Rented housing stock declines despite capital available from investors and housing associations
The housing shortage in the Netherlands is expected to reach a peak in 2018. Construction levels remain insufficient to close the gap between supply and demand. Fewer building permits were granted in 2016 compared to 2015. The shortage will start to decline only after 2019, when the number of dwellings built will outstrip the number of additional households. There needs to be an emphasis on building more mid-priced rented homes and inexpensive owner-occupied dwellings to increase the dynamics in the housing market. Housing associations can play a key role by making part of their stock available for the mid-priced rented market and using the revenue for investments in dwellings for the lower-income segment. An amended programme will be needed over the coming years for approximately 100,000 senior citizens with a mobility restriction. This is clear from research conducted this year by Capital Value in cooperation with ABF Research.
Housing shortage to peak in 2018
For a number of years now, the production of new-build dwellings has lagged behind growth in the number of households. In 2016, the number of building permits granted even fell - to around 51,000 dwellings (2015: 53,500). It is difficult to increase building production in the short term given the lack of planning capacity. At the start of 2017, the statistical housing shortage was estimated at 178,000 dwellings and is forecast to amount to 200,000 at its peak in 2018. The expectation is that only from 2019, the number of dwellings built each year will outstrip the number of additional households. The shortages will be greatest in the COROP regions of Greater Amsterdam (6%) and Utrecht (4%). No region is expected to see a decline in the number of households.
Rented housing stock will shrink over the coming years
The survey reveals that the number of rented dwellings will decline over the coming years. The extent of the decline depends primarily on the way housing associations and investors let and/or sell individual units. The survey takes two scenarios into account. Depending on the scenario that will be followed, the supply of rented housing is expected to decline by 15,000 to 39,000 dwellings as a result of the sale of individual units by housing associations and investors as well as the demolition of outdated dwellings. Both housing associations and investors want to construct more rented homes over the coming years. To achieve this, the planning capacity will have to be expanded and procedures relaxed and shortened.
Building permits to housing associations reach a low despite improved financial position
In their annual prospective information (dPi), housing associations have indicated they wish to add approximately 20,000 dwellings per year to their stock. However, a low was reached in 2016 with only 4,100 building permits granted. A majority of the housing associations have found themselves in a positive financial situation over the past few years. As a result, they now have the possibility of investing in regulated rented homes and of making their older stock more sustainable. This trend towards sustainability will increase in importance over the coming years because approximately 54.8% of the housing association stock is older than 35 years.
Housing associations and investors can play a key role in increasing the dynamics in the housing market
A larger mid-market segment in the housing market will make an important contribution to a better flow through in the housing market. Given current and future demand, increasing the supply of mid-priced rented homes cannot be achieved only through new-build. In order to reduce the shortages, it is also essential to use the existing supply. Kees van Harten, Director at Capital Value, “Given their sizable housing stock, housing associations can play a key role here. The sector owns considerably more dwellings for the target group than necessary, as defined by the Housing Act. Changing the use or selling parts of this stock that are suitable for the mid-market segment can make an important contribution to expanding that segment. An increasing number of housing associations (51%) have indicated that they want to sell complexes in the coming years. The recent publication of the Netherlands Environmental Assessment Agency (Planbureau voor de Leefomgeving) emphasises that this would lead to an increase in the number of dwellings in the mid-market segment. In light of the record amount of capital available among investors, it is now possible for housing associations to take advantage of opportunities through housing sales. Housing associations can then use the sales proceeds to invest in dwellings for the lower-income segment.”
Number of senior citizens up sharply, requiring specific building programme
In the period up to 2022, the number of households occupied by people age 75 and older will increase sharply, rising with approximately 180,000. Nearly half the increase will take place in the Randstad conurbation. Of this growing group of seniors, around 100,000 households have a mild to severe mobility restriction, of which 75,000 to 80,000 households are occupied by people age 75 and older. Part of this demand is geared towards the mid-priced segment. Housing construction for this target group has been insufficient in recent years, making it difficult to find appropriate housing. The good news is that a growing number of investors want to invest in dwellings for seniors. Seventy-one percent of pension funds say they want to invest in new-build for seniors and/or assisted living dwellings. A number of foreign investors are also specifically targeting this segment due to the increasing demand. In 2022, the total number of households with a mild to severe mobility restriction is expected to reach 1,132,000 households, of which 559,000 aged 75 and older.
A historic residential investment volume in 2016 and more capital available in 2017
In 2016, total investment volume amounted to €4.3bn, up 33% from 2015, making it a historic year for the residential investment market. Dutch institutional investors made the most important contribution, investing approximately €3bn (around 13,000 dwellings). They invested mainly in new-build dwellings in the mid-priced rented segment. The survey reveals that this amount could have been even higher but that a lot of capital was not used due to a lack of supply.
The Dutch and international investors surveyed indicated that for 2017, they jointly have a record amount of over €6bn available. Still, once again this year it is unclear whether there will be sufficient supply to actually use this capital. Developers and the construction sector will have to make more of an effort to take advantage of the moment and further expand the planning capacity in cooperation with municipalities. They have paid too little attention to the rented housing market in recent years.
According to Marijn Snijders, Managing Director of Capital Value, “For a good flow through in the housing market, it is important that more mid-priced rented homes and more inexpensive owner-occupied dwellings are built. Municipalities and market parties will have to intensify their cooperation at local and regional level. It is essential, here, to consider not only the quantity but the quality of the product. A broad-based rented sector with sufficient affordable rental properties and the addition of more inexpensive owner-occupied dwellings is of fundamental importance to the functioning of the housing market.”