Why buying houses remains out of reach for most young people (and building more is not the solution)
House prices continue to rise and, for most first-time buyers, the dream of owning a home has been out of reach for years. At least, without a pile of cash from mum and dad. But building more isn’t the solution, writes journalist and UvA alumna Maaike Schoon in her book Waarom jij geen huis kunt betalen (Why you can’t buy a house, ed.). “More money just means that houses become even more expensive.”
Let’s get straight to the point. Why can’t first-time buyers buy a home?
“The root of the problem lies in land prices. Land is a financial product and the oldest asset class in the world. When there is a lot of money, people want to invest it somewhere. Especially when interest rates are low and there are few other opportunities to make a profit, land is the best investment.”
“People all want to live in the same location, in Amsterdam’s city centre for example. That’s where house prices rise first, and it spreads like wildfire. You could build more houses, but the problem is you can’t put them all in the centre of Amsterdam. There is still the same amount of land in that exact location. If more money becomes available, the only consequence is that prices rise. If you can get a higher mortgage, house prices go up; it’s almost a one-to-one relationship.”
“A lot of subsidies have gone into housing construction, but studies by the Centraal Plan Bureau (CPB) concluded that this hasn’t directly led to more houses, but it has led to higher land prices.”
“The CPB has also calculated that for an average house with an average income, you need to put in a hundred grand of your own money. But who the hell has a hundred grand on their bank account? Prices are now so high that it is becoming unaffordable for an ever-increasing proportion of the population to buy a house.”
So who can actually buy a house?
“It’s never been a problem for wealthy people. But those starting from the bottom can’t get a foot in the door. The housing market is now a living game of Monopoly. Once you’re in the system, you get richer without having to do anything for it.”
Why is it so important for Dutch people to be able to buy a home?
“Nowhere else in the world are there as many tax benefits for homeowners as in the Netherlands. As a homeowner, the government kind of spoils you when it comes to tax. We consider it so important that everyone has their own home that you receive political support for it.”
“I have read anecdotes from the 1980s, when people could choose between social housing and buying. They show that people didn’t really have strong opinions on the matter. Boomers bought their homes because it was recommended to them, because it was sensible, but not because they intrinsically believed it was better. That has certainly changed.”
Do rising prices for owner-occupied homes also lead to a tighter rental market?
“If land prices rise, that also affects the construction of new social housing. Especially if you’re dependent on housing associations that don’t own their own land. In that case, homes can still be built, but the landowners are asking top dollar for the site.”
“In addition, there is now a larger group of people reliant on a smaller pool of social housing because house prices have risen so dramatically relative to disposable income. Over the past forty years, there has been a very clear choice to prioritise stimulating the owner-occupied housing sector. If, alongside the owner-occupied housing market, there were a social sector functioning extremely well, you could still say: fine, go ahead, you buy a house and I will rent. But there isn’t. Social housing could act as the buffer you need to ensure people can actually just live. If you scale that back and heavily stimulate the owner-occupied market, this is what you get. Then there is no buffer left.”
In politics, many explanations are given for the unaffordability of housing. Is that consistent with what is actually happening?
“In politics, the answer is often given that there are too few homes. But that’s not the whole story. The implication that if you build more homes, you’ll solve the housing crisis, isn’t true. It’s not just a question of supply and demand, but also a question of distribution. How do you distribute the available space among people? And what do you consider fair in that regard? It’s fine to build more homes, but that won’t bring house prices down. The bottom line is that there is too much money in the market.”
“Mortgage interest relief is also driving up prices. I do understand why people say: “Thanks to mortgage interest relief, my son was able to buy a house.” But if that hadn’t been there, he might just as well have been able to buy it, because prices would have been lower.”
What about migration?
“The migration issue is complicated. There are too few social housing units, so more and more people are competing for fewer and fewer homes. But that’s not the reason you can’t afford a house. Refugees have nothing to do with house prices, because they can’t afford a home themselves either.”
“By focusing the debate on migration, you’re ignoring the fact that house prices have risen by 200 per cent since 1995. That’s a far more important reason why you can’t afford a home. The crux of the problem lies in who has what and who is protected by the system. The people with the highest incomes and the biggest homes are still often native Dutch people.”
Maaike Schoon studied theatre studies at the University of Amsterdam and went on to complete a master’s degree in journalism in Groningen. She has written for, amongst others, Het Parool, Opzij and Quote. For Vrij Nederland, she writes about politics and economics, with a focus on the housing market.
Since 2021, she has also been the presenter of the VPRO programme Buitenhof, where she interviews various people on current affairs and political topics.
Her first book, Waarom jij geen huis kunt betalen, will be published on 7 April.
So what is the solution?
“There needs to be a reduction on the demand side. If house prices are going to rise anyway, some of that increase in value must be returned to the society that has brought about that increase in the first place. People who currently own a home would then have to give up a small amount, and less money needs to be pumped into the housing market.”
“The tax treatment of renting and buying could be brought more into line, so that buying is no longer favoured. Clinging to these kinds of advantages contributes to the inequality and inaccessibility of the housing market.”
“The capital gains we’re seeing now simply aren’t really the result of hard work; they’re the result of luck. We might well ask ourselves what we’re doing with that. There needs to be an awareness that the people coming after you are taking on extra debt because of your capital gains.”
“I am a parent myself and I can see that my children will never be able to buy a house in this city, unless there is a massive crisis and I happen to have a huge pile of money lying around. So if I can contribute to a housing market that is more accessible to them, I am happy to do so. I would rather see a system that works better for everyone than one where your entire financial life depends on whether you are lucky on the housing market.”
“If you want to solve this, you’ll have to do more than just build. You need to look at how we can make land prices less dependent on the international market and how we can channel slightly less money into the owner-occupied housing market. It can’t happen overnight, but the point is that we need to set a different course.”
