Encouraging low income home ownership in the
Netherlands; policy aims, policy instruments and results
Paper presented at the ENHR-conference on 26-28 May 2003 in Tirana, Albania
Workshop 5 Housing and European Integration: East European Housing Policies
and Practices in Western Europe. Comparative policies.
Marja Elsinga
Delft University of Technology
OTB Research Institute for Housing, Urban and Mobility Studies
Post box 5030
2600 GA Delft
The Netherlands
Tel:
+31 15 278 3246
Fax: +31 14 278 4422
E-mail: [email protected]
1
Encouraging low income home ownership in the
Netherlands; policy aims, policy instruments and results
Abstract
The encouragement of home ownership among low income groups is seen as desirable in
various countries and within various political doctrines. Even in the Netherlands, that is known
for the large social rental sector, there is broad political support for low income home
ownership. The aim of this paper is to unravel the motives behind this policy and the way these
aims were translated into policy the period 1945-2002. An attempt is made to use Esping
Andersons’ theory as a framework for this. Finally some results of the policy are presented.
A number of interesting shifts have been observed in this period. Originally, the emphasis was
on subsidized new construction, with guaranteed mortgages. Steadily, the subsidies came to be
linked to income and the accent shifted, partly due to social democratic and liberal influences,
to the existing housing stock, with mortgage guarantees to cover the purchase of existing
properties, including those in the social rental sector. However, low income home ownership is
still rather modest compared to other west European countries. The strong financial support
given to the social rental sector, whereby renting remained relatively attractive for the lower
income households is the most plausible explanation for this.
Keywords: Housing policy low income, home ownership, housing policy
2
1
Introduction
In many countries, encouragement of home ownership among low income groups is a stated
objective of housing policy. In terms of Esping-Andersen’s welfare state theory (1990) and its
elaboration in terms of public housing policy by Hoekstra (2002), this ambition may be labelled
a ‘conservative corporatist’ policy. In a corporatist welfare state regime, there is a strong
emphasis on home ownership, accompanied by a segmented social policy whereby different
groups are entitled to different provisions. In many cases the traditional family unit enjoys the
greatest benefits. In this manner, the government attempts to maintain the hierarchy of society
based on social status. Belgium presents a particularly striking example. However, the
encouragement of home ownership among low income groups is now also appropriate to the
social democratic vision. Here, a free choice between buying and renting, regardless of income,
forms the basis of the policy such as that seen in Sweden for some years. The encouragement
of home ownership can also be thought of as an aspect of (neo-)liberal policy, certainly where it
is directly linked to the downsizing of the social rental sector, as was the case in the United
Kingdom.
In the Netherlands, which since the Second World War has had successive coalition
governments comprising various combinations of Christian democrats, social democrats,
(conservative) liberals and social liberals, the encouragement of home ownership has been a
key feature of policy for several decades. The purpose of the current document is to describe
the development of incentive policy during the period 1945 to 2002, and to classify this
development according to the criteria presented by Esping-Andersen and Hoekstra. The
underlying principles of incentive policy and the manner of its implementation are described in
the context of the political composition of the government of the day. We then examine the
statistics for home ownership among the low income groups before going on to consider
whether there is any direct relationship between these figures and the policy.
2
Literature and methodology
Low income home ownership
The encouragement of home ownership among low income groups enjoys a special position
within housing policy. It can best be described as policy which has been developed by means of
a logical process, further to what Kemeny (1995) terms ‘home owning societies’. A good
example of such a society is presented by the United States, where home ownership is
regarded as ‘superior’, and the social rental sector is regarded as a safety net for those in
utmost need. This policy has been subject to extensive research, designed to demonstrate the
benefits of home ownership. The research suggests that home owners take better care of their
houses, tend to vote more often, are more closely involved in the local community and in
society as a whole, have higher self esteem and their children achieve better results at school
(Rohe & Stegman, 1994; Rohe & Basalo, 1997; Haurin et al., 2001). The potential
disadvantages, i.e. the downside of home ownership, are relatively underexposed in the
American literature (Rohe et al., 2001).
Parallel to the ‘home owning society’, Kemeny identifies the ‘cost renting society’. This is
prevalent in several European countries, where rents are calculated on the basis of cost price
rather than according to the market forces of supply and demand. In these countries, of which
the Netherlands is one, the rental sector is certainly not restricted to the lower levels of the
housing market. In this context, Kemeny (1995) also refers to the ‘unitary rental market’ in
which the commercial rental sector is forced to adapt prices to compete, at least partially, with
the cost rent system adopted by the social rental sector, which is often extensive.
The developments seen in the United Kingdom are particularly interesting in this respect. In the
1980s, under Margaret Thatcher’s conservative government, there was a deliberate shift from a
cost renting society to a home owning society. This prompted an academic debate about the
advantages and disadvantages of home ownership among low income groups. Saunders
emerged as the main representative of those who sought to identify and communicate the
advantages of ownership. In his book A nation of home owners he demonstrates that owning
one’s own home has many benefits, both financial and social (Saunders, 1990). However, even
3
more research has been performed in the United Kingdom into the drawbacks of low income
home ownership and the large-scale sell-off of council housing (see Karn et al., 1985; Murie,
1991; Forrest et al., 1990; Doling et al., 1988; Ford et al., 2001). The main risks - mortgage
arrears, repossession and run-down housing as the result of poor maintenance - are examined
in these studies.
