Dutch real estate investors have written to housing minister Hugo de Jonge warning that new home construction projects will slow drastically if he presses ahead with plans to regulate rents for up to 90% of the country’s residential property.

Without change, just 50,000 new homes will be built every year, rather than the 100,000 that the government is counting on, lobby group Neprom has told the minister in a briefing.

The plan to expand the regulated rental sector will mean the construction of rental homes will no longer pay off for investors, says Neprom chairwoman Desirée Uitzetter. ‘Legally allowed rents will soon be hundreds of euros per month lower than developers, investors and local authorities were counting on in their plans,’ she said.

‘At first glance, it sounds like good news for tenants, but those homes will ultimately not be built because they have become unfeasible for investors.’

The association warns that the fear of regulation alone has led to large-scale pension funds and insurers halting new construction projects that are still on the drawing board. And according to real estate research group Capital Value, some 25,000 homes which were at the planning stage will not now be built.

Mixed areas

‘The rental homes affected by the regulation are often part of a larger area development and bear a significant part of the costs of social housing and mid-range rental homes in that area,’ Uitzetter said. ‘This means the financial basis will therefore disappear from the project and the construction of the cheaper houses will also stop.’

Many Dutch local authorities have rules about the proportion of social housing in new developments. In Amsterdam, for example, 40% of housing in a new project must have a rent of less than €763 per month.

Investments

There are signs the slowdown is already happening. Investment in new housing projects in the Netherlands plunged to €282 million in the second quarter of 2022, according to new research from property consultancy CBRE.

In the first quarter, investments totaled €777 million and the long-term average is around €664 million, CBRE said

Housing minister Hugo de Jonge announced in May that he plans to expand the current rent control system, based on points for size, location and amenities, to more housing and set an upper limit of €1,000 to €1,250.