BRIEFING: Dutch ease resi regulation, Germans tighten up

About half of the Dutch and German populations live in rented accommodation but the two countries differ sharply on whether more or less red tape is the way to tackle serious shortages of affordable housing.

Residential is probably the most 'politicised' real estate investment market, Marcus Cieleback, head of research at Patrizia Immobiliën, told PropertyEU's one-day Netherlands real estate investment briefing in London. ‘Housing is a basic need and therefore there is always an element of political risk when operating in the sector.’

Things can go badly wrong, according to Cieleback, when governments interfere in the housing market. This was the case in the UK several decades ago and only recently has a private rental market begun to re-emerge there.

Living with regulation
'Regulation isn’t necessarily a drawback for investors. But if reform isn’t stable things get tricky. If, on the other hand, you have a stable regulatory situation you can start to deal with it, accommodate it and understand it,’ Cieleback said.

He referred to a Patrizia study of regulation across Europe which indicates that regulation leads to low rent increases. At the same time regulation leads to higher volatility, something investors like.

‘The Netherlands, Sweden and Germany are among the most regulated residential markets in Europe, but funnily enough they are also the most institutional. Regulation can create stability, whereby you can be sure your rents will evolve over time. From that point of view regulation isn’t a bad thing,’ Cieleback said.

He noted there was currently a ‘real world experiment’ under way in Germany and the Netherlands.
Germany is moving towards tighter rent controls. In Belin, for instance, landlords are not allowed to charge more than 10% above the average rents for new-build apartments. ‘The Netherlands, in contrast, is removing some regulation out of the market to encourage more private involvement and get more much-needed homes built. It will be interesting to see how both residential markets develop,’ Cieleback said.

Ministerial matters
The briefing at CBRE’s London City office also heard how Dutch housing minister Stef Blok has liberalised rent controls to encourage more medium and higher-income tenants to buy homes.
Blok has also compelled the powerful state-guaranteed housing corporations to focus on their core task of providing rent cap homes in the Netherlands and forbidden them from competing with investors in the non-regulated sector by developing and owning more expensive free-market rental apartments.

The measures introduced over the last three years were necessary, the Liberal Party minister told the conference, as it was universally acknowledged that the Dutch housing market had been in bad shape. Minister Blok showed a selection of newspaper headlines dating from 2012 which variously referred to the housing market being in the doldrums, in despair and in a coma. Three years later newspaper headlines tell a different story: 'Recovery in housing market so strong that rural prices rise too' and 'Housing market drives sustained growth and investment'.

Blok's reforms have not been introduced without 'stepping on some toes', he conceded. Many middle-income tenants, who for years enjoyed low rents, are understandably unhappy with liberalisation. The attitude of some critics towards the minister was summed up by a published cartoon showing Blok as a horned demon with glowing eyes.

Minister Blok joked that investors may come to see him as a saint given that he had created a level playing field for them in the Dutch residential sector. The public housing corporations used to be the ‘go to people’ for municipalities trying to get major residential-led, mixed-use urban development projects off the ground. Now local governments will require private-sector investment partners to develop free market apartments at the schemes.