As Amsterdam Overheats, Investors See Rent Cap Scaring off Money

(Bloomberg) -- Two of the largest investors in Dutch housing say a government proposal to cap some rents would drive projects out of cities such as Amsterdam and make an existing shortage worse.

“Investor appetite will decrease and fewer houses will be built, while the only remedy to the housing problem is to build more,” said Gertjan van der Baan, chief executive officer of Vesteda, a real estate investment company based in the Dutch capital.

Policymakers in the Netherlands are struggling to keep homes affordable for middle-income households in the major cities. Last month, the price of an average home rose above 300,000 euros ($342,000) for the first time, up from 230,000 euros in 2015, government statistics showed. Rents are also increasing.

Interior Minister Kajsa Ollongren is working on legislation that would give municipalities with tight housing markets a so-called emergency button: the power to cap prices for new rental contracts at a certain percentage of a government-set property value. The law seeks to keep rental homes -- both newly built and used -- within the mid range of 720 euros to 1,000 euros.

The left-wing Amsterdam government would push such an emergency button “as soon as possible,” a city spokeswoman said by email. Laurens Ivens, the capital’s top housing official, earlier this week proposed to set the limit at 3 percent of the property’s value per year. That would mean rent for a house valued at 400,000 euros couldn’t exceed 1,000 euros a month.

Amvest, a Dutch housing investor with some 5.3 billion euros in assets, said the proposed law could impact current projects and also have negative consequences for the company’s future investment.

“Investors would avoid cities with such an emergency button and the successful policy of recent years will come to a halt,” Amvest said by email.

Realtors association NVM estimates the Netherlands needs 80,000 new homes a year to keep up with demand. But it said the country won’t meet that goal this year, after falling short both last year and in 2017.

With the rising construction costs and increases in land prices, it is already “very, very difficult” to get a decent return and a rental cap will make it even harder, said Vesteda’s Van der Baan, whose firm is backed by pension funds.

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