The Netherlands has a glaring shortage of rental housing between €700 and €1000. But when it comes to who will build these homes, governments, housing corporations and investors point to each other.

Two and a half years ago, Stijn Jansen (28) moved from Cuijk near Nijmegen to a temporary house in Utrecht. With a rent of over €1000 per month, the house was way above his budget, but because of his new job at the trade union FNV at Schiphol Airport, he needed something fast. Once in Utrecht, he would continue his search.

But so far, an affordable rental or purchase home is not in sight. Judging by the income requirements of landlords, Jansen can pay a maximum of €760 per month. Rental housing at that price is impossible to find, and he can't borrow enough for owner-occupied housing in the city. "I keep looking, but it makes you despondent," he says.

Jansen is not the only one struggling to find a house. There is a huge shortage of rental housing in the Netherlands for people who earn just too much for social housing (income threshold €38,035), but too little to buy a house. These are starters and families with incomes up to about €50,000, in large cities even €60,000.

Especially in cities such as Amsterdam and Utrecht, there is high demand for this type of rental housing, as owner-occupied houses are relatively expensive there. Estimates of the shortage of middle rental housing in the Netherlands vary between 60,000 and 200,000.

Interior Minister Kajsa Ollongren will soon come up with a number of measures to promote the construction of medium-rent housing and the affordability of existing housing. In the big cities, rents are rising rapidly due to the tight supply. The minister is therefore considering the introduction of an "emergency button middle rent" to combat excessive rents. It is still unclear exactly how such an emergency button should work, but the idea is to cap the rent at the beginning of the contract.

Corporations

When it comes to building medium-term rental housing, Ollongren sees a role for housing corporations. Since the amendment of the Housing Act in 2015, they must focus on what then-Minister Stef Blok defined as their core task, making housing available to the most vulnerable groups.

Soon the Lower House will discuss a bill that should make it easier for corporations to build medium-rent housing. The so-called market test, by which corporations must demonstrate that there is no market party in a certain area that can build medium-rent housing, should become simpler.

But corporations themselves seem unenthusiastic about the new possibilities. 'If we invest in middle-income housing, it will be at the expense of our own target group,' says Hedy van den Berk, director of the Rotterdam housing corporation Havensteder. According to her, building middle-income rental housing does not generate money, but actually costs money. For housing in the middle segment, corporations cannot borrow at a low interest rate, as they can for social housing.

According to Van den Berk, it is therefore more interesting to build in the social sector, and possibly transfer larger homes to the medium-priced rental sector. "In social renting, there are more and more single-person households.

The reluctance of housing corporations to build medium-rent housing may also have to do with the burden increases they have faced in recent years. The landlord levy introduced in 2013 was supposed to force them into efficiency after scandals such as the Vestia fraud. Together with the rising corporate income tax and the limitation of interest deduction, they face an estimated €3 bln in additional burdens in 2022.

Trade association Aedes would like to see that the social rent limit (€720.42 in 2019) can be raised locally. Then corporations can also borrow money for those homes at a low interest rate. Chairman Marnix Norder admits that there are already long waiting lists in the social sector as well, and many corporations do not have enough money. 'But then people do have a perspective. Now there is a group that we leave to their own devices'.

Free sector

In addition to housing associations, politicians have pinned their hopes on institutional investors. These have been watching the Dutch rental market with increasing interest in recent years. By now, institutional investors account for some 10% of new construction. Investors would like to invest even more, especially now that interest rates are low and residential real estate is an attractive alternative to government bonds. But in practice, this is proving difficult.

There is a lack of building sites and municipalities do not yet know how to deal with these market parties. One of the problems for investors is that municipalities do not allocate land for middle rental. The rental homes then lose out to owner-occupied homes, for which municipalities receive a higher price. 'In those kinds of tenders, we often don't even tender,' says Wim Wensing, director of investments at Amvest, which develops and invests with institutional money in mid-rent in particular.

According to Wensing, the rub here is that the free rental sector is in fact the only unsubsidized part of the housing market. After all, owner-occupied homes have the mortgage interest deduction. As a result, owner-occupied homes are worth more than free-sector rental homes. And for social rental housing, there are the secured loans.

According to market parties, the municipalities that do pursue a specific policy on middle rental (and sometimes settle for lower land revenues) sometimes go overboard with the conditions. For example, investors feel that Amsterdam is currently imposing too many requirements on the rental sector. For example, the capital prescribes that 40% of new construction must be social rental, 40% medium rental and 20% free sector rental. Medium-price rental housing must also remain in that segment for at least 25 years and rent increases are capped.

'Because of that accumulation of requirements, we can't really make it an attractive investment or a high-quality home anymore. You actually only risk losing money on it,' says Wensing. The pension funds and insurers for whom Amvest invests must still be able to make a return.

Municipalities

Responsible Amsterdam alderman Laurens Ivens previously told the FD that he thinks the measures are necessary because new construction is the only part of the housing market in which the municipality can influence the harsh rise in rents. According to him, the municipality still gets enough high-quality responses to public tenders. Amsterdam has enough building sites, Ivens stated.

Nor do investors like Minister Ollongren's plan for an emergency button. After all, such an emergency button means political interference, a button that the next cabinet can also turn. 'We are resolutely opposed to this. That sends the wrong signal to long-term investors,' says Frank van Blokland, director of the Interest Association of Institutional Investors (IVBN).

But what should be done? According to Bart Dopper of consultancy firm Stec Groep, free sector rental is now stalled mainly because of the lack of trust between municipalities and investors. 'Municipalities are not used to sitting around the table with investors. Many municipalities are afraid that investors mainly want to make money quickly,' says Dopper.

To break this stalemate, a number of institutional investors therefore recently put forward a proposal in the so-called Biedboek Middenhuur for middle rental housing in the province of Utrecht. An initial group of municipalities responded positively. So for house seekers like Jansen, there is hope.

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