The Affordable Housing Law: What are the implications for landlords?
The real estate market has been turbulent for a while, and not without reason. Last year, the government announced the Affordable Housing program: a plan to regulate mid-segment rental housing more stringently. How exactly? There’s now more clarity, as the draft affordable housing Law was made available online on February 28, 2023.
The main takeaway? It won’t get easier for landlords, but with the right knowledge of the developments, this doesn’t have to be intimidating.
The affordable housing Law Overview
The government aims to regulate rental housing with the Affordable Housing bill in two ways:
A new mid-segment for middle-income rentals, with a fixed maximum rent based on the Housing Valuation System (Woning Waarde Stelsel; WWS).
Mandatory point system associated with the Housing Valuation System.
The new regulations are expected to reduce rental income by 190 euros per month for over 300,000 rental properties.
1. A new mid-segment for middle-income rentals
Social and free sector rentals
Rental homes are assessed using the Housing Valuation System based on factors like size, amenities, and energy efficiency. The resulting points determine the rental price. Currently, homes up to 148 points fall under the social rental sector, which can be rented for up to €808.06. Homes with more points fall into the free sector, with no rental price restrictions.
New mid-segment
The Affordable Housing bill introduces a new segment. The "liberalization threshold" of 148 points will be raised to 186 points, creating a low segment (up to 147 points) and a new mid-segment (148 to 186 points). Rent in both segments will be regulated. The maximum rent for homes with 186 points will be €1021.02. Only homes with 187 points or more will fall into the high segment and be eligible for free market rent.
Low segment: (social) rental homes up to 148 points with a maximum rent of €808.06.
Mid-segment: rental homes up to 186 points with a maximum rent of €1021.02.
High segment: free sector homes from 187 points without rent regulation.
Cap on WOZ Value in the Housing Valuation System
Even with the new regulations, the WOZ value (property valuation) of a home in the free sector (soon from 187 points) can only account for a maximum of 33 percent of the total points. This prevents WOZ values, which have risen sharply in recent years, from overly influencing whether homes fall into the free sector. Currently, this WOZ value cap also applies to homes with 149 points or more. The raised threshold could benefit homes between 149 and 186 points, as their WOZ value will count fully unless it places them in the free sector.
2. Mandatory Housing Valuation System
Currently enforceable maximum rents
Maximum rents in the social sector, determined by the Housing Valuation System, are currently enforceable but not mandatory. This means landlords can ask for higher rents, which happens in about half of the privately rented homes. Tenants can challenge this only by going to the Rent Tribunal or a court.
Mandatory maximum rents
With the Affordable Housing program, maximum rents (including those in the new mid-segment) will become legally binding. Landlords must include the point total and corresponding rent in the lease. Municipalities will be responsible for enforcement. Renting a social housing unit above the regulated price will risk administrative fines and, in extreme cases, management takeovers.
New rules for existing leases
Homes below the current liberalization threshold
The catch? The new law will apply to existing leases of homes below the current 148-point liberalization threshold after a one-year transition period. Previously, real estate investors were assured this wouldn’t happen, but the government has reversed its stance. Tenants can have their home’s points recalculated and, if it falls at 148 points or less, have the rent adjusted (without retroactive effect). The idea is that landlords knew the home didn’t fall into the free sector at the contract’s inception, implying a relatively low rent.
Homes above the current liberalization threshold
Existing leases of homes above the current liberalization threshold (free sector homes) will not be adjusted. This makes sense, as landlords expected to set their rent prices when the lease was signed. Even if these homes fall into the regulated mid-segment under the new rules, tenants cannot adjust the rent.
When will the affordable housing Law come into effect?
The final details of the Affordable Housing program are still pending. The draft law is currently with the Council of State for advice. The proposal is expected to be debated in the House of Representatives this fall, followed by a Senate vote. It will be some time before the legislation comes into effect. Landlords can use this period wisely.
What can you do as a landlord in the meantime?
Increase your home’s points
Use the transitional year to invest in your property, raising its points above 186. The government will incentivize this strategy by rewarding green energy labels more than before. With the right investments, achieving an energy label A or higher is often possible. Points will also be deducted for energy labels E, F, or G, making sustainability a worthwhile investment.
A "quick scan" can provide insight into your home’s current points and how to increase them. The rising WOZ value might already help your property reach the required points.
Find a long-term tenant
If your current free sector lease is ending soon, consider finding a tenant willing to sign a long-term lease, such as three years. The tenant cannot terminate the lease early, ensuring your rental income under the current regulations, giving you more time to adapt your real estate strategy to the new rules.
Invest in the right rental property
If increasing your home’s points sufficiently isn’t feasible and the new regulations significantly reduce your rental income, consider changing your real estate strategy. Depending on your lease agreements, you might decide to terminate the lease (with compensation) and sell the property (with tenants if necessary), allowing you to invest in another rental property.
In this scenario—and for new real estate investors—two aspects of the new regulations are particularly relevant:
Investing in new construction pays off. New mid-segment rental homes will have a 5% rent surcharge for ten years. These homes can be rented at the regulated price plus 5%. This applies to new homes delivered after January 1, 2024, with construction started before January 1, 2025.
Outdoor spaces gain value. For free sector rentals, it’s worth investing in the property’s outdoor space, which will gain more points under the new rules.
Implications for you as a (prospective) landlord
Let’s not mince words: the affordable housing Law complicates things for landlords. But whether you’re just starting in real estate or a seasoned landlord, understanding the new regulations can be advantageous. Koops Real Estate Agency is here to explain how in a personal, no-obligation consultation. Our rental experts closely monitor these developments and provide tailored advice, focusing on opportunities rather than limitations.
No need to panic. Instead, contact us today; together, we’ll discuss the best rental strategy for you.