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The City of Amsterdam and investors agree on the construction of cheaper rental properties

Published on 25-02-2020

In brief

Investors promise to build ten thousand cheaper homes in Amsterdam over the next five years

In exchange, they are allowed to increase the rent more strongly than they have so far, and the municipality is going to look again at the land price.

The so-called middle button emergency button, a rent ceiling for the free sector, remains a hot issue.

The municipality of Amsterdam has made agreements with investors and developers about the construction of cheaper rental properties. Over the next five years, market parties in the capital will build ten thousand so-called mid-rental homes, according to an agreement that the parties will sign on Monday. Medium rent includes homes that cost between approximately € 740 and € 1030 per month.

To be able to make the agreements, responsible alderman Laurens Ivens had to weaken the rules for new construction in Amsterdam. Investors have been offending the strict requirements they have for some time. Some have therefore already ignored construction sites in the capital, the FD wrote earlier.

For a long time Ivens insisted that there were enough tenders for public tenders in the city, and that an adjustment of the rules was therefore not necessary. That has now changed. "We saw that investors who want to stay in the long term threatened to drop out," he says.
 
Rent increase

In exchange for the promise to build a large number of homes, investors can increase the rent with inflation plus 1% during the first twenty years. Until now, that was only with inflation for 25 years.

After twenty years, the same rent increase for five years only applies to existing lease contracts. If a new tenant arrives, investors may request the market rent. After 25 years, investors are allowed to raise rents faster or sell the properties. For social rental properties, this period increases from the currently applicable 15 to 25 years.

Moreover, the municipality of Amsterdam is willing to lower land prices if necessary. The costs of land are calculated in the municipality by deducting the construction costs from the purchase price of the houses, or from the amount that they are expected to generate in rent. According to investors, the prices that that yields are so far too high. In the agreement, the municipality promises to review the calculations.
 
Existing properties

Frank van Blokland, director of industry association for institutional investors IVBN, emphasizes that IVBN members would like to cooperate in a solution for the housing shortage. "We are maximizing our options to contribute to new construction and existing construction," he says. Institutional investors manage money from, for example, pension funds or insurers.

Ivens is proud of the agreements on existing rental properties. Until now, the councilor only has an impact on the rent of new homes, while existing homes often become considerably more expensive when a resident leaves. The members of the IVBN and of Vastgoed Belang, an association of private investors in real estate, now undertake to increase rents up to a maximum of inflation plus 1% over the next four years.

In addition, they will rent out part of the homes released for an appropriate price to households with a middle income. That is a gross annual salary of roughly € 40,000 and € 60,000 per year.
 
Emergency button

A hot issue that remains is the so-called emergency button in the middle rent. That is a measure with which Minister Stientje van Veldhoven (Home Affairs) also wants to curb rents with new contracts. It is something that Ivens has asked for, and what investors see as a major threat to their returns.

The agreement that has now been concluded states that the parties can revise the agreements if new rules give cause for this. "If the initial rent [the rent with a new contract, ed.] Is regulated somehow, the deal is off the table," says Van Blokland.

Ivens emphasizes that the agreements relate to the current rules, and that it is too early to speculate about future rules.
 
BRON: Financieel Dagblad, 3 februari 2020
Nieuwbouw woningen in de Houthavens in Amsterdam.Foto: Mariette Carstens/Hollandse Hoogte