Dutch Delta Plan Housing: The only policy instrument to secure returns for institutional investors and housing for residents

Dutch Delta Plan Housing: The only policy instrument to secure returns for institutional investors and housing for residents

The Dutch residential real estate market became highly financialized over the last years. Regulatory changes and new collaborations between public and private parties characterise the market orientation in the Dutch governance of housing production.

Housing associations were forced to focus on their core task, social housing, since the amendment of the Woningwet 2015. New socio-economic trends, such as increasing flexibility of the Dutch labour market and less popularity of home-ownership, is increasing the demand for a deregulated rent-housing sector. Rentals in the deregulated rent-housing sector almost doubled over de last 10 years. Institutional investors became the most important actor in the deregulated rent-housing sector. Institutional investors are real estate enterprises that manage extensive real estate portfolios. They manage these extensive portfolios for pension funds, insurance companies, and commercial banks for the long term.

Widespread disagreement between Dutch housing politics and institutional investors

Currently, the position of institutional investors in the Dutch residential real estate market has been questioned by some councils in the major cities. The councils in the major cities argue that institutional investors only realize expensive rent in the deregulated rent-housing housing sector, which starts at a minimum of €850, much above the boundary of regulated housing (€720). On the other hand, institutional investors argue that they bridge the regulated housing market and owner-occupied housing.

Local governments are completely dependent on institutional investors with regard to housing production in the deregulated rent-housing sector

As a result of the amendment of the housing act in 2015, housing associations were forced to focus on their core task, which is social housing in the regulated rent-housing sector. Institutional investors became the most important actor in the deregulated rent-housing sector. Local governments in the major cities have high ambitions to add housing in the deregulated rent-housing sector as a result of increasing demand, but they do not have the ability to finance it. Therefore, local governments are completely dependent on institutional investors with regard to housing production in the deregulated rent-housing sector. The figure below visualizes the investment volumes of the most important institutional investors in the Netherlands.

Figure: Investment volumes of the most dominant Dutch institutional investors. Source: Savills Research.

Mismatch between strict local housing regulations and investment interests of institutional investors

The councils in the major cities argue that institutional investors only realize expensive rent in the deregulated rent-housing housing sector, which starts at a minimum of €850. The gap between the social housing sector (€720) – and €850 is not fulfilled if institutional investors only realize housing above €850. In order to prevent excessive rent increases, some municipalities such as Amsterdam are thinking to implement the emergency button. The emergency button is a policy instrument of local governments where they think they can stop excessive increases in rental prices.  The implementation of the so-called emergency button will result in a substantial decrease of new construction in housing, a mismatch between local policies, and housing production. In addition, institutional investors would move to alternative locations outside the Netherlands or other investment classes. An appropriate public-private collaboration can help to realize both objectives. Additionally, there are no similar parties in the Dutch rental market which can take over the role of institutional investors. Housing associations focus only on social housing, because of the amendment of the “Woningwet”, so they are out. The mismatch between strict local housing regulations and investment interests of institutional investors causes irritation among institutional investors, slows down housing production, increases housing shortage in the long run and finally, it does not enhance housing affordability.

Delta Plan Dutch Housing

The underlying reasons for the mismatch between housing policies and housing production are the lack of planning capacity and slow spatial planning which makes housing scarce. The lack of planning capacity in the Randstad makes ground scarce and therefore extremely expensive. The increasing urbanisation in the Randstad results in housing shortages. Moreover, there has been a restrictive policy regarding new housing developments in the last couple of years. Overall, the mismatch between supply and demand in housing is worrying.

In order to counter this mismatch, municipalities should increase their planning capacity and lower their ground prices in order to enhance housing production. A Delta plan should address this mismatch. An overarching organisation consisting of provinces, municipalities, institutional investors, and developers focuses on housing production. The national government should designate specific urban development areas in the Randstad, determine reasonable ground prices for project developers, and choose stakeholders (i.e. institutional investors) which can speed up the process of urban development. This approach is favourable for institutional investors, governments, and residents. Housing shortage could be reduced and returns on investments for institutional investors would not be damaged by restrictive policies.

— By Scato de Smit

Arts-Led Gentrification in Amsterdam: The Influence on Property Values

Arts-Led Gentrification in Amsterdam: The Influence on Property Values

Gentrification represents a popular research topic in academia and is analysed from cultural, social and economic perspectives on change. In my research, I focused on the economic aspects of gentrification. One of the major problems connected to gentrification is the displacement of people from a lower socio-economic class by people from a higher socio-economic class. This means that we can speak of a case in which the loss of one person benefits another. Moreover, a frequent argument is that governments play a steering and/or stimulating role in gentrification processes since the upgrading of neighbourhoods often works to their advantage. Policymakers are said to use the creative industry as an instrument for gentrification in order to achieve policy goals such as reducing crime or attracting higher income groups to a specific area.

Increasing interest in creative people

The ‘creative class’ is part of the creative industry and is a hot topic since the turn of this century. Whereas attracting the ‘creatives’ was previously seen as a solution to make a city more successful, it is now often seen as a problem that leads to gentrification. The presence of artists in an area is one of the strongest statistical predictors of future gentrification, and forms a prerequisite to the first phase of the gentrification process in which artists are seen as ‘gentrifiers’ of a formally disadvantaged neighbourhood.

