The cabinet plans to make the housing market more accessible to first-time buyers and middle-income earners. To this end, Minister Kajsa Ollongren (of the Interior) is preparing new laws and regulations. One of the spearheads is that the annual rent increase for the free “liberalized” sector will be restricted. The minister is also coming up with a package of measures that includes ‘buyout protection’ and the possibility of extending temporary fixed-term rental contracts. We briefly outline these developments for you.
Maximizing annual rent increase
For social housing, maximum rents apply and the annual rent increase is capped. In the free “liberalized” sector, these legal restrictions do not apply. As a result, tenants in the free sector can sometimes face substantial annual rent increases. The minister therefore indicates that he will come up with measures within which the annual rent increase in the free sector will be capped at inflation plus a maximum of 2.5%. This will put the maximum annual rent increase in the ‘free’ sector on a par with that in the ‘social’ sector. According to the minister, this will ensure that all tenants in the free sector also know where they stand and can no longer be unexpectedly confronted with a substantial rent increase.
Buyout protection
In addition, the minister wants to allow municipalities to designate certain neighborhoods where they can introduce so-called “buy-back protection. With this measure, the minister wants to cut off investors, who currently buy up homes at low interest rates with the sole purpose of renting them out. As a result, starters and middle-income earners looking for a house to buy would miss the boat. After all, they cannot compete with the amounts that investors are paying for these homes. The minister does want to continue to allow municipalities to offer customization. For example, municipalities will have the option of issuing a permit for districts where buyout protection applies, in order to make rental housing possible in that specific case.
Extension of temporary leases to be extended
Finally, the minister announces that he is also going to expand the possibility of extending temporary leases for a fixed period. Currently, there is no such possibility. As a result, a temporary contract for housing can only be concluded once. As soon as parties decide to extend this contract after the end of the first temporary contract, a contract for an indefinite period arises by operation of law. From that moment on, a tenant can also claim rent protection towards his landlord. This may discourage landlords from continuing to rent housing to the same tenant after the first temporary contract ends.
The minister has indicated that she is currently exploring the possibilities of extending temporary leases to a maximum period of three years without creating an indefinite lease. According to the minister, this will meet the demand from tenants and landlords. It will allow a landlord to offer (more) customization on a case-by-case basis. This also gives tenants more flexibility if, for example, they unexpectedly wish to use the rental accommodation for a longer period.
Conclusion
The minister has outlined the preliminary contours of the measures she plans to take. What is certain is that the minister intends to significantly regulate the “free rental sector. However, the introduction of buyout protection may have a negative impact on investors’ willingness to invest in the housing market anymore. This could further exacerbate the current shortage of rental housing, which could increase rents in the free rental sector. Limiting the maximum annual rent increase could also lead landlords to anticipate this and simply increase the initial rent. The proposed regulation aims to curb excesses in the free rented sector, but the question is whether it solves the actual cause: the structural shortage of housing. Ultimately, creating additional housing will be the solution to keeping rental or owner-occupied housing affordable and available to all.
It is not yet known whether the announced legislation and regulations will go through and what they will look like in concrete terms in the near future. We await the minister’s bill with interest and will inform you further in the event of new developments in this regard.
This article was written by the Real Estate Practice Group.