Demand for affordable rented housing in the Netherlands remains high

Shortage of affordable rented housing not resolved in 2020
Calculations by ABF Research have revealed that the rented housing building volume will be approximately 125,000 until 2020, including 85,000 homes for the social sector. In addition, private capital will be required for the construction of 40,000 homes for the private sector. The increase in the number of households in the Netherlands means this forecast building volume will not be enough to resolve the growing shortages of affordable rented housing, particularly in the urbanised areas of the country. Consequently, the number of households living in suboptimal accommodation will also continue to rise. In actual fact, the question is whether the forecast volume will even be achieved. Figures from Statistics Netherlands (CBS) show that the number of new construction permits issued to corporations dropped to a historical low of around 6,000 homes in 2014. What is more, pension funds appear to be unable to acquire sufficient new rented housing above the liberalisation limit.

Record amount available in 2015 as well
Dutch pension funds have indicated that, for 2015, they will have an amount of more than 1.5 billion euros available to invest in new-build rented housing. Dutch private investors are focusing primarily on existing homes and have in excess of 1 billion euros available for 2015. The expectation is that approximately 3 billion euros will be available from foreign sources. Never before has so much capital been available for investments in rented housing.

According to Managing Director of Capital Value, Marijn Snijders, “For the Dutch housing market it is a good thing that, in addition to Dutch investors, there are so many foreign investors that are prepared to purchase rented housing. Consequently, more and more foreign banks are expressing an interest in financing housing in the Netherlands. Previous research had already revealed a growing interest on the part of German banks. We are now seeing that banks from other countries are also keen to get a foothold on the Dutch market. This will lead to a more diverse financing market which is a healthy development for the Dutch housing market”.

The threat of mismatch; a lack of sufficient product
In recent years it has become clear that some of the financing available from Dutch pension funds was not invested due to a lack of sufficient product. These investors are the most important driving force on the new-build rented housing market above the liberalisation limit. In 2013 and 2014, pension funds were only able to add 3,500-4,000 homes annually. As a result, a total of around 650 million euros of available capital was not used. It is equally improbable that the total available capital for 2015 can be used. The construction sector and local authorities are focusing too heavily on the construction of owner-occupied housing due to recent improvements in that market. The question is, therefore, whether the forecast construction target of 40,000 rented homes for the private sector (approximately 8,000 homes annually) will be achieved in five years time without extra measures by local authorities and other market players.

Investors positive about working together with corporations
The majority of the pension funds surveyed (85%) is positive about working together with corporations and want to intensify this cooperation. This may help corporations that want to sell their older stock to free up resources for new social rented housing. Approximately 30% of the corporations surveyed indicated a desire to sell complexes, with 64% indicating that they wanted to do so to facilitate new investments in social rented housing. Corporations are also selling approximately 15,000 homes annually and have indicated that they want to intensify sales to owner occupiers in the coming years.

An important role for local authorities, developers and constructors
When it comes to creating sufficient supply, local authorities have an important role to play. By critically assessing land prices they can encourage market players to include rented housing in their plans for new construction as well. In addition, they can adopt a positive attitude towards the sale of housing association stock and thereby give corporations the opportunity to invest in new social rented housing. Developers and constructors play a key role by focusing not only on owner-occupied housing, but by trying to find inventive ways to construct sufficient long-lasting and affordable rented housing.

According to Managing Director of Capital Value, Kees van Harten, “Never before has so much capital been available for investments in rented housing. Local authorities, investors, the construction sector and corporations have a joint responsibility to ensure that this capital can actually be used. If there is insufficient supply on the market, there will be a risk that investors will start looking for alternative opportunities.”

Capital Value is going to present the results of the survey of international investors on 3 March 2015.