Column: The financialization of Dutch housing

The financialization of Dutch housing
Cody Hochstenbach

This column was prepared for Grace Blakeley’s presentation of her book Stolen in Utrecht, the Netherlands (FNV, 14 November 2019).

We are facing a housing crisis in the Netherlands, especially in our cities. The current house price boom in Amsterdam is unprecedented. According to the UBS Real Estate Bubble Index, there’s not a single other major international city that saw stronger price increases over the last five years. Utrecht, where we are now, doesn’t lag too far behind either, with house price increases far outpacing income growth. Our cities are increasingly unaffordable and inaccessible for the many.

These worrisome trends do not come out of nowhere though. Interestingly, even though the Dutch social-rental sector is still relatively large, almost 30% of the housing stock is owned by not-for-profit housing associations, the Dutch housing market is a highly financialized one.

In the pre-crisis period, up to 2008, price increases were driven by ever expanding mortgage credit. The Netherlands are, in fact, the mortgage-debt champions of Europe, or even more or less the whole world. In no single other country is the per capita mortgage debt as high as it is here. Households have to take on huge debts in order to buy a house. They have to take part in the Ponzi scheme of debt-driven homeownership, exactly the kind of privatized Keynesianism Grace talks about in her book Stolen.

Just like in the UK, house-price increases in the Netherlands were enabled and maintained by ever expanding mortgage debt. However, the Global Financial Crisis sent house prices spiraling downwards. The debt-driven growth model proved to be unsustainable. In the post-crisis world this model has therefore been replaced by a wealth-driven growth model. It is private capital that now washes into urban real estate, driving up property prices.

This private capital comes from different sources.

First, there are the big firms. Private rental housing has become an interesting investment object for a range of investors. Think of hedge funds, real-estate investment trusts and pension funds. Attracting such firms has been a cornerstone of Dutch housing policy in recent years. Our former minister of Housing, Stef Blok, now minister of Foreign Affairs, used to visit international real estate fairs to entice foreign investors to buy up Dutch social housing, offering the prospect of steep rent increases and profits.

Second, and perhaps more importantly, there are the wealthy individuals.  Just like in the UK, the Netherlands has seen a remarkable revival of private landlordism in recent years. Wealthy individuals buy up extra property to rent out. In Amsterdam, up to 25% of all purchases are made by such private investors. Taken to its extreme, this increase in “buy-to-let” results in the creation of a class of rentiers and a class of renters.

The rentier class can use multiple properties to extract rent and accumulate wealth, without really contributing to the productive economy. Their economic model is a speculative one and contributes to staggering levels of wealth inequality. The Netherlands is in fact one of the countries with the strongest wealth inequality in the world, with the housing market being a major driver.

The investment function of housing has become more dominant, pushing the consumption function of housing to the back. That is the house as a home, as a lived space.

The financialization of housing profoundly influences the social fabric of our cities. The population of cities like Amsterdam and Utrecht is rapidly growing, yet social-housing numbers are dwindling.

After decades of promoting the market and cutting back on social-rental housing, the ideal to build cities that are affordable, socially just and environmentally sustainable seems to drift out of reach. It is presented to us as a hard, natural law that improvements to our cities will always make them more expensive, excluding lower-income groups.

As a consequence, spatial inequalities are increasing. Economic, cultural and political capital concentrate in the gentrifying urban cores, while social problems increasingly concentrate in post-war estates struggling with disinvestment, safely out of sight from the ruling elites.

Almost one in five Dutch tenants now struggle to pay the monthly rent. This used to be only one in twenty in the early 2000s. Recent years have seen the introduction of temporary rental contracts, strengthening landlord power, something that’s pretty much standard in the UK but new here. Young adults are stuck in the parental home, or pay half their income in the private rental sector.

Perhaps most worrisome, the number of homeless people in the Netherlands has more than doubled since 2009.

But these outcomes are not the inevitable result of a set of natural laws; they are the outcome of political processes and political decisions. It is therefore also  possible to contest these decisions and propose radically just and sustainable alternatives. Grace Blakeley’s book Stolen points us the way.