Incentive policy
Alongside Kemeny’s perspective, which takes a detailed look at the effect of the two types of
society on the social rental sector, the approach adopted by Esping Andersen is also interesting.
Particularly pertinent to the Dutch situation with regard to the encouragement of home
ownership is the threefold classification made by Esping Andersen, which offers a number of
useful insights. Esping Andersen (1990) conducted research into welfare states in Europe,
identifying three types of welfare state regime: the liberal regime centring on the market, the
corporatist regime, in which the family unit plays a crucial role, and the social democratic
regime in which the government itself is a key player. Criteria which determine the classification
include ‘decommodification’, the manner of stratification and the arrangement between market,
family and state.
Hoekstra (2002) further elaborated this classification in terms of the housing market in his
study on housing policy in the Netherlands and Belgium. He concludes that the supply subsidies
can be regarded as corporatist. Moreover, the existing owner occupied housing market is one in
which the government rarely intervenes, whereby any encouragement of home ownership is
frequently identified with the desire to create ‘more market’. The government’s significant
involvement and intervention in the social rental sector, in housing allowance, and in the
allocation of housing represent a typical social democratic approach. With regard to Esping
Andersen’s theory, Hoekstra concludes that the conservative corporatist model is closely tied to
conservatism itself, whereby it will be useful to distinguish modern corporatism as a separate
entity.
In his analysis of housing policy in the United States, Marcuse (2001) identifies a dual system,
comprising a conservative approach and a liberal approach. The former places the emphasis on
the private market, decision-making by decentralized authorities, maintenance of the status
quo, rights of ownership and a merit-based policy. In other words, it is a policy which may
generally reckon on the support of the Republicans. The liberal approach stresses the role of
the central government, redistribution of the housing market and a policy based on needs.
Further analysis of policy in the US reveals that there are indeed differences between the liberal
and conservative approaches, but that there are also similarities and mutual influences. The
distinction between the ‘deserving’ and the ‘undeserving’ poor, a standard conservative theme,
is an undercurrent of much of liberal housing policy, and was certainly part of the Clinton
administration’s attitudes, evident in its attitude towards welfare reform. Low income home
ownership is something for the ‘deserving’ poor. The dual distinction applied by Marcuse is
closely allied to the political constellation in the US. Nevertheless, as Figure X shows, the
distinction can also be placed in the context of Esping Andersen’s threefold classification,
consisting of three ideal types. The various Dutch political parties can also be positioned in the
Esping Andersen triangle, this forming the basis for the remainder of this paper (see figure 1).
The purpose of this analysis is to position Dutch policy on the encouragement of home
ownership according to the following research questions:
• What form did the encouragement of home ownership among low income groups take
during the period 1945-2002 in terms of the underlying arguments and their
implementation?
• Can any correlation with the position of the government coalition be detected further to
the Esping Andersen model?
• Has policy been successful, of so, is success directly related to policy itself?
4
Method
The relevant policy documents were examined to identify the underlying arguments and
manner of implementation of policy designed to encourage home ownership among low income
groups in the Netherlands during the period 1945-2003. The political composition of each of the
successive coalition governments was analysed, whereupon any links between the political
affiliations of the coalition and the form of the policy were examined. Finally, statistical
information was used to produce a summary of the development in home ownership,
particularly among the low income groups, whereupon it became possible to identify any
correlation with policy.
3
Development of the Dutch policy to promote home ownership
Encouragement of home ownership in rural districts before World War II
Prior to the Second World War, government aid to promote home ownership was restricted to
special groups and relied on instruments such as the Landarbeiderswet (Agricultural Workers
Act) of 1918. This act was not primarily concerned with the promotion of home ownership, but
was intended to improve the social and economic circumstances of the target group to prevent
mass migration to the cities. Although the burgeoning industrial sector did indeed need
workers, an unchecked exodus of the rural population to the cities was seen as a social hazard,
since they were thought likely to arrive in centres of moral turpitude and communist activity.
The purpose of this legislation was therefore to assist agricultural workers in acquiring their
own plot of land, with a house, which they could then use to secure their own livelihood. The
government offered loans (bearing interest) for the purchase of such plots. During the general
depression and the period immediately prior to the war, the Agricultural Workers Act lost much
of its significance. Because the loan amounts were not increased in line with rising prices, few
took advantage of it after the war either.
In 1924, a system of housing-related saving was introduced, overseen by both local authorities
and private sector organizations. By the end of 1946, there were 56 spaarkas banks, similar in
form and purpose to the American savings and loan associations or the British building society.
Between them, they held a total of some 43,000 contracts. Since their introduction, four
savings banks had been declared bankrupt and 19 had been dissolved. One significant reason
for this was the lack of expertise among the managers. Moreover, some savings schemes had
been put in place by unscrupulous businessmen whose main motive was personal profit. In
1946, legislation was introduced to return order to the sector and to ensure that the consumer
was better protected against incompetent management or ‘sharp’ practices.
