Who is going to finance new housing?

Het Financieele Dagblad
Erasmus School of Economics

The question of housing keeps many people busy. How is the construction of all these houses going to be paid? In an article by Het Financieele Dagblad, Professor of Financial Markets at Erasmus School of Economics Mary Pieterse-Bloem explores some of the options.

By the end of the next decade, the Netherlands is predicted to have a population of more than nineteen million. A million houses will need to be constructed in the coming years to accommodate them all. The only remaining issue is who would fund such a massive building project.

The possible role of real estate banks

Banks invest in residential and commercial real estate, but not in the land and infrastructure required to create. A real estate bank might be an alternative for reviving development projects that have stalled. A real estate bank specializes on commercial real estate lending. The majority of its clients are investors in shopping malls, retail assets, commercial properties, industrial estates, and metropolitan and provincial office buildings.  Historically, real estate banks were distinct entities that functioned independently, albeit they were sometimes affiliated with a larger bank. Pieterse-Bloem wonders as to what issue a real estate bank is truly assisting in resolving. The issue is not financial; it is one of coordination, she asserts. For financiers, there are too many uncertainties: governments that make permit procedures complex, shifting nitrogen and CO2 limits, and cumbersome laws for inner-city building.

Banks are disadvantaged by capital constraints

The government's control must be reclaimed; the Living Environment and Infrastructure Council concurs. Pieterse-Bloem, on the other hand, sees little value in a government that assumes central control. She views the government as more of a friction hunter, reducing impediments and incompatible rules. She recognizes that a 'wall of money' is in place but laments that banks are falling behind other financiers due to all those additional capital requirements. Pieterse-Bloem isn’t worried about the banks' position becoming marginalized. 'Banks have a track record of accurately calculating and pricing risks, and they will continue to do so.' As a result, banks will be able to operate considerably more as consultants and intermediaries between financiers and purchasers.

More information

You can download the full article from Het Financieele Dagblad, 29 November 2021, above (in Dutch).

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