Minister presents first contours of plans to regulate mid-market rent
On 14 October 2022, Minister De Jonge (Public Housing and Spatial Planning) informed the House of Representatives by letter about his plans to introduce rent regulation in the middle segment. Why this regulation and what are the consequences? You can read more about that in this blog.
Why regulate middle rent?
The reason for the plans is the sharp increase in rental prices of rental housing in the middle segment. At the same time, the availability of housing in the middle segment has also decreased significantly, especially in the big cities. This, among other things, puts pressure on access to housing in the cities for many people with socially relevant professions.
At present, only rents for housing below the liberalisation threshold, which currently stands at a rent of €763.47, are regulated. Regulation is done by applying the housing assessment system (WWS). The WWS determines the maximum reasonable rent based on the quality of the dwelling. For this purpose, a points system is used that values various aspects of a property, such as surface area, facilities and energy label.
If the minister's plans go ahead, the WWS will also apply to houses up to about 187 points, which in the current WWS amounts to a rent of about €1,000 per month. By extending the application of the WWS to 187 points, tenants in the middle segment will soon also be able to go to the rent assessment committee to have their rent assessed for reasonableness. If the agreed rent exceeds the maximum reasonable rent based on the property's point number, the rent will be adjusted downwards by the rent assessment committee.
New rental agreements
It is important to note that under the current plans, the regulation of middle rent will only apply to new rental agreements. According to the minister, the regulation interferes too much with property rights to also introduce it for existing rental agreements. Nevertheless, the regulation has major consequences: the minister estimates that eventually over 90% of rental properties will fall in the social and middle rental segment and will therefore have to be rented out under €1,000.
Maximising annual rent increase
Regulation will additionally relate to annual rent increases. Until May 2024, the Maximum Rent Increase for Liberalised Rental Agreements Act limits the maximum rent increase in the free sector. The minister is considering what the annual maximum rent increase in the middle segment should be after that period. A new system for this will be included in the law.
The minister has heard noises from the market that the WWS is in need of modernisation. Market parties have indicated that tenants' demand today is different from when the WWS was introduced and that this demand is now insufficiently valued in the WWS. To stimulate the construction of mid-rent homes, the minister will assess whether to modernise the WWS. This will include looking at an overall price surcharge on the WWS for the middle rental segment, valuing sustainability and, for example, the (communal) outdoor area of the rental home in the WWS and adjusting the cap on the WOZ value.
In anticipation of national regulation, several municipalities have made their own agreements with developers on new medium-rent homes to be built. For instance, agreements have been made on how many houses within a project should be built in the social and middle segment, and how many houses should be in the free segment. The forthcoming national regulation thwarts all or part of these agreements. For instance, regulation may result in homes that were planned for the free sector ending up in the mid-rent sector after all. Therefore, the minister will examine how the national regulation of the middle rental sector should relate to these local agreements.
According to the minister's schedule, the Middle Rent Regulation Act is due for consultation in early 2023. It is expected that more will then become clear about the content and consequences of the regulation of the middle rent.
Source: parliamentary letter from minister for VRO on regulation of the mid-lease of 14 October 2022