Too little is done to tackle the problems on the housing market
Erasmus School of Economics

During this year's Budget Day, the problems on the housing market were highlighted by the king, but the government is still doing too little to tackle the existing problems. ‘Little to nothing is actually changing', says Matthijs Korevaar, Assistant Professor of Finance at Erasmus School of Economics.

Very little changes

On average, houses have become 20% more expensive since the start of the corona crisis. Renting prices have also risen sharply, putting housing affordability under pressure. The question remains how homes will once again become accessible to first-time buyers. According to Korevaar, the government has no clear answer for the time being. Little to nothing is changing, is the conclusion. ‘The government has released 100 million euros to stimulate housing construction, but that is just a palliative.’

The government even explicitly warns against the lack of solutions. Since the current government is demissionary, the annual budget contains no major policy changes. Some investments were announced, including 100 million for new construction and a 30 million discount on the landlord levy. According to Korevaar, however, that 30 million euros will make little difference. The landlord levy will increase if the WOZ values continue to rise, says Korevaar. ‘Housing corporations may therefore have to pay even more.’

Abolish mortgage interest deduction

‘The tax incentives for home ownership are cited as one of the main causes of the high purchase prices,' says Korevaar about the Budget Memorandum. ‘Economists have been in agreement on this for some time, but the government itself now explicitly acknowledges that its own policy has had a major impact on housing prices. However, still no steps are being taken to change the current policy.’

The mortgage interest deduction encourages people to finance the purchase of their homes with debt. That gives people an incentive to spend a relatively large amount of money on housing. Advisory bodies therefore argued that the mortgage interest deduction should be abolished sooner rather than later. 'The low interest rate ensures that this step can be taken relatively easily now', says Korevaar.

Assistant professor
More information

The full article from, 27 September 2021, can be found here (in Dutch). 

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