Dutch Rent Control Struggles Offer A Cautionary Tale for the U.S.

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The Netherlands' rent control law is worsening the housing shortage, offering a cautionary lesson for the U.S., where similar policies risk reducing rental stock and housing quality. Plus, this week in Propmodo Technology, we’re diving into vertical transportation with the support of our friends at Otis.

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Dutch Rent Control Struggles Offer a Cautionary Tale for the U.S.

A new Dutch rent control law designed to make homes more affordable is backfiring and aggravating the nation’s housing shortage. This July, the Dutch government imposed rent controls on 300,000 apartment units, moving them out of the unregulated market and giving the Netherlands the highest proportion of rent-controlled homes in Europe.

The Netherlands needs about 100,000 new apartment units annually to keep up with population growth, but it’s built an average of two-thirds that many over the past decade. This shortfall has driven up prices for unregulated apartments since 2012. And with more properties pushed into the rent-controlled market under the new laws, many apartment owners are choosing to sell.

Michael Vrijman, who runs the Dutch operations of a Swedish company that owns 13,500 flats across the Netherlands, says the “sad reality is that for home seekers, it now has become harder than ever to find a rental property in an already tight market.”

The Netherlands’ struggles with rent control may provide a warning for the U.S., where policymakers increasingly consider rent control as a solution to the nation’s affordable housing crisis.  In July, the Biden administration called on Congress to pass legislation penalizing some corporate landlords for rent increases above a certain level.

As calls for rent control grow louder, some economists warn of potential adverse effects. Economists at the Federal Reserve Bank of St. Louis recently wrote that despite innovations to rent-control laws meant to maintain housing supply, research shows that these policies typically decrease rental stock. 

Other downsides include a negative effect on housing quality, with rent-controlled units becoming more dilapidated as landlords have less incentive to maintain them. With affordable housing a vital issue in an election year, the rent control debate will likely continue even if most research has proven the trade-offs might not be worth it.

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