Case study Netherlands: Rent control
Image by Fons Heijnsbroek
Silicon Valley politicians, activists in the Housing Dept, and subsidized housing zealots continue to campaign for more destructive rent control programs, even as international (and U.S.-based) data piles up proving it doesn't work. Andrew Stuttaford reports for National Review on rent control failure in the Netherlands.
Price controls make shortages worse. Rent control is, notoriously, no exception to that principle. And still rent control is put in place again and again, normally because the electoral rewards it generates for the politicians who advocate it outweigh (to them) the economic mess that rent control leaves in its wake, a mess made worse by the fact that once put in place, the same political incentives make it very difficult to remove them.
And so to the Netherlands.There is a growing number of Dutch people struggling to find a rental property after a new law designed to make homes more affordable ended up aggravating a housing shortage. Aiming to protect low-income tenants, the government in July imposed rent controls on thousands of homes, introducing a system of rating properties based on factors such as condition, size and energy efficiency.
The Affordable Rent Act introduced rent controls on 300,000 units, moving them out of the unregulated market.The Netherlands has the highest proportion of rent-controlled properties in Europe. Eighty percent of those were rent-controlled before the new law was introduced. Now the total is 96 percent.
The law (which, among its provisions, bans fixed short-term leases) is a consequence of the fact that the Netherlands’ population is increasing. To keep up with population growth, the country needs to build roughly 100,000 new homes a year, but is only managing two-thirds of that.
The goal was to protect lower- and middle-income residents from unscrupulous landlords, who had become increasingly predatory, according to Hugo de Jonge, the former housing minister who introduced the legislation.
De Jonge, a centrist (more or less) conceded that the “reform” would mean “pain.” And in that respect his “reform” has delivered. Landlords are selling up; others are abandoning expansion plans.
Leaders report that prices are already increasing, “People at the lowest income levels will benefit from the tight rent caps, those a bit higher on the economic ladder are being squeezed into a dramatically smaller private market.”And, in the end, those at lower income levels will be hurt as the system sinks ever deeper into stagnation, with limited incentive for builders to build more rental housing.
Rent control does what it does.One of the early steps taken by Argentina’s Javier Milei on taking office was a major liberalization of the country’s restrictive rent control regime. The liberalization had an almost immediate positive effect, lowering prices, and increasing supply.
The Argentinian and Dutch stories are different versions of the same endlessly repeated lesson.It will probably still go unheeded, because the political rewards for doing so are worth it.
Read the whole thing here (behind paywall).
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