Interest in this type of savings scheme waned significantly after the war. The rising construction
costs in the immediate post-war years meant that building-related saving was no longer
worthwhile. The interest on a credit balance could not keep pace with the increase in
construction costs, whereupon the final savings balance would still be too low to provide a
substantial deposit on a house. The last of the savings banks was dissolved in 1970, although
the Bouwfonds Nederlandse Gemeenten, which started out as a savings and loan building
society, is still in existence in a different form. The 1946 Act regulating the savings and loans
society sector was eventually repealed in 1983.
Focus on home ownership: the early 1950s
Minister Witte of Reconstruction and Housing (a Christian Democrat) was a leading proponent
of home ownership. He believed that once the main housing shortage caused by war damage
had been resolved, attention should turn to the social aspects of housing construction. He
further stated that the most important consideration would be to ensure that the significance of
the home to family life should be manifested in a clearer, more attractive manner by ensuring
that the home was one’s personal property. In order to develop this principle further, the
Kappeyne van de Copello Commission was appointed in 1953. Its main remit was to investigate
means by which home ownership could be promoted. The commission was expected to address
the desirability of encouraging home ownership among broad groups of the population, with
particular regard to the disadvantages of this course of action. There was broad agreement
5
concerning the main disadvantages of home ownership among the low income groups. In many
cases, incomes were simply too low to cover the outgoings, there was insufficient security
regarding future employment and income, and the investment risks were disproportionately
high. Moreover, it was feared that home ownership among low income groups would have a
negative effect on employment mobility, since people would be ‘nailed down’ in one place. The
commission identified a number of disadvantages directly related to limited mobility. A cogent
objection was that growing families would not be readily able to move on to a more spacious
home. Furthermore, limited mobility would hamper the fair distribution of housing. In the rental
situation, households tend to ‘move up’ to a better home with some regularity, while this is less
likely with private ownership given the extra costs involved. There was also some doubt as to
whether those in the lower income groups would have the financial means to undertake proper
maintenance of their homes. The quality of the housing stock and the residential environment
was therefore under threat.
Conversely, the working committee also identified a number of significant social advantages of
home ownership among the low income groups. It would contribute to ‘demassification’ and
differentiation, since the homeowner would be able to construct or modify his home to his own
tastes and requirements, thereby having a more intense relationship with the property and the
immediate neighbourhood. In this respect, home ownership could actually contribute to the
quality of the housing stock and residential environment. The home is, after all, property for life
which people are likely to cherish and protect. Home ownership was also thought likely to
promote thrift and a savings discipline, since the homeowner must first save up for a deposit
and must ensure adequate reserves to repay the mortgage loan. According to the Kappeyne
van de Copello Commission, the resultant sense of thrift would enhance the stability of family
life, would improve the quality of daily life and would reduce economic vulnerability. The
financial obligations involved in house purchase would have a particularly favourable impact on
family life in that people would no longer be able to devote their disposable income to drink and
other habits likely to have a negative influence on the stable family situation. Reduction of
economic vulnerability was likely to be most significant at a later stage of the owner-occupier’s
life. By the time he reached retirement age, the mortgage would be paid off and outgoings
would be considerably lower. Finally, the working committee concluded that home ownership
would enhance the geographic stability of the population. Before the Second World War there
had been a tendency for people to move house with marked regularity, a situation which had
become a cause for concern. In 1937, for example, no fewer than a quarter of all Amsterdam
families changed address. Apart from the expense involved (and resultant loss of capital
reserve), this movement represented a “recurring escape from a socially controlling
environment”. Taking all aspects into consideration, the commission concluded that home
ownership was probably a valuable institutional factor within society.
Subsidies for house purchase: the 1950s
In anticipation of the findings of the Kappeyne van de Copello Commission and the legislation
which would result, a provisional subsidy scheme was introduced in 1953 for those who were
about to set up an independent household for the first time. This subsidy was payable in
addition to the existing subsidy (or ‘premium’) paid to private parties to offset the cost of
housing construction (whether for rental or sale). Under the new scheme, ten annual payments
would be made to the owner-occupier. This system was primarily aimed at those in
employment and small business owners, who were permitted to devote 20% of the surface
area of the property to business use. The amount of the subsidy was related to the type of
home, subject to a maximum in terms of the building costs. In 1953 and 1954, almost ten
thousand people took advantage of this scheme.
The Kappeyne van de Copello Commission, which presented its final report in 1956, proposed
an arrangement which would entail the government acting as guarantor for mortgage loans in
addition to providing certain subsidies. This recommendation gave rise to the Besluit
Bevordering Eigen Woningbezit (Promotion of Private Home Ownership Decree) of 1956. The
subsidy component of the new system was more or less in line with that of the 1953 scheme.
