A significant portion of the foreign and local capital available to invest in the private rental sector in the Netherlands could leak away due to lack of opportunities, a leading Dutch industry organisation has warned.
Some €5 bn to €6 bn of local and foreign capital is available for the asset class but IVBN, the sector organisation for institutional investors in the Netherlands, claims this mountain of capital could be diverted to other investment classes or disappear abroad if drastic measures are not taken to increase the supply of rental units coming onto the Dutch market.
The Dutch rented homes sector is overwhelmingly dominated by public housing associations that rent out some 2.4 million homes. The housing associations operate under a mandate to provide affordable accommodation to lower-income tenants. But the reality is that a large section of middle-income tenants never graduate from housing association accommodation to renting or buying in the private sector. In addition, housing associations have over the years moved into the market for middle-income rental homes.
Housing minister Stef Blok has led government effort to stimulate the private rental sector, partly by compelling housing associations to return to their core mandate. A combination of new regulation and debt issues did result in several portfolio sales by housing associations in 2014 to early 2015. But the deal flow has slowed markedly in the last six to nine months.
The supply shortage has been compounded by the fact that little new and investible supply is being developed. IVBN has presented research which suggests that municipal councils, who play an important steering role in terms of development, are not doing enough to stimulate the building of new stock suitable as middle-income private rental homes. One reason for this is that municipalities can earn more from selling land plots for houses for owner occupation than for rental homes.
The Dutch institutional investor association has suggested three possible solutions to increase the supply of rental homes. The first is that 25-40% of all new residential developments should be earmarked for the private rental sector. The second is that more plots be made available for the development of mid-income rental homes. The third option presented by IVBN is that institutional investors be allowed to acquire some 20,000 to 30,000 units annually of the more expensive homes owned by the housing association, and by degrees add them to the private rental sector.
