ABN AMRO: 'Further reforms and measures needed in housing market’

Press release -

Home for sale sign

The new government will have to tighten existing measures and introduce new reforms if the housing market is to continue recovering. These are the conclusions of research by ABN AMRO's Group Economics department into the housing market.

Over the past few years, the housing market has gone through many reforms, yet Group Economics believes additional policy is required to solve certain persistent shortcomings. To encourage the construction of new homes, for example, the economists recommend tweaking the Dutch Decision Ladder for Sustainable Urbanisation to move the focus away from inner-city construction and towards the urban fringe areas. This is especially important for larger cities where demand is high and available space is limited.

More regional leeway

According to Group Economics, another promising measure would be giving regional authorities leeway to manage their own housing markets. ABN AMRO economist Philip Bokeloh explains. “In order to capitalise on regional differences, these local authorities need more freedom to act. Right now their hands are bound by other levels of government, who each work in their own frameworks. That national one-size-fits-all approach is hindering growth; we can see this occurring in certain depopulating areas, where the national rent ceiling for public sector housing is stifling investment in private sector rental homes for middle incomes. It would be a lot easier to meet local housing demand if this rent ceiling were to be established regionally instead of nationally. More local freedom also creates room for experimenting.”

Reallocation of existing rental housing supply

Group Economics also proposes a reallocation of the existing supply of rental property, resulting in more available homes for middle incomes. One way to accomplish this is to lower the public sector rent ceiling, but the drawback is that tenants with modest financial means will be exposed to the vagaries of the free market. Another measure the next government could take is to make housing corporations start grading homes based on their quality instead of on their rent levels, as they do now. Group Economics thinks this would significantly increase the number of available homes in the private sector.

Pension capital to repay mortgages

The astronomical aggregate mortgage debt of the Dutch has caused international concern, with calls for measures to bring the figure down . According to Group Economics, one way to do this would be by creating opportunities to repay mortgages with pension capital. Bokeloh: “As far as already accumulated pension money is concerned, pension funds will likely protest. That's why we believe using future pension contributions would be a decent option. The government could look into further lowering the pension accrual cap. Employees earning over 100,000 euros – the current cap - do not accrue pension over the excess amount. If higher income groups are given more financial flexibility, they could use those funds to pay off their mortgages.”

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