Housing Supply in the Netherlands: The Road to More Affordable Living

Abstract

With the supply of residential dwellings in the Netherlands having failed to live up to demand over the last decade, apprehension among the population about the availability of affordable housing has risen. Particularly spatial, regulatory, planning, environmental and supply chain constraints have kept a lid on construction. Recognizing the socioeconomic challenges posed by inadequate housing supply, the government has embarked on an ambitious agenda with promising steps to boost the availability of affordable properties. To strengthen the traction of housing policies to reach its intended goals, a larger role for economic incentives and private sector involvement should be evaluated. A. Introduction 1. Following an extended phase of contraction after the global financial crisis, the Dutch housing market has experienced a prolonged period of remarkable price increases. After reaching a trough in mid-2013, house prices have nearly doubled, thereby also surpassing their previous peak seen on the eve of the global financial crisis by more than half. Demand was supported by a decline of mortgage interest rates towards historic lows, advantageous borrowing conditions, e.g., in the form of rather generous loan-to-value limits or the existence of interest-only mortgages, and a tax system strongly favoring the ownership of homes. In addition, net migration as well as the formation of new-and smaller-households have grown at relatively robust rates over the past decade, further contributing to sustained demand for living space. As a result, housing valuations in the Netherlands are among the highest in the euro area with model-based estimates indicating an overvaluation of 14 percent in 2022:Q2. 2 At the same time, residential properties are the least affordable when measured on the basis of price-to-income ratios which have risen by more than 50 percent since 2015.