The housing market for non-liberalised rental in the Netherlands (also known as “social rental housing”) has been regulated by the government for many years. Consider, for example, the liberalisation limit, maximum rent indexation and the powers of the Rental Committee. The free sector has been left untouched for a long time. Due to the tightness of the housing market, which meant that middle incomes in particular fell between the sectors, the call for regulation of the free sector has grown in recent years.
A first step was the amendment of the Housing Act 2014, which now allows municipalities to impose additional rental conditions for all housing, instead of only for social rental housing.
On 15 May 2020, Minister of the Interior Ollongren informed the House of Representatives about new (far-reaching) measures that will further regulate the free sector. The dreaded “emergency button” has not arrived, however the announced measures also severely limit the freedoms of landlords. In this blog, I will briefly discuss the announced measures.
1) Maximising the annual rent increase
In the private sector, the landlord and tenant were until now free to make agreements about the annual rent increase. It is often agreed to increase rent annually based on the Consumer Price Index (CPI). However, many landlords also opt for a fixed increase rate that is above the CPI, which is obviously more lucrative from an investor’s perspective. Members of Parliament from D66 and CDA filed a motion in 2018 asking the government to investigate the possibilities of a temporary “emergency button”. With such an emergency button, municipalities could freeze the annual indexation of rents or even set a maximum rent. A similar measure was introduced in Berlin in 2019, with rents frozen for five years. The Dutch government does not want to go that far (yet).
However, Ollongren has announced that rents in the free sector should only be increased over the next three years based on inflation + 2.5%, in line with the maximum for social housing. After this period, it will be reassessed whether a maximum limit is necessary for longer.
2) Longer term temporary leases
Since the introduction of the Property Rental Market (Measures to Facilitate Movement) Act 2015 (Dutch: Wet doorstroming huurmarkt) on July 1, 2016, a new type of lease for housing can be concluded. This is a lease that is entered into for a fixed period of less than two years. In the case of room rental, this concerns a maximum period of five years.
The landlord can terminate such a lease by informing the tenant in writing of the impending termination one to three months before the end date. There is therefore no cancellation or recourse to the statutory grounds for cancellation. As a result of this, the tenant enjoys minimal rental protection. On the other hand, the tenant has the right to terminate the lease prematurely. If the landlord informs the tenant incorrectly, too late or too early, or if a new lease is subsequently entered into with the same tenant, this lease will automatically be considered an indefinite lease. In that case, the tenant has extensive rental protection and other rules regarding termination apply. The landlord cannot prematurely terminate a fixed-term lease of less than two years. A tenant can do that. The tenant has a notice period equal to the payment term.
Although there are criticisms from politicians of these leases for their limited rental protection, in practice they are often used as a “probation period” or as a temporary solution during vacancy. Ollongren wants to expand the existing possibilities, including an extension of one or two years to a maximum period of three years in total. The minister also wants to investigate whether landlords can be offered more security, for example by setting a minimum period within which the tenant cannot terminate the lease.
3) Transparency of the rental price
The minister also wants to give tenants more clarity about how the rental price was determined. Consultations are currently being held with the real estate sector with the aim of drawing up a covenant for this purpose. It is obvious that a connection will be sought with the scoring as currently applied by the Rental Committee for social rental housing.
4) Purchase protection
Finally, the minister wants to put an end to real estate investors buying up affordable homes. As a result, starters with a middle income should have a considerably greater chance of obtaining a property to live in. Municipalities will be able to introduce buying-up protection in certain districts, which means that newly purchased homes cannot be immediately rented out. Under certain conditions, “desirable” forms of rental, such as rental to family members or houses that are part of a retail property, will still be permitted.
With the new measures, the free sector will become a lot less free. The future will show whether the goal (more opportunities for starters) justifies the means (further limitation of market forces and freedom of contract).
If you want to know what the new legislation means for your business or your company, I would be happy to advise you. Please do not hesitate to contact me.