This too was a subsidy which would be paid in ten annual instalments, with a possible initial
supplement depending on the size of the family. Local authorities were authorized to stand
6
guarantee for a mortgage, to a maximum of ninety per cent of the construction costs of the
property. Central government would ‘reinsure’ fifty per cent of the amount concerned. Special
units, the ‘Intermediary Bodies’ were created to process applications. There were five such
bodies, their members being appointed by the government. They acted as advisors to the local
authorities in assessing whether an applicant was eligible for the guarantee scheme. All other
existing provisions were discontinued, whereupon there was no further role for the savings and
loan societies.
Development of incentive policy: the 1960s and 1970s
At the beginning of the 1960s, encouragement of home ownership was a widely supported
objective of general housing policy. Misgivings concerning home ownership among the working
class disappeared with the rise in general prosperity and security of income. In the second half
of the decade, the emphasis of incentive policy shifted somewhat. Specific attention for the
lower income groups gave way to a more liberal policy and a more general approach to
encouraging home ownership. Owning a home of one’s own became a more popular ambition,
partly due to substantial rent increases and the reduction of subsidies in the rental sector.
In its Public Housing Memorandum of 1972, the Christian Democrat-Liberal government of the
day continued its policy of encouraging home ownership, placing particular emphasis on the
investment aspect. The subsequent Housing Memorandum of 1974 was produced by a new
government comprising social democrats, social liberals and Christian Democrats. This
document introduced a new principle, namely that everyone should be free to choose whether
renting or buying could best meet their housing needs. Subsidy arrangements were therefore
geared towards increasing the accessibility of the private ownership sector for the lower income
groups, with an expansion of the local authority mortgage guarantee scheme. Minister Gruijters
(D66) had firm ambitions with regard to the private ownership sector, as demonstrated by a
speech he gave in late 1975 in which he stated, “I consider it desirable that in the short term
we in the Netherlands should aim to reach the situation now seen in Belgium, being two-thirds
private ownership and one-third rented accommodation...” .
In 1974, the local authority guarantee scheme was expanded to cover 100% of the value of the
home. This meant that it was no longer necessary for the buyer to raise a deposit. (Previously
the guarantee had covered no more than 90% of the value of the property.) In 1975, there was
a further broadening of the scheme, which was extended to cover not only newly constructed
properties but the entire housing stock. A system of ‘protected’ home ownership was also
introduced, intended to overcome the psychological objections of ‘dyed-in-the-wool’ tenants to
purchasing a property. This took the form of an additional subsidy and a special organizational
framework within which local authorities, mortgage lenders and housing associations could
provide certain services (such as inspection on completion and ongoing maintenance).
However, this was linked to an anti-speculation clause, whereby owners would not be able to
sell the property for a certain period, to prevent ‘milking’ the market. Last but not least,
opportunities to purchase social rental sector homes were enhanced. The various provisions for
‘protected’ home ownership were extended to sitting tenants who purchased their homes
outright, while responsibility for overseeing the transaction passed from central government to
the local authorities.
Doubts raised by growth: 1978
In 1978, during the tenure of Minister Beelaerts van Blokland (CDA) and State Secretary Brokx
(CDA), the Structure Plan for Public Housing revealed that the government was not unreservedly
pleased with the rapid increase in private home ownership. Its official standpoint became that the
free choice between buying and renting should no longer be a objective of policy in its own right
(Ministry of Housing and Spatial Planning, 1978). During the boom on the housing market, a record
number of social rental homes were sold. This gave rise to the fear that the most attractive part of
the social housing stock would be sold off entirely, and so the government took action. In 1979,
local authorities were obliged to produce a policy document setting out their official standpoint with
regard to the sale of social rental sector homes. Each policy document was subject to the approval
of central government and all subsequent sales would then have to be assessed according to the
criteria set out (Pas et al., 1983).
7
Efforts were also made to regulate the sale of properties in the private rental sector.
Encouragement of home ownership was seen as not just a question of quantity, but also of quality.
The sale of poor-quality properties was discouraged by ensuring that no government subsidies
would be available. Local authorities were also given the opportunity to devise a local policy for
horizontal ownership, whereby applications to divide properties into smaller units would be
assessed.
The collapse of the market: 1979
In mid-1979, sales slowed to a virtual halt and prices began to fall dramatically. This led to strong
support being given to the rental sector in the housing policy adopted by the Van Agt government
which, in intention at least, was designed to be ‘buyer friendly’. Market parties and government
alike attempted to resolve the market’s stagnation. In 1979, a new scheme was introduced which
provided two levels of purchase subsidy according to the type of accommodation in question.
‘Premium A’-type housing was intended specifically for the lower income groups, with subsidies
dependant on the personal disposable income of the head of the household in the year prior to the
subsidy application. ‘Premium B’-type homes were subject to a subsidy which depended solely on
the construction costs.
In 1980, as house sales continued to stagnate, the subsidies for both types of property were
increased, and purchasers of the Premium-A type became entitled to an additional once-only initial
contribution. The income and construction cost ceilings were raised, making more purchasers and
more properties eligible for inclusion in the scheme. While the market for free sector housing
collapsed, the sales of Premium A-type homes flourished, partly due to the fact that the demand
among higher income groups had shifted to this sector. Because many new properties remained
unsold, a separate scheme (the ‘OKH’) was put in place to enable new properties originally
designated for owner-occupation to be assimilated into the rental stock.
