The Netherlands grapples with the social consequences of soaring house prices

House prices are rising in many large economies. This FT series examines whether these increases are sustainable.

Dutch call center worker Joan Kelderman knows from personal experience the downside to soaring house prices in Europe: her landlord is trying to demolish her cheap rented house in order to build a new housing complex. housing and shops.

The local authority in Zaandam, a town a few kilometers north of Amsterdam, said the project would create more than 530 new homes, of which 30 percent would be social housing; about half would be for sale or rent at market prices.

But the 57-year-old former nurse called it “gentrification” after she and other residents were offered a moving allowance of € 6,500 and were told to leave. “They say we have to find another place to live, but nothing is available,” she said. “Even if we find something, it will be smaller, more expensive, and further afield.”

The Dutch real estate market has become a hot political issue. Prices for existing homes in the Netherlands rose 14.6% in June, the highest rate in two decades – and one of the highest in the EU.

ABN Amro economists estimate the Netherlands has 330,000 fewer houses than it needs and is expected to build 1m more over the next decade to close the gap. People with low wages often have to wait more than 15 years to obtain social housing, while the number of homeless has doubled in the last decade.

Kelderman and dozens of his roommates recently protested against the local mayor’s office to fight back against plans to demolish 122 social housing units for low-income and disabled people. She said they will go to court to challenge the proposals.

[Housing] is a political issue and has been for some time

They are not alone ; social concern about housing costs is increasing across Europe. Spanish protesters took to the streets in March to demand fairer housing costs. The Swedish government was overthrown last month over its proposal to lift rent ceilings. And in September, the people of Berlin will vote on whether to expropriate 240,000 properties from large commercial owners.

House prices in the EU rose 6.1% year-on-year in the three months to March, the fastest growing in 13 years, leaving them 30% higher since 2010, according to Eurostat. Rental costs have increased by more than 15 percent over the same period.

Like the rest of Europe, the Dutch real estate market fell sharply after the 2008 global banking crisis and the euro area debt crisis in 2012. But residential real estate prices have rebounded sharply since the Bank Central European Union cut interest rates into negative territory seven years ago, lowering mortgage costs. New stimulus measures since the start of the coronavirus pandemic have fueled the boom.

FT Series: Global Real Estate Prices – Raising the Roof

House prices are rising in many large economies, but is it sustainable?

Part 1: How the pandemic sparked the world’s biggest house price boom in more than two decades.

Part 2: Buyers are flocking to smaller US towns, renewing policy makers’ concerns about affordability and risk.

Part 3: The Netherlands is grappling with the social consequences of rapidly rising house prices.

COMING SOON:

Part 4: Why Berlin tenants want to expropriate their homes from listed German landlords.

Part 5: Should house prices be factored into inflation data and what can central banks do about the economic effects?

Although housing costs were one of the main concerns expressed by the public during the recent review of the ECB’s strategy, its president Christine Lagarde told the Financial Times last month that she did not think it there was a risk of a bubble “on average in the euro zone”. . The ECB has ruled, however, that the cost of owner-occupied housing should be included in the primary measure of inflation it uses to calibrate interest rates, although it should be years before this takes effect. .

The Dutch central bank said high levels of household debt were “one of the main systemic risks for the Netherlands”; it aims to “ensure that the financial sector is robust enough to absorb the consequences of a collapse in the real estate market”. It introduces a rule requiring banks to have 5 billion euros in additional capital compared to their mortgage exposures from January.

Last month, Oxford Economics ranked the Netherlands as the riskiest real estate market of all developed economies, as house prices were 14.3% above their long-term trend, while the price / ratio rent was 15.3% higher than its long-term trend.

“The biggest problem is with young people, but young people now mean the 30-year-old, who still cannot rent or buy something,” said Gert Jan Bakker, consultant at the tenants’ agency WOON in Amsterdam. “Families are leaving the city. People who teach our children, policemen and streetcar drivers, they just can’t afford to live here.

He blames government policy for many of the problems. The Dutch rent protection system had been considerably weakened, Bakker said. It had become easier for landlords not to renew a tenant’s contract, creating “a lot of new urban nomads” who have to move out every two years.

The tax changes have also hit social housing associations particularly hard, causing them to sell many houses to commercial developers.

Bakker said the government should stop allowing homeowners to deduct the cost of mortgage interest payments from their tax obligations – even though it itself benefits from the policy and he acknowledged it was “politically difficult” .

The abolition of the tax break is one of the conditions that Brussels demanded of the Netherlands in return for its share of the € 800 billion EU stimulus fund.

The cost of housing “is a political issue and has been for some time,” said Lex Hoogduin, professor at the University of Groningen and former member of the board of the Dutch central bank. “The problem is exacerbated by the inelastic supply of housing due to all the permits needed to build new homes in a highly regulated market.

Amsterdam has taken some steps to tackle the problem, including rules to prevent people from buying second homes for rent on Airbnb and other short-term rental platforms.

But Marjon, a 44-year-old historian, said the high cost of housing in Amsterdam had forced her to sell her apartment and move further north to afford more space after having children five years ago. years.

Now she takes the ferry to work downtown from the old shipyard known as NDSM, which is booming with a scattering of cranes converting industrial warehouses into friendly apartments, cafes, galleries and offices.

Soaring house prices are “not good for social cohesion,” Marjon said. “The teachers at our children’s school cannot afford housing. . . It is not good for the ambience of the city. Soon no one will be living in the city except very rich people and foreigners.