Affordable housing high on the social and political agenda
Publication, Area and Property Development
Traditionally, the third Tuesday of September is Budget Day in the Netherlands (on this day, the Dutch Cabinet presents its budget plan to parliament). As the Budget Memorandum is ‘policy-deficient’ because of the current caretaker status of the government, Budget Day 2023 also revolved around the upcoming general elections in November. Affordable housing is a key theme in the elections. Our market and data experts share their first article in the series on affordability. Including an overview of the main political positions on affordable housing. 45% of voters believe that the upcoming elections should be primarily about the housing market, with much attention for affordable owner-occupied and rental housing. The topic of housing thus remains high on the social and political agenda
Cabinet target lags behind
Before zooming in on the political positions, it is good to briefly look back at how we got to where we are today. In 2022, the cabinet took a more directive role in the construction of housing, with the reintroduction of a Ministry of Housing and a construction ambition of at least 900,000 new homes until 2030. “There is real urgency, and thus the construction of new homes must be accelerated without delay”, King Willem-Alexander expressed the problems in the Dutch housing market in that year’s Speech from the Throne. But it’s doubtful whether those 900,000 new homes will be there in 2030, given the disappointing figures for both the number of sales and the number of approved new construction homes (see Figure 1).
Just over 140,000 new homes were added by July 2023. This is irrespective of whether 900,000 homes will be enough to keep up with the expected household growth until 2030. The number of permitted new construction homes in 2023 is expected to fall below 55,000, which is only 55% of the cabinet target. The future supply lags behind the future demand, thus the tightness in the housing market (and the affordability issue) persists.
What is an affordable home?
The caretaker government ‘Rutte-IV’ aims to classify two-thirds of the housing production - 600,000 out of 900,000 houses - as ‘affordable’. This begs the question: what is affordable? The national government specifies this as 350,000 rental and owner-occupied houses in the middle segment and 250,000 social homes (see Figure 2).
Although the definition of affordability may vary by region and housing type due to differences in transaction prices, household incomes and housing market tightness, affordable owner-occupied housing is generally assumed to fall under €355,000, in line with the national government’s affordability cap. The monthly rent of social housing cannot exceed the rent-control ceiling of €808. Mid-priced rental housing means homes with a monthly rent of minimum the rent-control ceiling up to €1,1762.
The housing market wants clarity and stability
The players in the housing market long for clarity and stability. The fall of the Rutte-IV government and the disappointing economic developments in the first half of the year, with a slight recession in the second quarter of 2023, have not made the housing construction task any easier. The new-build market is mired in political and economic instability. The caretaker status of the government and the upcoming election recess, starting 27 October, lead to delays in the decision-making process. And the often time-consuming formation process after the elections will not spur the production of new builds. Research by Vastgoedmarkt shows that since the announcement of the regulation of the mid-market rental segment, the housing investor market has been at a standstill and institutional investors are holding off.
The economic developments are causing uncertainty among buyers and renters. Consumer confidence in the housing market has been negative since the end of 2021. The unstable economic conditions, with cost increases and decreases in purchasing power due to the high inflation, have a major impact on buyers and renters and causes decreased affordability. In the second quarter of 2023, a Dutch household spent on average 24.0% of the net monthly income on net housing costs, which is a substantial increase compared to the same quarter last year (15.2%), as calculated by Calcasa. The topic of affordable housing is therefore very much on the minds of people. This follows from a survey by I&O Research among almost 2,400 voters. Many voters (45%) are of the opinion that the upcoming elections should be about the housing market, with a focus on affordable owner-occupied and rental housing (Figure 3).
What do the political parties say about affordable housing?
The positions of the political parties on affordable housing are diverse and encompass different aspects of the broader housing market issue. We have therefore summarised the main views in Table 1. All selected parties express concern about the housing shortage and strive for affordable housing. Notable is the common call for more government direction, often summed up under the heading of ‘public housing’. The theme of affordability varies depending on the spearheads and the rank and file of the political party. Whereas the VVD focuses mainly on the middle-income groups, the other parties focus on the more vulnerable groups. Each party emphasises different aspects, such as sustainability (GL-PVDA), migration (PVV), rural regions (BBB), and livelihood security (NSC).
Affordable housing as a subject of public debate
“In regard to public housing and spatial planning, the government is coordinating a joint effort, together with local authorities, construction firms and housing associations, to build more affordable housing. With this sentence from the Speech from the Throne 2023 fresh in our minds, we turn our attention to the upcoming elections. The regional housing construction tasks need to be grounded in a clear vision of the expected development of the regional population and households, with migration as a key pillar for the demographic growth in the Netherlands. Despite all the challenges, the development of affordable housing is still possible. A focus on building smaller, more standardised, phased and simpler will increase the feasibility and affordability of housing projects.
After the general elections, the ball is in the court of the newly formed parliament. In view of the polls, this may lead to different political relations and visions on affordable housing. However, no matter the political direction, affordable housing will remain a hot topic in the public debate. To be continued.