In 1980, the purchase price ceiling for local authority guarantee eligibility was raised yet further
(and specifically included the additional costs of purchase, such as conveyancing.) In 1982,
Minister Nypels (D66) made an urgent appeal to local authorities to be more cautious in their
issuance of guarantees, and to heed the advice of the Intermediary Bodies wherever possible. This
had been prompted by the significant number of applications for a local authority guarantee,
unprecedented in the history of the instrument (Van der Schaar, 1987; Kraan-Jetten, 1991).
In 1983, the government memorandum Eigenwoningbezit (‘Home Ownership’) was published in
response to the collapse of the market in the early years of the decade. Its objective was not so
much to encourage home ownership, but to promote the recovery of the market. A central
feature was the reduction of the risk factor for buyers and government alike. In addition, the
memorandum strove to prevent a decline in the overall proportion of homes in private
ownership.
The subsidy system introduced by the 1983 memorandum was intended to reduce or obviate the
risks inherent in major interest rate fluctuations, declining incomes and fluctuating property prices.
Under the new system, central government assumed responsibility for part of the mortgage on a
Premium-A type property, paying the interest charges and repayments on this proportion of the
overall debt. (This system is sometimes known as the ‘joint mortgage’). The scheme implies a fixed
annual contribution which is made for as long as necessary to clear the relevant proportion of the
mortgage debt. The subsidy period is therefore variable, as is the amount of the annual
contribution.
Decentralisation and privatization: 1989
The 1989 memorandum Volkshuisvesting in de jaren negentig ('Housing in the nineties') by
State Secretary Heerma (a member of the Christian Democrat and Social Democrat
government) called for less government intervention and more responsibility and freedom for
the local authorities and market parties. Encouragement of home ownership, to reach 50-55%
of the total stock, remained the policy objective through which Heerma stressed the importance
of these ends. However, much now changed with regard to the implementation of policy. The
main instrument by which the home ownership was made more attractive was a substantial
increase in rental sector prices. The housing associations were privatized, and outstanding
subsidies were paid out but offset against remaining government loans. The calculations
8
assumed substantial rent increases over a period of five years. Moreover, future subsidies for
the rental sector were greatly reduced. The possibilities of purchasing a social housing unit
outright were enhanced increased.
In 1992, the existing property-linked subsidies were amalgamated by means of the Besluit
Woninggebonden Subsidies (Home-linked Subsidy Decree; BWS), creating a system whereby
local authorities could themselves decide what proportion of their budget would be spent on
building social housing for rent, social housing for sale, or undertaking major improvements to
the existing rental stock. The Premium A-type home and accompanying subsidies were
assimilated into the BWS system and became known as simply the premiekoopwoning or
‘subsidized owner-occupier housing unit’. However, this system was not destined to remain in
place for long. The subsidy component was withdrawn in 1995 leaving only a modest
‘accessibility supplement’ which could be used at the discretion of local authorities to partfinance the construction of affordable owner-occupier homes. It was also possible to enhance
the affordability of homes through artificially low land prices.
The local authority guarantee scheme was privatized in 1995, in keeping with the line upon
which State Secretary Heerma had embarked. Previously, individual local authorities had
provided a mortgage guarantee under conditions which, despite national guidelines,
nevertheless displayed considerable variations. The new National Mortgage Guarantee was
administered by an independent non-profit organization, the government and local authorities
remaining in the background.
In 1995 the subsidized owner-occupier housing system was withdrawn altogether, leaving the
National Mortgage Guarantee as the only instrument by which home ownership among the
lower income groups could be encouraged. However, this ‘subsidy-less’ period did not last long.
In 1997, State Secretary Tommel announced the Koopgewenningbijdrage, literally ‘purchase
acclimatization contribution’. This was an income-related subsidy, and payable to tenants who
wished to purchase their rented home. This marked an important turning point in the policy to
encourage home ownership, in that the emphasis shifted from new construction to the existing
stock and its sitting tenants, and from subsidies linked to premises to those linked to the
occupiers themselves.
Focus on the citizen: 2001
The Memorandum ‘Mensen Wensen Wonen’ (People, Wishes, Homes), produced by State
Secretary Remkes in 2001, once again highlighted ambitions to promote home ownership. The
policy was presented as one which would enhance the freedom of choice and the independence
of the consumer. The sale of homes in the social rental sector took a prominent place on the
agenda, being put forward as a means to increase diversity and differentiation in
neighbourhoods and to increase the social involvement of local residents. In addition, the sale
of units by the newly-privatized housing associations would form an important source of income
to finance the planned urban renewal programmes.
To encourage the sale of rental sector units and home ownership among low income groups,
the Wet Bevordering Eigen Woningen (Encouragement of Home Ownership Act; BEW) was
introduced in 2001. This Act provided for an income-related subsidy, payable to all lower
income households (not only tenants), subject to a ceiling on both the purchase price of the
property and the loan taken out. State Secretary Remkes, like his predecessor Minister Gruijters
in 1975, was very clear about his ambitions: 65% home ownership by 2010.
