Daniela Glocker
OECD
Nicolas Gonne
OECD
OECD Economic Surveys: Netherlands 2025
Abstract
Housing affordability is a key challenge in the Netherlands, driven by persistent supply shortages. Policies favouring owner-occupied and social rental housing over private rentals have created imbalances in tenure options and reduced housing market efficiency. Short-term affordability measures often increase demand for homeownership, while strict rent controls and a buy-to-let ban discourage investment in private rentals. Expanding housing supply through streamlined permitting and measures against land speculation is essential, but a long-term strategy is also needed to align affordability policies with investment incentives to sustainably increase affordable housing.
The Netherlands is facing a significant housing challenge, marked by persistent supply shortages, affordability concerns and an imbalance between housing tenures. Decades of policy interventions have encouraged owner-occupied and non-market rental housing, while neglecting the private rental market (Figure 3.1, Panel A). As a result, the housing market has become misaligned with a three-tiered structure: a large owner-occupied segment benefiting from generous tax advantages, an extensive but increasingly strained non-market rental sector and a squeezed private rental segment that struggles to accommodate the needs of lower to middle-income households. Housing supply that has been slow to respond to rising demand (Figure 3.1, Panel B), as well as long waiting lists for social housing exacerbate affordable housing challenges. These developments have made households across the housing market increasingly dissatisfied (Figure 3.1, Panel C), particularly renters who are also facing a significant housing cost burden (Figure 3.1, Panel D).
The Dutch government has an ambitious plan to build 100 000 new homes annually, with two thirds designated as affordable for low- and middle-income households for both buying and renting. While the government has announced plans to ease permitting for new housing construction and to strengthen co-operation across the entire housing supply chain, important barriers remain. Measures to increase affordability in the short term might hamper increasing affordable housing supply in the longer term. Investment in owner-occupied housing is incentivised by mortgage interest deductibility, favourable transaction taxes, and lenient mortgage borrowing, which are pushing up prices. At the same time, pervasive rent controls dampen private sector incentives to invest in rental housing despite government support for construction. The 2024 Affordable Rent Act (Wet betaalbare huur) effectively reduced the already small private rental market segment (Box 3.1), which could exacerbate shortages going forward. Moreover, efforts to increase housing supply are held back by persistent labour shortages, slow permitting procedures, restrictions on construction activities due to the obligation to reduce nitrogen depositions (Chapter 1), and growing bottlenecks to connect new housing to the electricity grid (Chapter 2), all of which are pushing up construction costs and delaying the completion of new dwellings.
This chapter outlines a comprehensive strategy in line with findings from OECD’s comprehensive cross-country analysis of housing policies Brick by brick (OECD, 2023[1]; 2021[2]) to address the key challenges of the Netherlands’ housing market by focusing on three interconnected priorities. First, it emphasises promoting a balanced housing market across tenures by further reducing tax distortions favouring owner-occupied housing, while moving towards a supportive framework for investing in affordable rental housing both in the non-market and the private sector. Second, it explores measures to boost the responsiveness of housing supply, including by streamlining permitting procedures, reducing speculative land hording and strengthening incentives for municipalities to enable faster housing development. Finally, the chapter highlights the importance of balancing affordability measures with supply incentives, advocating for calibrated rent control policies that preserve affordability while maintaining investment incentives and targeted subsidies to ensure housing is both accessible and financially sustainable to households most in need.
Note: Panel A: Figures refer to the share of households, except for Australia, Austria, Canada, Colombia, Denmark, New Zealand and the United States, for which the non-market rental segment is proxied by the difference between the share of households in the aggregate rental segment and the share of social housing in the housing stock; OECD average refers to member countries for which all tenure types are available; see source for data limitations. Panel B: Additional dwellings take into account changes to the housing stock in the Netherlands through new construction, other additions, demolition, other withdrawals, and corrections. Panel C: Figures refer to the share of households in the Netherlands that reported being “satisfied” or “very satisfied” with their current dwelling in Statistics Netherlands’ Housing Survey (WoON). Panel D: Figures refer to the share of households in the market rental segment spending more than 40% of disposable income on rent; see source for data limitations.
Source: OECD Affordable Housing (database); and Statistics Netherlands (CBS).
The recent Affordable Rent Act (Wet betaalbare huur), in force since July 2024, extends the existing rent control system to a larger segment of the rental housing market, with the objective to make rental housing more affordable for people with middle incomes.
Specifically, the existing WWS points system (Woningwaarderingsstelsel), which determines the maximum rent based on dwelling characteristics has been updated to better reflect energy efficiency measures, shared outside spaces amongst already used characteristics such as size or property value. Further, it is extended to rentals beyond social rentals (sociale huurwoning) to include rental dwellings in the so-called middle segment (middenhuurwoning). This effectively raises the rent ceiling up to which rent control applies (liberalisatiegrens), thereby shrinking the private rental market segment (vrijesectorwoning). Some exemptions were included for new dwellings, which are permitted to 10% higher rents for a period of 20 years within the rent controlled system. The reform comes with measures to monitor and strengthen enforcement of rent control by the Commission on rent (Huurcommissie) and by municipalities.
The government updates thresholds, ceilings, and maximum rent levels for new leases annually. For ongoing leases in the social segment, the government sets maximum rent increases; in the middle segment, rents can be indexed by the growth rate of collectively bargained wages (CAO-lonen), plus one percentage point; in the market segment, rents can be indexed by the lower of consumer price inflation and collectively bargained wages, plus one percentage point.
