According to the Dutch financial consultancy company Finance Ideas, social housing companies can create up to 3 billion of extra liquidity. This is due to the contract of settlement that the Dutch tax authorities and Aedes (Association of Housing Corporations) signed last weekend.
This contract of settlement fills in the precise application of the law concerning corporate tax. For the corporations this is applicable retroactively as of January 1, 2006. According to the law, corporations must pay taxes over a portion of their activities. Nevertheless, according to Rob Rötsheid and Piet Eichholtz of Finance Ideas, there are benefits from the new financing methods that they can use against this.
"Thanks to this latest agreement corporations can place their fiscal investment institutions (fbis) within this. If they bring their commercial activities under this construction, the daughter company pays the results out to the mother company and the corporation can increase their financial capacity enormously, whereby more money becomes available for the social tasks of the corporation," explains Rötsheid.
"It is true that on the basis of the Waarborgfonds Sociale Woningbouw (WSW) corporations may loan money for social activities against lower interest rates, but the amounts that they may lend are limited," said Eichholtz, who is a professor of real estate financing at the University of Maastricht, as well as a financial adviser. Within the fbis, foreign assets of 60% are permitted.
"On the basis of the WSW a corporation with 1,000 more expensive houses (from 615 per month) may finance a balance-sheet value of merely 30 million. The corporation can later sell these houses to the fbis for the market value of ca. 150 million. From this, 90 million may be financed and given back to the mother company. The mother company can use one-third of the 90 million to repay the loan from the WSW and will then have 60 million over to invest in new construction and renovation. If you calculate that 2-3% of the corporations holdings are comprised of free-sector rentals, you come up with 50,000 houses. Fifty times 60 million is 3 billion extra of liquid assets that is freed up for reorganization," says Eichholtz.
Source: Het Financieele Dagblad