In encouraging home ownership among low income groups, the emphasis shifted from new
construction to the sale of existing rental units. The Heerma memorandum of 1989 had given
corporations the opportunity to sell a proportion of their stock, while the ‘People, Wishes,
Homes’ memorandum of 2001 added a set of ambitious quantitative objectives. The sale of
homes in the rental sector would make a significant contribution to State Secretary Remkes’
stated ambitions. The intention was that 70,000 rented homes should pass into private hands
each year, of which 50,000 would be in the social rental sector. The landlords could establish
the sale price with a discount of up to 10% of the market value if sold on the open market, up
to 30% when selling to a sitting tenant eligible for subsidy, or 20% when selling to eligible
buyers other than the sitting tenant.
The introduction of a new taxation system in 2001 required home owners to choose how their
9
home and relevant loan would be treated for tax purposes. For the first time in many years,
there was a substantial adjustment of the taxable income component based on the notional
rental value of the home. Mortgage tax relief was limited to a period of thirty years. However,
other changes were minor and adopted without considerable debate. Home ownership
continues to be subject to an ‘earned income’ supplement, but mortgage interest charges are
offset by the system of progressive relief. It may therefore be said that taxation instruments
remain the most important means of encouraging home ownership.
4
Classification of policy
Incentive policy was first put in place in the 1950s, by a government comprising Christian
Democrats and Social Democrats who chose to appoint a commission on Home Ownership. The
policy documents which followed were dominated by the conservative corporatist arguments.
The instruments adopted (mortgage guarantees and subsidies) also reflected this perspective.
Although successive governments and their subsidy schemes displayed various slight shifts in
emphasis, policy remained fairly constant until the early 1970s, building upon the
recommendations of the 1950s commission.
It is interesting to note that 1956 saw a clear break with the past, the emphasis until then
having been on home-related savings schemes, particularly among those living in rural areas.
From 1956 onwards, encouragement of home ownership among low income groups became a
policy objective in its own right. The importance of the savings and loans organizations
diminished greatly, although it was not until 1983 that the legislation regulating the savings and
loans system was finally repealed.
In 1971, the first specific support for low income households was suprisingly introduced by a
coalition of Christian Democrats and Liberals in the form of a discounted loan from the
Bezitsvormingsfonds (Wealth Creation Fund), set up with the revenue from the sale of
government shares in the state-owned steel industry. Applications for such loans were so
numerous that only a proportion could be met. The emphasis on low income groups was further
strengthened by a government which included the Social Democrats.
In 1974, a policy memorandum was published by a coalition of Christian Democrats and Social
Democrats in which the freedom of choice between renting and buying was first cited as a
policy objective. Increasing accessibility to the housing market for low income groups, a typical
social democratic principle, was explicitly stated. This led to increased opportunities for the
purchase of homes formerly in the social rental sector, and to the Protected Ownership
Scheme, intended for tenants who wished to buy but who also wished to retain some external
support. However, these new schemes had little opportunity to prove their worth since the
housing market collapsed shortly after their introduction. In the early 1980s, efforts to promote
the recovery of the market were at the forefront, whereby subsidies were increased and
eligibility requirements relaxed to ensure that at least some homes could be sold.
The 1989 Heerma memorandum (representing the standpoint of a CDA and PvdA coalition)
heralded a new era. Policy now sought to increase the costs of renting, privatize the local
authority subsidy scheme and gradually phase out subsidies for owner-occupied properties. It
was therefore a policy with liberal overtones (fewer subsidies, more market) but some
conservative corporatist traits (privatization and room for the midfield as well).
The recent Remkes memorandum (VVD) represented yet another change, whereby policy
gained a greater number of liberal characteristics: more freedom of choice for the individual, an
enlarged market, a smaller social rental sector and a central government policy to promote all
these aims. The introduction of the purchase subsidy marked the completion of the shift in
focus from the generic to the specific low income households, and from new construction to the
existing stock. In addition, the strong encouragement of the sale of social rental sector units,
accompanied by explicit quantitative objectives, placed a clear neo-liberal accent on the
implementation of incentive policy.
5
Results of the policy
10
International comparison of proportional home ownership
Although considerable attention has been devoted to policy intended to promote home
ownership among low income groups, and although such policy currently enjoys broad support,
the results to date have been limited. Compared to a number of other countries, the rate of
home ownership among low income groups in the Netherlands is extremely modest (Figure 3).
Indeed, the Netherlands and Germany are at the bottom of the league table in this respect.
Size of the owner-occupied sector and distribution by income
In 1947, the proportion of owner-occupied homes within the total housing stock was
approximately 28%. By 2002, this figure had increased to approximately 53%.
Figure 5 shows the development of home ownership by income quartile (25%). The first
quartile therefore represents the 25% of Dutch households with the lowest income and the
fourth quartile the 25% of households with the highest incomes. As the figure reveals, between
1967 and 1981, home ownership increased most in the two highest income bands (based on
the income of the head of the household only). The two lower bands also show some growth:
in the second band, home ownership has increased from 23% to 33%.
