Risk of increase in property market regulation in Amsterdam and Utrecht

The housing problem has never been as acute as it is today and this year’s municipal elections focused on one issue above all others: the housing crisis. In the run-up to the elections in March, much of the debate had been focusing on new regulations, enabling people to relocate more easily and other local solutions to ease pressures in the housing market. Now the campaign is over, we can start to look ahead. What do the election results mean for local policy on the housing market?

In the smaller and medium-sized municipalities, it was the local parties that came out on top with over 36% of the votes. Over the next four years, it will be largely up to them to tackle the smaller-scale problems on the housing market that those places are facing. But the housing crisis is concentrated mainly in the larger cities – that is where housing shortages are the most severe. These problems also often radiate out from the cities to affect the surrounding municipalities too. Cities will have to tackle the root causes of the problem in order to resolve the crisis at the national level.

In this paper, we look ahead to what the next four years could have in store for housing market policy in the five largest cities in the Netherlands: Amsterdam, Rotterdam, The Hague, Utrecht and Eindhoven. We look at the main ways in which existing policy could change, based on the election manifestos of the most influential parties. That will enable us to outline the likely consequences of the election results: what effects will they have on the housing market, and what will they mean for investors and developers in these municipalities?

Amsterdam: tighter regulation very likely
In the Dutch capital city, PvdA was the main winner, following a poor showing over the previous decade. The party is predicted to have won nine seats, making it the largest party in Amsterdam for the first time since 2010. A coalition with GroenLinks, who won eight seats, seems the most obvious way forward. The other partner in the existing coalition – D66, with seven seats – could complete the new coalition too.

This scenario seems the most probable, and would mean tighter regulation for the housing market, a more active land use policy and new allocation criteria. The aim of this would be to increase the amount of new housing being built, increase the amount of affordable housing available and help preserve inclusivity in the city. PvdA and GroenLinks want to regulate the mid-level rental segment (rents between €752 and €1,050) over the long-term – preferably at the national level, but otherwise through the introduction of a licence for landlords. Housing associations would play a bigger role. They would be required to build additional social housing, mid-level rental homes and affordable owner-occupied homes. More restrictions will be imposed on the allocation of rental housing, such as mandatory percentages of younger people, existing residents in the area and people working in key professions. The likely future coalition partners will also need to reach an agreement on the city’s construction programme: GroenLinks supports a fixed ratio of 45-45-10, while D66 favours a looser 30-40-30 ratio.

This scenario would make Amsterdam significantly less attractive for investors. Increased regulation would limit the options and make investing less attractive – although some institutional investors will continue to invest in the city regardless, due to their ESG policy. The expected increase in regulation will also slow down progress on the production of new housing, and undermine the business case for project developers, who are already facing rising construction costs, energy prices, labour costs, high land costs and increasing sustainability requirements. All this is rekindling the debate around land prices and the delays around home building, as we saw with the introduction of the 40-40-20 policy. Reduced interest among investors and project developers means that the housing associations will have to take up the slack. The extent to which this reassessment of housing market policy in Amsterdam will really come about will depend on the formation of the coalition: which compromises will D66 – or some other third party – be prepared to accept?

Rotterdam: opportunities for diversifying investments, but tighter regulation also likely
Rotterdam is a divided city, and the election results reflect that. As in 2018, the local Leefbaar Rotterdam party is by far the largest party with 11 council seats. The rest of the results are fragmented. VVD and GroenLinks are the next largest parties with five seats each, while D66, PvdA and Denk all hold three seats. It remains to be seen whether any of the other parties will want to enter into a coalition with the city’s largest party Leefbaar Rotterdam. In 2018, the party was side-lined because of its unconventional policy stances. It is clear that something will have to change, however, because the outgoing rainbow coalition (VVD, GroenLinks, D66, PvdA, CDA and CU-SGP) no longer has a majority.

