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Report of Executive Board of Directors

Focus on affordability

  • To meet growing demand for affordable homes focus on mid-rental segment

  • Challenging competitive market to acquire good locations cost-effective

  • Optimise our financial and social returns with lower risk profile

  • Moderate rent increase policy

  • Lobby with sector towards government to tread new restrictions

Optimising our financial and societal returns

One of the biggest issues facing us today is the increasing lack of affordable homes for middle-income families in the Netherlands, especially in major urban centres. We firmly believe that the only structural way to address this shortage is to build more affordable homes. This is why the Fund has decided to focus even more sharply on the mid-rental segment of the Dutch rental market, or homes in the € 720 - € 1,000 (as per January 2020, € 737 - € 1,027) price bracket. This will give us a portfolio that is fit for a future that will see a sharp rise in the number of one-person and two-person households and even greater demand for affordable housing. With our investment objective in mind, our ambition is to have 60% of the total acquisition pipeline consist of homes in the mid-rental segment. To realise this 60%, the Fund will have to pull out all the stops to make acquisitions cost-effective.

As noted above, new (local) policies related to the mid-rental segment - such as maximum starting rents, minimum surface areas, lower rental indexing and mandatory operating periods - are already having an impact on investment cases and the feasibility of any targeted returns. However, due to the persistent strong demand for mid-rental segment homes now and in the future, there will be virtually no question of rental risk. In addition, we expect these homes to continue to be a highly interesting investment long into the future. We believe this results in a lower risk/return ratio for this segment than for regular liberalised sector homes.

The Fund has taken measures to keep its current housing stock affordable. For the past two years, we have capped our rent increases at inflation plus 1% in 2018 and at inflation plus 0.5% in 2019. In 2019, we also lowered the income requirements for our rental properties, so more people will be eligible to live in them. In 2019, we rented out two properties to a specific target group based on income. Of course, we are also closely monitoring personal affordability to prevent any increase in rent in arrears. The biggest challenge is to increase the supply, by building more mid-market rental homes and investing more in housing across all sectors. The Fund will therefore focus even more explicitly on the mid-rental segment when considering or making acquisitions.

On Budget Day 2019 (‘Prinsjesdag’), the Dutch national government announced various measures to improve access to the housing market, such as: maintaining affordable rental properties in the existing stock by limiting the share of the ‘WOZ’ (Real Estate Value Act) value in the housing valuation system at 33%, improving the distribution of affordable rental properties in the existing stock (including tackling the problem of people with a middle or high income living in regulated rental homes) and incentives of € 2 billion to make up for the housing shortage. Furthermore, we are seeing the emergence of best practices, such as the municipality of Utrecht’s ‘City Agreement’, with Utrecht emphatically committed to cooperation and dialogue with market parties to achieve joint housing market objectives, including increasing the number of mid-rental homes. 

Bouwinvest and the Residential Fund will continue to lobby both national and local governments to stress the dangers of over-regulation in a market that is already under pressure due to the current lag in house production. Ultimately, we all want the same thing, a plentiful and sustainable supply of high-quality affordable homes, and we will only achieve this by working together to find solutions that are in the best interests of everyone involved, from tenants right though to investors.   

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