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Drastic changes to the housing valuation system

Drastic changes to the housing valuation system

Minister Stef Blok (Housing and the Central Government Sector) plans to introduce a new points system for valuing housing in the context of determining the maximum rent. The minister said that the current system could be improved and simplified by making more use of the WOZ value, the value of the home for property tax purposes.

Location and type of housing
One point of criticism on the current system is that the location of the home is hardly taken into account in the determination. This could be improved by using the home’s WOZ value instead of the complicated way in which the environment is presently taken into account. Location plays a large part in setting the WOZ value of a home. The type of housing is also a decisive factor in the value of a home. Currently the categories of single-family house, end-of-terrace or mid-terrace house and apartment are used. Replacing this method with the WOZ value would also create more consistency with the market value and would simplify the system.

Other parts of the housing valuation system lend themselves less readily to being replaced with the WOZ value. Changing the surface area would result in too great a change, for instance, and energy performance was only recently added after a careful process.

Scarcity points
The scarcity points in the current system must be scrapped since the WOZ value already takes into account the scarcity and tension between regions. The price per point will be increased in order to keep the total rent the same. The system still has to be worked out in detail, but it is expected that approximately 25% of the rent will be determined by the WOZ value.

Maximum rents
Including the WOZ value in the calculation means the maximum rent could change periodically. The government says this change is a good way to reflect changes in market preferences. The actual rent charged cannot increase more on annual basis than the rent increase permitted by law however. Maximum rents could also push rents above the rent-control ceiling, which means the homes could be rented on the unregulated market. The change to the system cannot result in more homes being able to be rented on the unregulated market however.

Support
The government held intensive consultation with the national tenants’ and landlords’ organisations such as De Nederlandse Woonbond (Netherlands Union of Tenants), Aedes (umbrella organisation of housing associations), IVBN (lobby organisation for institutional investors in Dutch property) and Vastgoed Belang (umbrella organisation of private property investors). The parties are not in agreement on all the points. On a number of points the government has opted for an intermediate form, so that there will be sufficient support to push the key points from the Housing Agreement through.

The Woonbond opposes compensation for the scrapping of scarcity points. The Woonbond feels that these should be scrapped without the price per point being increased. Not just the landlords’ earning capacity should be kept in mind, but affordability for tenants as well.

Aedes, the umbrella organisation for housing associations, wanted to retain the total earning capacity, including the value of the scarcity points already awarded in certain areas. The scrapping of the scarcity points could easily result in a difference of EUR 100 per home. This is expected to cause rents mainly in the big cities and the province of Utrecht to decline or to eliminate the incentive to build starter homes in these areas to too great an extent. Aedes would rather have seen a variant in which the elements of residential environment, housing type and scarcity points are replaced with the individual WOZ value per square metre.

The organisations are also divided on the consequences for homes that are near the rent-control ceiling. The Woonbond and Aedes want it to be possible for homes that have entered the unregulated market to revert to the subsidised rented sector, while IVBN and Vastgoed Belang want it to be the case that once a home enters the unregulated market, it may always be rented out on the unregulated market thereafter. They expect that otherwise investors will concentrate on building homes that are well above the rent-control ceiling, simply for the sake of certainty.

IVBN finally also pointed out the uncertainty that arises for new-build homes. These homes do not have a WOZ value. This causes uncertainty for the landlords about future rental income.

Introduction
The introduction of the new points system requires amendment of the Residential Tenancies (Rent) Decree and possibly also the Housing Rents (Implementation) Act and/or the Valuation of Immovable Property Act. The target date for introduction is 1 July 2014.

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