Amsterdam’s ‘breeding ground policy’

In line with Richard Florida’s influential book The Rise of the Creative Class, Amsterdam has tapped into the movement of supporting creatives with a specific policy ‘breeding ground policy’ (in Dutch: broedplaatsen beleid). Florida’s premises of the importance of attracting creatives to the advantage of the local economy have gained considerable influence in a variety of contexts, and have also become a mainstay for the city of Amsterdam. However, the assumption is that this arts-led gentrification leads to exclusion in the form of displacement. Although creatives also deserve a place in the city, the Municipality of Amsterdam is aware of the phenomenon of gentrification and the number of these creative clusters (‘breeding grounds’) has been increasing since 2002.

Breeding ground clusters are often temporary, which makes them highly ambivalent. Real estate owners can temporarily use creatives as a mean to increase their real estate values, since creatives can serve as a catalyst for urban (re)development processes, which increases the neighbourhood’s attractiveness.

Analysing the influence of creatives on property values

Due to the breeding ground policy that encourages clustering of creative activities in certain places in the city through subsidies, Amsterdam is a suitable case for measuring the influence of the creatives on property values. Based on the earlier mentioned arguments, I conducted research on the topic by focusing on changes in the structure of housing stock and on income levels, which allows residents with a higher income to enter new neighbourhoods. Based on open data from the Municipality of Amsterdam, I analysed 14 breeding grounds over the period from 2010-2014. I processed the open data focusing on the most detailed neighbourhood scale. As a disclaimer, it has to be mentioned that this choice influences the study results, and future research at a more detailed scale may display different results.

Over a period of five years, 14 breeding grounds have been established in Amsterdam. My results show that in none of the cases, there was a decrease in the share of social housing, leading to newcomers with a higher income entering the neighbourhood, in which the income levels and WOZ values (estimated market price according to the municipality) increased. This does not indicate that there is no decrease in social rent in the vicinity of the breeding grounds. This has taken place at 11 of the 14 breeding grounds, reflecting the trend in Amsterdam as a whole. In places where the share of social housing is higher than the average in Amsterdam, the Municipality of Amsterdam expected the largest changes. But even the share of social housing around the breeding grounds in these districts fell in accordance with the average of the district, or even less. Yet, displacement was found in the vicinity of three breeding grounds and allowed new residents with a higher income to enter the neighbourhood. In the 11 other cases, this was not seen. A possible explanation for this is the extensive share of social housing that still exists within Amsterdam.

The underlying idea of my research is the importance to find out what kind of influence a change in land use has. For example, it can be said that there has been no increase in property value in the vicinity of breeding grounds in this study, and that – counter expectations from the existing literature on the topic – a breeding ground in the area is not advantageous for real estate investors.

— By Daan Klaver

In the cold, calculated world of urban development, do relationships matter?

Much of the built infrastructure around us, particularly real estate and property, are generally described by urban planners and other practitioners in terms of quantifiable numbers such as square meters and cost. Through these quantities, a city becomes a sum of its individual numbers; its present condition, a summation of these various towers of mathematics. In this quantified world, we quite easily forget the qualitative – the people and the relationships that built the built environment. Through my graduate thesis, I explored these relationships to find out whether or not they really do matter at all in the arithmetic that is contemporary urban planning.

In 2011, the Municipality of Amsterdam launched a new Structural Vision for the city which promises to address much of the City’s housing shortages and defunct areas. It aims to transform industrial areas in Haven-Stad (Port-City) to residential and commercial spaces by building over 40,000[1] dwellings in the process. However, much of the land is owned privately and requires owners to be ‘persuaded’ to transform their properties – a policy new to urban planners at the city who usually redevelop municipally owned land without contention. The Municipality is struggling to meet these lofty housing targets and is seemingly at odds with developers representing property owners in Haven-Stad. The financial valuation is usually a prime point of contention.

Through a series of interviews with both city planners and private developers, it appears that behavioral elements such as trust and common goals considerably impact relationships. Flexibility in planning, measured in the thesis through negotiations or alterations to land-use plans, is impacted by those relationships; city planners went out of their way to accommodate developers and vice versa once trust was built. Negotiations proceeded smoother when both parties shared underlying development goals. Transformation takes effort and collaboration. As one municipal planner explained, converting one parcel of land can take up to two years of continued negotiations. The old top-down regime of drawing new plans on a blank slate simply does not work in Haven-Stad; owners have much of the bargaining power whether the Municipality acknowledges it or not. How the Municipality approaches those owners will dictate much of whether or not the transformation will occur.

The findings showcased that relationships can and do affect ‘behavioral flexibility’ among actors. In the case of Haven-Stad, this meant that stalemate simply cannot be attributed to financial disagreement. It stems from a lack of communication, trust, and shared goals as well. Traditionally, Dutch city planners develop indicative plans and then proceed to negotiate with stakeholders. Often the actors’ goals are so far apart that resolution is impossible. This thesis suggests instead that starting with negotiations rather than those indicative plans can lead to an understanding between these divergent actor groups, leading to more representative indicative plans.

In this urban planning sphere, the quantitative is not enough to explain some of the flaws in the Haven-Stad. It lies deep in the qualitative nuances of relationship dynamics. The flaw seems to stem from a discord between the Municipality’s somewhat lingering authoritative behavior and the ideal collaborative behavior required for a transformation endeavor. The land-use plan itself is promising, intriguing, and captivating – even logical. However, the persistent mistrust between parties, lack of financial transparency, and lack of communication all indicate that an alternate starting point in transformation is necessary for future spatial policy.

— By Adhish Gurung


[1] Municipality of Amsterdam. Port-City: redevelopment area. https://www.amsterdam.nl/projecten/haven-stad/