Build mid-range rental sector: future-proof but less feasible
To improve the affordability of homes in general, increasing the new-builds to 100,000 instead of 75,000 homes per year until 2030 is a necessity, not a luxury, which will require a great effort from housing corporations, market parties, and the government.
Large-scale additions in the €750 to €1200 price category are especially necessary, to improve affordability of private sector rental homes in the Netherlands in particular but also to help relieve pressure on the owner-occupied housing sector as affordable alternatives will then be available. Although housing corporations strive to add more in this segment, new-builds for this segment are almost exclusively provided by market parties. The main reason for this is that housing corporations have a limited budget available for new-builds due to the landlord levy.
Unsurprisingly, in many major cities, market parties focusing on the production of new-build rental homes are very active. The figure below shows the share of building permits for rental homes built by market parties in the last 5 years. The number of building permits is an important indicator of the number of homes scheduled to be built. Due to the fact that market parties are mainly adding rental homes in the private sector, this number indicates the extent to which private sector homes are being added to the housing market in a specific municipality. It is also an indicator of the extent to which the available capital of market parties is fully used. After all, market parties have a lot of available capital to invest.
Major cities in particular show that the greatest number of rental homes are being added by market parties. In Utrecht and The Hague for example, the majority of all building permits issued in the last five years were for market parties building rental homes. In total, market parties in these two cities received 9,390 and 5,742 building permits respectively.
It is interesting to note that these numbers are higher than in the City of Amsterdam, where a total of 5,212 permits were issued. In Amsterdam, 31% of all building permits were issued to market parties with a focus on rental homes. In view of the large shortage of private sector rental homes, particularly in the mid-range sector, it is very concerning for the City of Amsterdam that the available capital of market parties is not fully utilised. After all the City of Amsterdam aims to build approximately 1,670 new rental homes in the mid-priced sector annually until 2025, but in 2020 not enough building permits were issued to market parties for this purpose (only 1,236). As a result, the shortage may increase further and affordability may decline.
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