ARTICLE
20 September 2023

Affordable Rent Act – An Update

In the beginning of 2023, the draft 'Affordable Rent Act' (Wet betaalbare huur) was published. This Act intends to regulate mid-market rents in the Netherlands and amends the current rent regulation as per 1 January 2024.
Netherlands Real Estate and Construction
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In the beginning of 2023, the draft 'Affordable Rent Act' (Wet betaalbare huur) was published. This Act intends to regulate mid-market rents in the Netherlands and amends the current rent regulation as per 1 January 2024. On 12 September 2023, the Parliament has decided to continue processing this draft Act, despite the collapse of the government during the summer. In this update, we highlight the most important elements of the draft Act.

On 27 February 2023, the Minister of Housing published the draft 'Affordable Rent Act' (Wet betaalbare huur).This Act regulates mid-market rents and amends the current rent regulation. At the time the Act was published, it was the intention that the Act would enter into force on 1 January 2024. With the downfall of the Dutch government on 6 July 2023, it became unclear what implications the collapse would have on the (enforcement of the) Act. On 12 September 2023, Parliament has determined that this Act is not a controversial legislative proposal, meaning that Parliament will continue to process the Act. However, it is yet unclear whether a majority in Parliament will vote for the Act, since the coalition agreement between the governmental parties is no longer in place and after the elections of 22 November 2023, a new House of Representatives will be installed. The draft legislative proposal may be amended prior to and during the review in Parliament.

Three new segments and new terminology

The Act procures that the rental housing market will be divided into three segments: the low segment, the (new) mid segment and the high segment. Homes with an amount of points up to and including the 'low rent threshold' constitute the low segment. The exact number of WWS points corresponding to the low rent threshold will be definitively known as per 1 January 2024 (as indexations still take place in the meantime) but will correspond with the current rent control ceiling (liberalisatiegrens), which is currently set at EUR 808.06 (corresponding with 135 WWS points since 1 July 2023). Homes as from 136 points up to and including the so-called 'mid rent threshold' of 186 points (corresponding with EUR 1,123.13 as of 1 January 2024) constitute the mid segment. Homes with 187 points or more constitute the high segment. In both the low and mid segments, commencement rents will be regulated according to the WWS points system (whereas, currently, only homes in the social sector are regulated), meaning that commencement rents of homes in both the low segment and the mid segment will be maximized in accordance with the number of points attributable to such home, further to the existing WWS point system.

Adjustment of WWS points system

The WWS points system will be adjusted as follows:

  • the number of points based on the WOZ value of the unit will fully apply in the midmarket segment up to 187 points (whereas they are currently capped at 33%). The cap will remain applicable for units as from 187 points to prevent units to become liberalized based on the WOZ value of the unit;
  • more points will be attributed to units with energy label A or higher. For units with energy labels E, F and G, a decrease of points will apply. To make units more ustainable, investors can apply for a subsidy; and
  • more points will be attributed to outside spaces.

Furthermore, for newly built units that are constructed after 1 January 2024 (and of which the construction has started before 1 January 2025), a surcharge of max. 5% to the maximum rents will apply during the first 10 years. This measure aims to prevent a delay in current new build projects. This surcharge will apply only to mid segment homes and will not affect the segment into which the home falls. The existing WWS points for new construction will be phased out.

Indexation

Indexation of rents in the low and mid segments will be maximized. For the low segment, the maximum is equal to the annual wage development (with an exception for (middle) high incomes). For the mid segment, the cap amounts to annual wage development + 0.5%.

For the high segment it is not yet known whether a cap will apply. Until 1 May 2024 the current, temporary cap will apply to that segment (amounting to the lower of CPI + 1% or the annual wage development + 1%). On 13 July 2023, the Minister of Housing announced that he intends to extend the cap until 1 May 2027 based on annual wage development + 1%. The Minister expected to be able to publish a draft legislative proposal to this effect after the summer of 2023. The extension is intended to enter into effect as per 1 May 2024. So far, the draft amendment has not yet been published.

Difference between new and existing leases

The three new segments will only apply to "new leases", thus to leases entered into as of 1 January 2024. Existing leases remain 'regulated' or 'liberalized' under the current system. Excepted from this rule are existing 'liberalized' contracts with a number of points below the 'low rent threshold': the rent of these agreements must be brought in line with the WWS points after a grace period of 1 year, thus ultimately by 1 January 2025.

WWS point system becomes mandatory

For the new low and mid segment, the WWS point system becomes mandatory. Tenants will be able to have their rent assessed by the Rent Committee (Huurcommissie) throughout the entire term of the lease (instead of only during the first 6 months of the contract), which can lead to a reduction of the rent. In addition, the municipality can take enforcement action if the rent is too high, i.a. by imposing public law penalties. Also new is that a WWS point calculation must be attached to each new lease by the landlord (in all segments).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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