From 1981, it is possible to represent the distribution by means of 10% income bands. Figure 6
presents a summary of home ownership by income band (10%) for the period 1981-1998. Here
we see that in the 1980s, a time of market recession, there was a decline in home ownership
among the lower income groups.
The conclusion must be that policy directed at encouraging home ownership had only a limited
effect. Low income groups will frequently opt for rented accommodation or may remain unable
to purchase despite assistance further to the policy. The growth seen in the 1960s and 1990s is
almost certainly a result of the favourable economic climate: low unemployment, reasonable
mortgage interest rates and rising house prices. However, when the economic boom and the
demand for owner-occupied housing increases further, prices rise to such an extent that home
ownership is once again out of the reach of the lower income groups. This effect can be seen in
the second half of the 1970s and the late 1990s.
Construction of new homes for owner-occupation
Figure 6 shows that construction of homes intended for owner-occupation was largely in the
subsidized sector throughout the 1950s. In the 1960s, the free (unsubsidized) sector started to
catch up, accounting for almost half the total production. In the early 1980s, following the
collapse of the market, the situation changed once again and it was the subsidized sector which
kept the construction industry afloat. Later in the same decade, unsubsidized production began
to recover and in 1995 subsidized production was phased out entirely.
Sale of units in the rental sector
Alongside new production, part of the growth in the owner-occupied sector was accounted for
by the sale of rented accommodation. After the Second World War, many rental units had been
purchased by private landlords as investment properties to be let to tenants. In the subsequent
period, the sale of rental units accounted for some 30% of the growth in home ownership.
Between 1947 and 1975, some 340,000 rental units were taken into the owner-occupier sector,
most of these being from the privately-owned stock. The Appartementenwet (Apartments Act)
of 1956 made it easier to sell horizontal ownership properties, i.e. those which had been built or
converted to contain two or more self-contained units. From the mid-1960s until the late 1970s
in particular, many rental properties of this type were sold to their sitting tenants or, when
tenants moved out, on the open market.
During the housing market boom of the late 1970s, the sale of social sector rental units also
increased, there being up to 5,000 transactions in 1978 alone. However, concerns that the
better stock would be sold off leaving only the less attractive units led to policy being reviewed
once more in 1979. The resulting Protected Home Ownership scheme was not successful,
although it is unclear whether this was due to the collapse of the housing market or simply
because there was no demand for such an ownership form.
11
Figure 7 shows that the sale of social sector rental units increased throughout the 1990s, from
3,500 in 1992 to 17,500 in 1998. Partial deregulation of the rental market was one of the main
motives for landlords to sell off the more expensive units. However, the situation reversed at
the end of the decade, due in no small measure to the level of market prices which were now
so high that many tenants were unable to purchase the property they occupied, or were
unwilling to do so as the purchase price and subsequent outgoings were too high in comparison
with the existing rent. Due to the high prices on the housing market, the decline in new
production and the restructuring of the existing stock of affordable rental accommodation, the
rental market came under increased pressure. Not only did this diminish the inclination of
tenants to buy, it also diminished that of landlords to sell.
Possibly even more significant than the economic climate has been the support given by the
Dutch government to the social rental sector. Figure 8 shows that such support is generally
directed at the lower income groups, while support to the owner-occupier sector, including
subsidized owner-occupied homes, tends to benefit the higher income groups. This has resulted
in purchase being advantageous for the higher income groups, while renting remains the most
attractive option for the low income groups as can be seen in figure 8. This figure shows the
housing related outgoings per point of standard housing quality assessment system applied
within the rental sector, extrapolated for the owner-occupier sector. The definition of housingrelated outgoings is to be found in Appendix 1.
6
Conclusions
The three ideal types for welfare regimes from Esping Andersen turned out to be useful as a
framework for analysing Dutch policy aims and instrument on encouragement of home
ownership. The principles underlying incentive policy with regard to home ownership have
demonstrated a shift from conservative-corporatist standpoints to more social-democratic and
liberal arguments. There is a clear relationship between the motivation of the policy and the
political composition of the successive governments responsible.
In terms of instruments, ways and means, there has been a parallel shift from production
subsidies (not related to income) to direct income-related subsidies applying to the entire
housing stock. On the one hand, this shift is appropriate to the emerging motives of freedom of
choice and responsibility, and on the other it is in line with general policy in which the focus has
shifted from new production to the existing stock, and from the generic to the specific.
The schemes particularly targeted to low income groups have had only limited effect. The
‘Premium A’ subsidy and the Protected Home Ownership Scheme had little impact, because the
market collapsed shortly after their introduction and this crisis led to a low point in general
willingness to buy, certainly among the lower income groups. Even the most recent measures
targeted at the lower income groups (purchase subsidy and discounts for sitting tenants) have
yet to achieve any significant results. This is partly due to market circumstances: prices are now
so high that most homes do not fall within the subsidy scheme and are therefore unaffordable.
Another underlying cause is the limited desire to sell on the part of the newly-privatized housing
associations, together with the lack of means by which the government can actively promote its
objectives.
There are two periods in which home ownership among low income groups has indeed
demonstrated growth: the late 1960s and early 1970s, and the late 1990s. These are periods
which do not stand out for any remarkable policy interventions, but simply due to their
favourable economic climate.