All the parties agree that more homes need to be built in Rotterdam – especially affordable homes. Not all parties have put a number on this, but the aim is for around 25,000 homes over the next four years. However, positions differ on how to achieve this. VVD believes that there is too much social housing in the city, while other large parties would like to preserve (D66) or expand (PvdA, GroenLinks, Leefbaar Rotterdam) social housing. All parties recognise that the mid-level rental segment needs to be expanded – with or without a points system. There is thus a good chance that new-build projects will be required to include a significant proportion of social and mid-level rental housing. Interestingly enough, all the parties agree that the target group should be as wide as possible, from students to the elderly, to ensure that all Rotterdammer residents can continue to live in the city.

It is clear that additional housing is required in the city. But there remains significant debate about where. Locations such as Brainpark are favoured by many parties, but the future of Rotterdam The Hague Airport is a real bone of contention. An initiative proposed by GroenLinks, PvdA, SP, Party for the Animals and CU-SGP would transform the airport into an area for 10,000 homes, but there is currently no majority for this. D66 does not support the airport in its current form and would prefer to turn it into a business airport, while DENK and VVD would like to keep or expand the airport. Leefbaar Rotterdam did not take a stance on the airport in its election manifesto. It is thus difficult to make any predictions about the political complexion of the future coalition in Rotterdam – just as it was four years ago.

Because several parties have committed to keeping all Rotterdam residents in the city, regardless of what stage of life they are in, there are opportunities for more diverse investments in the city. This could include student accommodation, but also concepts like collective living for first-time buyers, future-proof homes and residential care complexes for senior citizens. This will make Rotterdam attractive to a wider group of investors. New-build projects will still need to be financially viable. This may become more difficult because stricter regulation is likely, especially when it comes to the ratio between social rental homes, mid-level rental homes and expensive rental homes. Location will play a vital role, even though this appears to be a stumbling block in forming a coalition, as central locations can provide higher yields, increasing the options for different types of housing.

The Hague: opportunities for investors, but with tighter requirements
The results of the local elections in The Hague were broadly similar to the results of four years ago. The local party Groep de Mos/Hart voor Den Haag (HvDH) is once again the largest party, with nine seats. D66 (eight seats) has overtaken VVD (seven seats) and is now the second party. They are followed by GroenLinks (five seats). These four parties made up the coalition from 2018, until HvDH was expelled due to suspicions of corruption. The current coalition of D66, VVD, GroenLinks, CDA and PvdA is also expected to retain its majority.

The manifestoes of all the main parties in The Hague mentioned affordable housing, but each party has a different perspective. VVD wants to abolish the requirement for 30% social rental homes and supports making agreements with individual investors. D66 and HvDH prefer to stick to the 30% requirement, and GroenLinks favours a rise to 40%. Social housing therefore remains an important factor in new-build projects. GroenLinks and HvDH want to agree 40% medium-priced homes with developers, and D66 wants to leave maximum scope for the high-end segment in new-build projects. All the parties broadly agree on where the new homes should be built. Most of the land available within the city limits has been built on, so growth will have to occur by making the city more dense. High-rise buildings will remain concentrated around the major railway stations of Binckhorst and Den Haag Zuidwest. The parties also want to tackle the small number of unoccupied buildings in the city – for example, by converting buildings into student accommodation, which is in short supply in The Hague.

There is significant demand for tailored accommodation in the city, with shortages of affordable housing, student housing and housing for senior citizens. Investors could be part of the solution here, despite opposition to this from some parties. D66 wants to restrict private investors in particular, but also argues for temporary rent limits in areas where there have been excessive rent rises. GroenLinks also focuses mainly on the negative side of investor involvement, and would like to see general measures against buy-to-let purchasers. VVD and HvDH take a more sympathetic stance to investors and developers. They want them to build in the best locations (VVD) or introduce leasehold indexing to make projects more attractive (HvDH). Nevertheless, the emphasis in new-build projects should be on affordability. A smaller proportion of high-end housing could radically affect the feasibility of projects.

