DNB President Calls for Reversal of Affordable Rent Act
Klaas Knot, president of De Nederlandsche Bank, advocates scrapping the law to ease pressure on the housing market and boost rental supply
The Affordable Rent Act, introduced by former Housing Minister Hugo de Jonge, aimed to make rental housing more affordable for middle-income earners. However, the law has faced significant criticism, and now, Klaas Knot, President of De Nederlandsche Bank (DNB), is calling for its reversal. According to Knot, the law has led to a significant decrease in the supply of rental properties, with the private rental market shrinking by 38% since its introduction in July. At the same time, rental prices have continued to rise, contradicting the law’s original intentions.
Knot, who spoke at the International Monetary Fund (IMF) meeting in Washington, highlighted that small rental companies are selling off their properties in response to the new regulations, worsening the shortage of available rental homes. While holding onto their properties for now, larger investors may also scale back their focus on mid-range rental homes, which are vital for younger and lower-income tenants.
Knot warned that while the Affordable Rent Act sought to address affordability, it has had the opposite effect, driving many rental properties into the owner-occupied market and further limiting housing options. “If you put all these factors together, it’s difficult to be positive about the law,” Knot remarked. He suggested that while some damage has already been done, it is better to reverse the law before the situation worsens further.
Impact on the Middle Segment
The Affordable Rent Act imposes a cap on rental prices for homes in the middle segment, which are crucial for those earning too much to qualify for social housing but not enough to afford an owner-occupied home. Under the law, rents for homes with a quality between 144 and 186 points are limited to between €879.97 and €1157.95, depending on various factors like the property’s energy label and living area.
However, these restrictions have dissuaded private landlords and investors from continuing to rent out their properties, as their earnings potential is significantly reduced. With the added burden of increased taxes on second homes under the Box 3 wealth tax and stricter regulations on temporary rentals, many landlords are choosing to sell their rental properties, further decreasing the supply of affordable rental homes.
An example provided by critics shows that a terraced house in The Hague’s Regentessekwartier neighborhood, valued at €300,000, would have its rent capped at €1,002.61 under the current points system, making it less profitable for landlords. As a result, these properties are more likely to be sold off than rented out.
Rising Home Prices and Limited Supply
The shortage of rental properties is not the only issue. The Affordable Rent Act has contributed to a sharp rise in home prices, as many rental properties are being converted into owner-occupied homes. Knot noted that this has fueled demand for homes, pushing prices up even further. In 2024, the average home price in the Netherlands rose to €466,890, more than ten times the average salary.
Although the government is working on increasing the supply of homes and curbing speculation in building land, Knot cautioned that these efforts would not bring about a significant reduction in home prices in the short term. He also called for a review of tax benefits, such as the mortgage interest deduction, which inflates the financing capacity of homebuyers and further drives up prices. “But unfortunately, this government, like previous governments, is not doing anything about that,” he added.
A Need for Change
The general consensus among experts, including Knot, is that the current housing crisis cannot be solved with rent regulation alone. To address the core issue of housing shortages, they call for increased investment in housing construction and fewer regulatory barriers. Removing sustainability requirements and abolishing restrictive nitrogen policies could help expedite the construction of new homes, ultimately easing the pressure on both the rental and owner-occupied markets.