Private investors crucial puzzle piece in distorted housing market


Private investors crucial puzzle piece in distorted housing market

Private investors purchase some six to ten percent of Dutch owner-occupied homes: often people with a second or third property. With the help of a Veni grant, urban geographer Cody Hochstenbach (University of Amsterdam) is investigating everything about this puzzle piece in the distorted housing market. ‘Using the unique data from Statistics Netherlands, I can accurately investigate how this works.’

Cody HochstenbachCody Hochstenbach

From his rented apartment, Cody Hochstenbach looks out over social housing properties of forty square metres. ‘Sometimes, families with two or three children live there. Due to corona, they are all at home.’ Hochstenbach finds it distressing that all those people cannot find a suitable home due to scarcity and high prices on the housing market.

In large cities sometimes 20 percent

The distorted housing market fascinates Hochstenbach, who gained his PhD research into spatial inequality in Amsterdam and Rotterdam. With a Veni grant from NWO, he is now focusing on private investors who since about 2013 have played an increasingly important role in the Dutch housing market. These can be people who deliberately invest in a second or third property and also parents who purchase an apartment for their studying child. ‘In towns, they sometimes locally purchase twenty percent of the properties’, says Hochstenbach. ‘At the national level, that is six to ten percent, depending on your definition.’

More knowledge, better policy?

As private investors are purchasing so many properties, it is important to know more about this group. They contribute to the pressure on the housing market and therefore to the rising prices. Government policy might be able to help the problem. For example, last year, Amsterdam tried to make buyers of newly built homes actually live there as well. Hochstenbach: ‘If you want to make something like that compulsory for existing homes at a national level, so that you really can make a difference, then new legislation is required.’ Before that can happen, more knowledge is needed about private investors.

I can link homes to individuals and follow buildings and people over the course of time
- Cody Hochstenbach

Unique in the world: Statistics Netherlands microdata

Hochstenbach is allowed to make use of a special database at Statistics Netherlands. ‘The microdata of Statistics Netherlands is unique in the world. It contains the data of all Dutch citizens and all homes. I can link homes to individuals and follow buildings and people over the course of time.’

Subject to strict privacy rules, Hochstenbach can use the Statistics Netherlands data to find out who the private investors are, the course of their investments, and what the effects of these are on the affordability and availability of homes and wealth inequality in the Netherlands. ‘The Netherlands is well known for its low income inequality, but the inequality in capital is high. Home ownership plays an important role in that.’

Many older people with money to spare...

From his preliminary research, Hochstenbach already knows something about the people who invest in an extra property. ‘There is an entire cohort of elderly people with a lot of capital because they purchased a property at the right moment. They are looking for a good investment, and because the interest rates are so low and properties give a relatively stable return on investment, they invest in a second property.’ Their motives for doing this differ quite a bit: ‘Some seek profit and search on the map for a place where the chances of that are high, but there are also people who want to invest in their own part of the town and genuinely make the building more attractive.’

Did you know? In 2017, the former Minister for Housing Stef Blok proudly said: ‘I am the first politician from the VVD party that has caused an entire government ministry to disappear.’ Hochstenbach: ‘He thought he had fixed the housing market and that the market will do the rest itself. Blok went to foreign investors fairs to showcase Dutch social housing properties. I do not want to blame Blok, but he was an important player in the further stripping of the social housing sector in recent years.’

...And bad government policy

That so many people are buying an extra property is also due to government policy. Bad policy in Hochstenbach’s eyes. ‘Since the end of the 1980s, and recently even more strongly still, the position of landlords has become stronger at the expense of tenants. Landlords can ask for more rent, increase the rent more and offer temporary lease contracts.’

Also, the supply of housing in the social housing sector in the Netherlands has shrunk considerably. ‘The Netherlands used to be known for its abundant social housing with an extensive and attractive supply. Today’s politicians have now undermined that tradition. Rented housing has been sold, and it is no longer the intention that people on a median income rent in the social housing sector. Since recently, a single person can only rent in the social housing sector if he or she earns less than €35,000 per year, which means singles now have less access to these homes.’ As owner occupied-properties for starters are too expensive, and there are too few properties to rent in the social housing sector, the demand for rented properties in the private sector is increasing. That is an extra stimulus for private individuals to purchase and rent an extra property.

Frontal view of balconies on an apartment building

Investors as the solution

Hochstenbach is clearly critical about Dutch housing policy. Should the social housing sector be returned to its former glory? ‘That could certainly be a part of the solution, as then people with a median income would once again have the right to a home in the social housing sector. However, as far as I’m concerned, those homes could best be owned by investors. Investors can form part of the solution if the government encourages or forces them to rent at a reasonable rate. That could be realised, for example, via a fiscal benefit or a discount on the ground.’

Home ownership is the norm, unfortunately

Actually, Hochstenbach thinks it is a shame that home ownership has become the norm in the Western world. ‘We see renting as money down the drain. Politicians have encouraged that idea: parties on the right of the political spectrum know that home owners immediately vote more to the right, whereas parties on the left of the political spectrum thought that if the working class could buy homes, then they would climb up the social ladder to the middle class.’ That is why, for example, the mortgage tax relief was introduced, which has mainly made the banks richer and house prices higher.

It does not bother the researcher whether he buys or rents. ‘I want everybody to be able to live in a home that in terms of size, type and affordability fits his or her phase in life. I think that people currently in their thirties having to share a house or still live with their parents is a form of poverty. And what about the people who are forced to carry on living with a violent partner because they cannot afford to leave? Or the 40,000 registered homeless people? In reality, the number is far higher. Due to corona, they now have to spend the entire day in a Salvation Army homeless shelter. Those are terrible places to be stuck in, as many homeless people suffer from psychological problems.’

More information

Cody Hochstenbach works at the University of Amsterdam at the Faculty of Social and Behavioural Sciences, programme group Urban Geographies. In 2019, he received a Veni grant from NWO. Besides his research, he writes sharp columns for RTL Z about housing policy, and he shares his knowledge and viewpoints in various media (only available in Dutch).

Tekst: Rianne Lindhout