A new legal tool to combat skewed housing

A new law is significantly changing the rules surrounding the rental and leasing of residential spaces. What consequences does this have for housing associations? The "Housing Market Transition Act 2015" (hereinafter "the new law"), which came into effect on July 1, is intended to combat skewed housing.

Rent-sum approach

For a long time, housing corporations have been struggling with the problem that their homes are often not occupied by the intended target group (read: people with relatively high incomes are "occupying" homes while people with much lower incomes are left out). The so-called rent-sum approach (one of the components of the new law) should change this.

The essence

The rent sum approach gives housing cooperatives "leeway" to increase some rents more than others. Here's the thing: the average rent increase per cooperative may not exceed inflation plus 1%. However, under the new law, rent increases at the individual level are possible up to a maximum of 2.5%. In this way it can be achieved that social tenants with too high income pay a more market-conform rent. With the aim of promoting the flow of social tenants into the free sector or even owner-occupied housing. When the rental price of a property is representative of the market value of that property, the rental price of social rental housing will be in a more realistic and thus better relationship to, for example, the mortgage payments for a similar property. Because buying a home is generally more financially attractive than renting a home, tenants of social rental housing will thus be more likely to decide to buy a home rather than continue to rent.

Lower-income tenants

With the introduction of the rent-sum approach, the rents of certain social housing units will increase. Along with this, low-income households will also find it more difficult to move on to more expensive housing. To counter this, the so-called "suitability test" was introduced in January 2016. Housing corporations must be able to prove to households entitled to rent allowance that in 95% of the cases they have rented a house with a rent below the so-called 'capping threshold' (the part of the rent above which no or little rent allowance is provided). Thus, housing corporations are forced to offer cheaper housing to rent allowance-eligible households.

Note that the rent-sum approach does not apply to private landlords because - unlike housing corporations - they do not bear a social duty to keep housing employable for low-income people. The rent-sum approach will take effect Jan. 1, 2017.