Utrecht: Rijnenburg issue and building regulations could make it hard to form a coalition
GroenLinks (nine seats) and D66 (eight seats) remain the largest parties in Utrecht, even though both have lost a few seats this year. That means they will need to form a new coalition. Still, both parties look very likely to be a central part of any new coalition, because the remaining seats are split between many other parties.

A coalition that includes GroenLinks, D66, VVD and PvdA seems the most obvious option, but there would be many differences to resolve first. Above all, the parties will need to reach an agreement on the new-build development in Rijnenburg. GroenLinks is strongly opposed to the development, and would prefer to focus on other options in the city centre. The other parties are reviewing both options. In addition, there will be a debate about how flexible the construction programme should be (introduction of 40-40-20 ratio) and to what extent additional operating requirements should be included in the zoning plan. As a result, the situation in Utrecht remains difficult to predict. It seems certain that the municipality will want to tackle the current shortage of housing by using more temporary homes and building additional homes at the office locations in Papendorp, Rijnsweerd, the A12 area and Overvecht. In addition, most of the parties have high ambitions for making both the new and existing housing stock more sustainable.

It seems likely that Utrecht may try to introduce more regulation around the construction of new housing and the way it is managed. All the parties are in favour of some kind of agreement with project developers regarding what type of housing is built, pricing and allocation. However, the level of regulation will not reach the levels seen in Amsterdam. The business case for new developments may be challenged by the possible introduction of a stricter 40-40-20 policy, such as the policy in Amsterdam. That will certainly be the case if the zoning plan is expanded to include a cap on rents, maximum rent increases and requirements regarding dwelling size. If investors and developers have to contend with such additional requirements, business cases will depend on land prices becoming much lower and more realistic.

Eindhoven: cooperation on housing based on success formula from the tech sector
GroenLinks is the big winner of the municipal elections in Eindhoven, and the party will probably get nine seats. Of the coalition parties, VVD (six seats) and PvdA (five seats) received fewer votes than four years ago, while CDA’s position (six seats) remained unchanged. But it seems that the people of Eindhoven continue to have confidence in the current coalition. It seems very likely that the same parties will form another coalition.

What is striking about the party programmes is how much unanimity there is compared to the parties in the other four major cities. The main differences of opinion concern the construction programme – in particular the proportion of social housing. All the parties want to work with housing associations, developers and investors in order to tackle the housing problem. This is Eindhoven’s ‘triple helix’ model, which has already been implemented successfully in the field of tech. CDA, in particular, sees this kind of close cooperation as an important example for how to tackle the problems of the housing market. This is why Eindhoven is not considering more regulation. They city wants to boost the production of new housing by working together, and to ensure that the right target groups – students, the elderly and people on low or middle incomes – benefit from this too. There is also agreement among the parties on where the new homes should be built. The Woensel and Kastelenplein shopping centres are about to be redeveloped and rejuvenated, with the addition of more homes.

The municipality’s novel approach will lead to many opportunities for collaboration for investors and developers in Eindhoven over the years to come. The aim is to increase the volume of new homes being built, make the region more successful and make Eindhoven greener – and all the while ensure that the various target groups in the city are catered to. Local regeneration programmes in particular will create many opportunities. The limited number of new regulations proposed do not seem to be impeding the triple helix collaboration between the municipality, developers and investors, and housing associations.

Election results may also affect investment allocation
Amsterdam and Utrecht are likely to aim for more regulation in the housing market, to a greater or lesser extent. This is less the case in Rotterdam and The Hague, and certainly much less in Eindhoven. The resulting differences could affect investors’ capital allocation. In the short term, uncertainty around municipal policies will lead to some reticence. In the medium term, this could lead to investors looking elsewhere, whether inside or outside the Netherlands.

All in all, greater regulation seems to go against what municipalities, investors, housing associations and project developers want to achieve: an inclusive, sustainable and affordable city. Whether that is in Amsterdam, Rotterdam, The Hague, Utrecht, Eindhoven or beyond. Creating more homes requires cooperation and mutual trust, all while keeping shared goals in mind. In that respect, Eindhoven is perhaps providing the best role model for the larger cities in the west of the country.