Mid-Market Rental (Measures) Act passed in the Senate and the Hague Housing Regulations
In early 2018, we informed you about the plans of Minister Ollongren (Interior and Kingdom Relations) to combat the shortage of housing in the mid-market rental segment (a rent ranging between € 720.42 and approximately € 1,000 per month). In the meantime, these plans have led to the adoption of the Mid-Market Rental (Measures) Act (Wet maatregelen middenhuur), which was adopted by the Senate on 28 May 2019 and is expected to come into effect on 1 July 2019.
Scope of the Mid-Market Rental (Measures) Act
The scope of the municipal housing regulations is more broadly defined by the introduction of the Mid-Market Rental (Measures) Act. Whereas the current Housing Allocation Act 2014 only offers the possibility to regulate the occupation and provision of 'cheap housing', the addition 'cheap' will disappear from the Act after the new Act comes into force. This makes it clear that the distribution of non-economic housing (i.e. housing with a liberalised rent) can in principle also be regulated through housing regulations. This does not seem to be a substantial material change: the concept of 'cheap' is not defined in the existing legislation, for which reason homes with a liberalised rent could already be included in this category in the current situation. However, the legislative amendment removes the possible space for debate about the scope of the term 'cheap rented housing', which in itself benefits legal certainty.
On the other hand, the forthcoming legislative amendment will not affect the fact that the municipal council may only act in a regulatory manner if this is necessary to combat unbalanced and unfair effects of scarcity of housing. The expectation is that such unbalanced and unfair effects will not easily occur in the upper segment of the rented housing market. The legislative amendment will therefore not change anything for those houses.
The legislative amendment further intends to encourage housing associations to invest in the mid-market rental segment. Such investments do not form part of the core tasks of the approved institutions, with the result that they can only be made with the approval of the minister. The procedure for obtaining this approval will - as we already announced in our earlier notice - be greatly simplified as from 1 July 2019.
The Hague Housing Regulations
Although the forthcoming legislative amendment thus appears to be mainly a confirmation of the theoretically already existing possibility to regulate the distribution of scarce liberalised rented housing, practice has now shown that the amendment can definitely set changes in motion. In anticipation of the entry into force of the Mid-Market Rental (Measures) Act, the municipal council of The Hague has decided to revise the housing regulations, which provides for an expansion of the existing regulation of housing in the non-liberalised segment.
At the time of publication of this newsletter we did not have a fully consolidated text of the amended housing regulations, but the purport of the amendment is that the existing permit requirement with regard to the occupation of non-liberalised rented housing will also apply to the occupation of 'medium-priced housing'. It is important to note that only households with an annual income below € 55,000 (single-person household) or € 65,000 (multi-person household) will be eligible for a permit to occupy medium-priced housing. According to the bylaw, a medium-priced rented house is a house with a rent above the rent-control ceiling (currently € 720.42) and a points system-based rating not exceeding 188 points (as from 1 July 2019, a maximum rent of € 967.24 will apply).
If a house in this category is occupied (tenant) or made available for use (landlord) without a housing permit after the entry into force of the new bylaw, the Municipal Executive will in principle be able to take enforcement action (i.e. enforce the termination of the use) while, in addition to this, an administrative fine may be imposed on the infringer. The amount of the fine to be imposed on the landlord in the case of commercial letting will be € 10,000 (€ 20,000 in the event of recurrence).
An interesting aspect of the new Hague regulation is that the permit requirement already known from the social housing sector, including the associated income requirement, will apply to rented housing in the mid-market segment, while on the other hand the equation of the mid-market segment with social housing will not extend to the enforceability of the maximum statutory rent that applies to non-liberalised rented housing. This means that, despite the permit requirement, medium-priced rented housing can, in itself, still be rented out 'for the highest price'. However, the expansion of the permit system and the associated income requirement will lead to a reduction of the group of potential tenants. This is reasonably expected to lead to increasing pressure on average rents in the mid-market segment. It remains to be seen whether and to what extent this effect will actually occur in practice, as well as the effect of the measure on the distribution of scarce housing in The Hague. The extent to which the Hague example will be followed by other municipalities will most probably partly depend on the experiences that will be gained in The Hague in the coming period.
If you have any further questions on this issue or would like to receive more information, please contact Guido Koop or your trusted adviser at the Loyens & Loeff Real Estate Team.