The growth in home ownership among low income groups may be described as extremely
modest, certainly when compared to a number of other European countries. The main
explanation for this is that, despite policy directed specifically at the owner-occupier sector, the
financial support for the social rental sector and housing allowance have always remained high
on the political agenda, thanks to the efforts of both social democrats and Christian democrats.
For the lower income groups, remaining in rented accommodation has therefore always been a
particularly attractive option. In short, although encouragement of home ownership enjoys
12
broad political support in the Netherlands, the broad political support for the social rental sector
and the strong and rather independent position of this sector seem to limit the achievement of
success until now.
13
Literature
Doling, J., J Ford and B. Stafford (eds.) (1988) The property Owing Democracy, (Aldershot, Gower Publishin Company
Limited)
Elsinga, M. (1995) Een eigen huis voor een smalle beurs; het ideal voor bewoners en overheid? (Low income home
ownership: an ideal for government and residents?), (Delft, Delft University Press).
Elsinga, M., and J.B.S. Conijn (2000) Woonuitgaven en woonkosten van huishoudens (Housing expenses and housing
corsts of households), (Delft, Delft Universisty Press)
Esping Andersen, G. (1990) The three worlds of Welfare Capitalism, (Cambridge, Polity Press).
Haurin, Donald R., Toby L. Parcel and R. Jean Haurin (2001) The impact of Home Ownership on Child Outcome, Low-
income Homeownership Working Papers Series, Joint Center for Housing Studies of Harvard University.
Ford, Janet, Roger Burrows and Sarah Nettleton (2001) Home Ownership in a risk society: social analysis of mortgage
arrears and possessions, Bristol (The Policy Press).
Forrest, R., A. Murie and P. Williams (1990) Home Ownership: Differentiation and fragmentation, London, (Unwin
Hyman).
Forrest, R. P. Kenneth, and P. Leather (1999) Home Ownership In Crisis: The experience of negative equity in Britain ,
Aldershot (Avebury)
Heijden, H.M.H. van der, M.E.A. Haffner (2002) Ontwikkeling van de woonuitgaven in zes West-Europese landen
(Development of housing expenses in six West-European Countries, (Delft, Delft University Press)
Hoekstra, J.S.C.M and A.A. Reitsma (2002) De zorg voor het wonen; Volkshuisvesting en verzorgingsstaat in Nederland
en België (Care for Housing ( Housing and Welfare states in the Netherlands and Belgium), (Delft, Delft University
Press)
Karn, Valerie, Jim Kemeny and Peter Williams (1985) Home ownership in the inner city; salvation or despair?,
(Aldershot, Gower).
Kemeny, J. (1995) From Public Housing to the Social Market, Rental policy strategies in comparative perspective,
(London/New York, Routledge).
Kraan-Jetten, A. (1991) Effectiviteit van overheidsbeleid; systematisering van inzichten, getoetst aan het beleid ter
bevordering van het eigen woningbezit (Effectivity of policy: tested on policy to promote home ownership), (Beusichem,
Centraal Service Bureau De Betuwe BV)
Marcuse, Peter (2001) The liberal/Conservative Divide in the History of Housing Policy in the United States, Housing
Studies, 16, no 6, pp.717-736.
Murie, A. (1991) Divisions of Home ownership, Environment and Planning A, 23, 2, p. 349-370.
Pas, B. J. Pouwels and J. Kropman (1983) Huren en kopen : achtergronden en consequenties (Owning or renting a
dwelling: backgrounds and consequences), Nijmegen (Instituut voor Toegepaste Sociologie)
Rohe, William, M. and Michael Stegman, (1993) The Impact of Homeownership on the Social and Political Involvement
of Two Low-income People, Urban Affairs Quarterly, 30, p. 152-172
Rohe W.M., and M. Stegman, (1994) The Impacts of Home Ownership on the Self-esteem, Perceived Control and Life
Satisfaction of Low Income people, Journal of the American Planning Association, 60, 2, p. 173-184.
Rohe W.M., and V. Basalo, (1997) Long-term Effects of Home Ownership on the Self-perceptions and Social Interaction
of Low-income Persons, Environment and Behaviour, 29, 6, p. 793-819.
Rohe, William M., Shannon Van Zandt and George McCarthy, (2001) The Social Benefits and Costs of Homeownership:
a Critical Assessment of the Research, Low-income Homeownership Working Papers Series, Joint Center for Housing
Studies of Harvard University.
Saunders, Peter, (1990) A nation of home owners, (London, Unwin Hyman Ltd)
Schaar, J. van der, (1987) Groei en bloei van het Nederlandse volkshuisvestingsbeleid (The growing and flourishing of
Dutch Housing Policy), (Delft, Delft University Press)
Teymant, I., and W. Schepens, (1981) Noodkopers; een onderzoek onder eigenaar-bewoners in twee Amsterdamse
stadvernieuwingsgebieden (Forced to buy: a survey of residents in two Amsterdam urban renewal areas’) (Amsterdam,
Sociologcal Institute of the University of Amsterdam).
14