. In any case, the most important thing is that in each region the locations are discussed. Which ones are easy to realize? Where do we have to remove obstacles? In West Friesland they have a wonderful traffic light system for the projects.’

Avoid introducing locations that are not realistic. The rapid construction in Haven-Stad in Amsterdam is one such example, says Boelhouwer. ‘That is supposed to be a housing location, but thousands of people work there and there has been a fair amount of investments by companies recently. Relocating all those companies some ten kilometres down the road in new business parks makes no sense. Hence, a location like that qualifies as not realistic or extremely costly.’

Boelhouwer calls it a wake-up call that housing associations in Amsterdam have not signed the housing deal there. Ultimately the government will have to increase its funding for the housing task, he believes. ‘A number of research agencies commissioned by the Ministry of the Interior and Kingdom Relations have calculated that you need an additional 30 to 35 billion euros, broken down by inner-city and suburban, to get to that 900,000 homes.’

“Municipalities should be more lenient with their land positions”

The National Housing Agenda arrives at similar amounts. “Municipalities should be more lenient with their land positions” Boelhouwer: ‘Development companies are still a cash machine for municipalities, to fill holes in the budget by selling expensive land positions.  Most municipalities are increasing their land prices again this year. That, too, does not help to get the housing construction moving again, nor to realize housing deals. While the goal of these very same municipalities is to provide public housing for their residents.’

The government bodies are to be blamed for the failure to invite to the table the parties that are expected to make all those beautiful housing plans happen. To then hound them with new laws and regulations that are unattractive to them is another incomprehensible action in the eyes of investors and developers.

The plan faces considerable headwind, caused by Minister Hugo de Jonge himself through his regulation of rental prices in the mid-market segment, says Edward Touw, head of communications at real estate investor Heimstaden, which has its roots in Scandinavia. ‘Interest rates and inflation are hurdles that can be overcome. The regulation of mid-market rents means that in many cases, building new homes that we want to rent out has become not, or barely, financially feasible. The costs are rising, while revenues are falling. As a result, projects in the Netherlands become less feasible, while we can still realize them abroad.’

As long as the mid-market rent plans do not change, Touw is pessimistic about meeting the housing goal of 900,000 new homes by 2030. ‘Had market parties been at the table, for example in the form of NEPROM or IVBN (the association of institutional property investors in the Netherlands), that plan would probably never have seen the light of day.’

‘There needs to be a connection between the NEPROM regional tables and the housing deals,’ VanWonen director Bolks adds. ‘One way or another. This allows us as developers to propose locations that we think offer the most opportunities for rapid housing development. While taking into account nitrogen emissions, land ownership, nuisance zones and so on.’

He too recognizes that ‘not everyone’ wants a ten-storey apartment complex in the city centre. ‘Our shortage is largely a quality shortage. A very large proportion of customers want an affordable single-family house with a garden, along the outskirts of the city. But that is not what the government is currently pushing for.’

Removing obstacles
Bolks points out that in Overijssel, there is a permanent consultative body, a platform of real estate professionals from the region, called Woonkeuken (the Dutch word for ‘kitchen-diner’). ‘That is mainly for general consultations. We have not (yet) discussed locations. In Gelderland, where we are also active, we were invited at the table in the run-up to the housing deal, but nothing was done with our input in the Gelderland housing deal.’

“Let's bring together the acceleration tables, the region tables and the housing deals. Involve us in the execution process”

Municipalities are waiting for the provinces because of the housing deals. Aldermen do not want to speak out of turn, Bolks notes. ‘On top of that, municipalities themselves are also increasingly imposing their own requirements for the granting of permits. For instance, on sustainability, nitrogen emissions, visual quality, noise, health and architectural design. Each department of a municipality has its own favourite topic. Also, municipal project leaders are less inclined to take decisions because they are afraid of being reined in. There is no longer any power of perseverance.’

All in all, projects take much longer as a result, if you get them done at all, says Bolks. Yet, he is not sour about it. On the contrary. He wants to contribute to the solution, he says. ‘Let’s bring together the acceleration tables, the region tables and the housing deals. Involve us in the execution process. Let’s truly work on it together, starting with the low-hanging fruit, the locations where it is easiest to get started.’

The most important thing is that the government removes obstacles and involves market players such as investors and project developers. Together, they need to get to work on screening locations. Bolks: ‘De Jonge’s task is not to remodel the market. We will leverage our creativity to invest, develop and build. His task is to help housing consumers. For example through SVn loans for first-time home buyers, or subsidies for zero-energy homes.’

Professor Boelhouwer agrees. ‘By involving market parties in the housing deals, it brings reality to the plans. Together with Jos Feijtel, a member of the housing construction expert team of the Ministry of the Interior and Kingdom Relations, I have made a 36-point plan on what can be done to accelerate housing construction. Prominently at number one is making regional plans concrete, together with all stakeholders. Look at what is possible in the short and long term and act accordingly. The government could also provide guarantees for the somewhat harder-to-finance projects, and we can build temporary housing. That too leads to acceleration.’ 

Photo: Provincie Gelderland
Article originally published in ROmagazine.nl




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