Laws and regulations regarding the Dutch housing market have undergone significant changes in recent years. A major driver of many changes is the government's desire to promote affordable housing. This blog post discusses a selection of important changes for housing with a market rent that were recently adopted as well as some interesting legislative proposals that are pending with parliament.
Good Landlordship Act
On 1 July 2023, the Good Landlordship Act came into force. This new law introduces a national standard for good landlordship and Dutch municipalities will be given powers to prevent and combat undesirable forms of landlordship. This standard concerns the behaviour expected of landlords and rental agents in relation to home seekers and tenants. Good landlordship means for example that the deposit is capped at two months of the basic rent, that procedures need to be in place to prevent residential discrimination, and that the landlord is obliged to inform tenants of their rights.
This new law also provides instruments for the enforcement of this new law by the municipality. Every Dutch municipality must set up a reporting and information point for complaints about undesirable behaviour by landlords. In addition, a municipality can establish a rental permit requirement in vulnerable neighbourhoods, pursuant to which additional standards are imposed on landlords.
In the event of a violation of the standards of good landlordship or, if established, the leasing permit, the municipality is obliged to enforce such violation and can choose to impose an official warning, administrative coercion, an administrative fine or, as a last resort solution, to take control of the leased property.
Regulation of the mid-rental segment (announced)
The government intends to further regulate the housing market with the proposed bill regarding affordable housing. People with a middle income such as teachers, nurses and police officers have less and less chance of finding affordable housing in particular in urban areas, while the shortage of these professional groups continues to grow. The draft bill regarding affordable housing has been published for public consultation and is currently with the counsel of state for its advice on whether it is well-drafted and not unconstitutional. As the bill has not been declared ‘controversial’ by the house of representatives, the bill will be considered by parliament prior to the new government having been installed after the November 2023 elections, provided that the legislative proposal is formally submitted before such date. The bill is intended to become effective as per 1 January 2024.
Pursuant to the proposed bill, the housing valuation system for social housing will be updated and the scope expanded. Whether a property is considered social housing is and will be determined based on a ‘points’ valuation system. Points can be earned based on the quality, sustainability and (to a limited extend) the value of the property. If the property scores 148 points or less the space may only be leased to people that qualify for social housing and the base rent is capped at EUR 808.06 per month (level 2023). Pursuant to the proposed bill regarding affordable housing, an additional threshold is proposed of 186 points, for which the base rent is capped at circa EUR 1,100 (level 2023). Both caps will be annually indexed.
In addition, the cap on rent will be coercive rather than enforceable. Municipalities will be asked to enforce these rules on maximum rent in addition to the possibility for a tenant to claim adjustment of a non-compliant rent in court. The government anticipates that approximately 90% of the Dutch rental housing market will become regulated.
To manage the housing shortage, the government also set a goal of 900,000 new homes to be built before the end of 2030. Approximately 40% of this must end up in the affordable owner-occupied or mid-rental segment. To improve the willingness of property investors to invest, it is anticipated that under certain circumstances landlords of newly built homes can charge a 5% surcharge on top of the rent for the first 10 years.
Abolition of temporary leases (pending)
The house of representatives has recently passed the bill to change certain sections on lease law as included in the Dutch Civil Code, strongly limiting the possibilities for entering into a temporary lease. Under the new bill, a temporary lease can only be offered to specific groups such as expats, students or people in a social emergency with a demonstrably urgent housing need. Tenants that are not part of one of these predetermined specific groups, can only be offered a lease for an indefinite term that needs to be terminated taking into account the grounds for termination as set out in de Dutch Civil Code (e.g. material misbehaviour of the tenant or redevelopment in line with the designated use under the zoning plan). The bill also includes additional termination grounds if the property is urgently needed for personal use by the landlord or its close relatives. The bill is currently with the Senate and is anticipated to enter into force on 1 January 2024.
The new law will apply to all new leases after the entry into force of the amendment of the Dutch Civil Code and will therefore not apply to leases concluded before the effective date. In that case, the old rules will continue to apply.
Cap indexation
Indexation of the rent for market rent leases has been capped by law at the lower of (i) the inflation, or (ii) the development of wages, plus one percent point. This amendment is intended to prevent excessive rent increases in times of high inflation and to keep rents affordable. For 2023, the indexation for rent of market rent residential units is capped at 4.1%. The cap for indexation in 2024 will be announced at the end of this year. The legislative cap on indexation will apply until 1 May 2024.
Fiscal investment deduction
With the sustainability investment deduction (MIA), investors benefit from an investment deduction that can amount to 45% of the investment amount. The 2023 budget for MIA is €192 million, and this budget will be increased by €48 million every year to correct for price increases and inflation. The investment deduction applies for environmentally friendly investments that are listed on the MIA ‘sustainability list’. The sustainability list is regularly updated to ensure alignment with current themes, such as the transition to a circular economy.
Other pending legislative proposals
The government is preparing a bill to prohibit homeowners from putting their home up for rent without having received an exemption from their municipality. The ban applies to all homes in the Netherlands that are unrented six months before the law comes into effect. All homes that have been rented out for more than six months at the time the law comes into effect are not subject to the ban and will receive an exemption.
Furthermore, the government announced working plans to introduce legislation to prevent abuse of service charges by specifying by law which goods and services fall under service costs. It is also being investigated whether a maximum can be introduced that a landlord may charge for service costs.
