Low rents cost housing associations billions in investment capacity

‘It is time we start talking about this,’ says Korevaar in an interview with the Dutch platform Binnenlands Bestuur. He describes low rents in the social housing sector as the ‘elephant in the room’ in the Dutch housing market debate.

The rent gap has widened sharply

Housing association properties have historically been cheaper than comparable homes in the private rental sector. Taking differences in quality into account, Korevaar’s calculations show that they were around 15 per cent cheaper for decades. Since 2015, however, the gap has widened considerably. Measures such as rules on allocating homes according to income and the one-off rent reduction introduced in 2023 have meant that rents charged by housing associations have risen much less than those in the private sector. The difference now stands at around 31 per cent for existing tenants and 40 per cent for new tenants. ‘We have never seen such a large reduction in rents before,’ says Korevaar. He describes the effect as ‘an implicit benefit for the tenant, but an implicit tax on the housing association’.

Affordability versus new construction

Korevaar stresses that the current policy has had a clear positive effect on housing affordability. The share of tenants’ disposable income spent on basic rent has fallen from around 27.5 per cent to 22.5 per cent. For an average tenant, he estimates this represents a saving of approximately €4,000 a year. ‘The affordability policy has been successful. But the price is that housing associations can no longer use that money,’ says Korevaar.

This creates a dilemma, he argues. Housing associations play an important role in delivering new homes, but rent policy has reduced the income available for investment. At the same time, the large gap between social and private rents makes tenants less willing to move from a social rental property into a more expensive private-sector home. ‘As a result, the rental market is becoming stuck,’ Korevaar says.

Rents barely keeping pace with construction costs

Whether housing association rents are ‘too low’ is ultimately a political choice, Korevaar says. However, the figures indicate that the current relationship between rents and costs is unusual. Over the past decade, rents for newly built housing association properties have risen by just 6 per cent, while construction costs have increased by approximately 30 to 40 per cent. ‘When you compare the two, I do think rents are too low,’ Korevaar says.

Two possible routes forward

Korevaar identifies two ways of strengthening housing associations’ finances without placing a significant additional burden on lower-income tenants. The first would be to compensate lower-income tenants for a rent increase through more generous housing benefit. The second would be for the government to provide housing associations with greater subsidies, allowing them to keep rents low. Both options would cost the government money. However, according to Korevaar, they could narrow the gap between social and private rents while significantly increasing housing associations’ capacity to invest. ‘Ultimately, that would make rents a little lower for everyone.’

Korevaar acknowledges that advocating higher rents is politically difficult. ‘Nobody likes the idea of increasing rents. But it can actually work quite well.’