Source: Ministry of Housing and Spatial Planning (VRO) (2024[3]).
The Dutch housing market has been shaped by policies that favour owner-occupied housing and social rental housing over private rentals, leading to imbalances in tenure options and reduced housing market efficiency. Generous tax incentives, including tax deductibility of mortgage interest payments combined with low taxation of imputed rents, exemptions from capital gains taxes, state guarantees for buyers, and high loans-to-value mortgages have promoted homeownership as a favourable investment, driving up prices and widening wealth inequalities. Meanwhile, strict rent regulation and favourable financing conditions for housing associations discourage private investment in rental housing.
Limited affordable housing options create significant challenges for households and the broader economy. The private rental sector is small (Statistics Netherlands, 2025[4]), increasing pressure on social housing, with long waiting times as people whose income situation improved continue to occupy non-market rental dwellings. Additionally, middle-income households, often ineligible for social housing and unable to afford homeownership or high private rents, face limited housing options. Furthermore, the lack of flexibility in the housing market hampers labour market mobility, making it harder for workers to relocate for job opportunities. These imbalances deepen socio-economic divides, amplify inequality, and reduce the resilience of the housing market. Addressing these challenges requires targeted efforts to move towards policies that are neutral regarding housing tenure.
3.2.1. Phasing out favourable tax treatment for owner-occupied dwellings
Owner-occupied housing enjoys significant tax advantages compared to rental properties and other investments. On top of this, additional policies like exemptions from transfer tax under some circumstances (Table 3.1), and measures to improve affordability for first-time homebuyers, such as a national mortgage guarantee, drive up demand and push home prices even higher as sellers price in these advantages in the asking price. This bias towards ownership versus renting introduced by the tax system creates wealth inequalities between those who rent and those who own their home.
Despite some reforms, owner-occupied housing remains under-taxed compared to other assets. In the Dutch tax system, homeowners pay income tax in box 1 based on a small, estimated rental value of their home (Eigenwoningforfait). This imputed rent is much lower than the higher assumed returns that are taxed in box 3, which applies to other types of investments like private rental properties or second homes or stocks (Chapter 1 and Box 1.6). Additionally, homeowners can deduct mortgage interest payments from income that is taxed in box 1, such as labour income, making debt financed homeownership a significantly more attractive investment (Figure 3.2). Since 2018, the mortgage interest deduction has been gradually reduced from 52% to 36.97% in 2024, aligning it with the basic income tax rate. However, this change was partially offset by a reduction in the imputed rental value rate. For example, for properties valued below EUR 1.31 million the imputed rental value rate dropped from 0.7% to a maximum of 0.35% over the same period, leading to a significantly lower estimated taxable value. By contrast, for real estate taxed in box 3, the assumed rate of return has increased from 5.3% in 2018 to 6.04% in 2024, and the tax rate in box 3 increased from 30% to 36% over the same period. Furthermore, the introduction of a new bracket at the bottom of box 1 income tax schedule in 2025 has also led to changes in the mortgage interest deduction. While the mortgage interest deduction rate has further decreased to 35.82% in the lowest bracket, it has increased to 37.48% in the higher brackets, thereby partially offsetting some of the previous progress.
By type of financing and use, EUR
Note: A negative value implies that the amount can be deducted from other taxable income, while a positive value indicates the amount that needs to be paid as additional tax because of the investment. Simulations assume for owner occupied housing that 50% of the property value is financed through a mortgage at a 3% interest rate. The imputed rental value (Eigenwoningforfait) is set at 0.35% of the property value, which applied in 2024 for homes between EUR 75 000 and EUR 1.31 million. Mortgage interest payments are deductible in box 1. The homeowner's taxable income from the property is determined as the imputed rental value minus deductible mortgage interest which is taxed at 36.97%. If the deduction exceeds the imputed rental value, the taxable income is reduced to zero. In the Scenario of owner-occupied housing fully paid by equity, the homeowners taxable income is determined based on the imputed rental value which is taxed at 36.97%. For property investments not for owner occupation, the scenario with debt financing assumes that 50% of the property value is financed with a loan, and deductible debt is adjusted for the threshold (EUR 3 700 for a single taxpayer). The assumed return on investments and other assets is 6.04%, while the return on deductible debt is -2.47%. The tax-free allowance for box 3 is EUR 57 000. The taxable return is calculated based on the proportion of net assets (after deducting debts and allowances) relative to total assets. A 36% tax rate applies to the taxable return. For the fully equity financed property investment, no debt is deducted from the taxable income.
Source: Authors calculations based on 2024 tax rates as published on https://www.belastingdienst.nl/.
The Netherlands offers one of the most generous tax reliefs for homeowners in the OECD (Figure 3.3), contributing to rising inequalities between homeowners and renters. Homeowners, whose homes served as collateral for a mortgage, face a significantly lower housing cost burden than renters. Between the bottom and the top income quintile, the median mortgage cost as share of disposable income was 10.7% (top) and 13.1% (bottom) for homeowners in 2022, a significant decline since 2010, where the difference was 17.5% (top) and 23.7% (bottom) indicating a decline in inequality between income groups (OECD, 2024[5]). However, for renters not only has the housing cost burden increased across income quintiles, but also the inequality between income groups. While in 2010, the cost of rent as share of disposable income ranged from 14.4% in the top quintile to 31.7% in the bottom quintile, the shares were respectively 13.5% and 35.7%in 2022.
Addressing tax distortions that favour homeownership is essential to create a more balanced housing market in the Netherlands. The reform of box 3 taxation demanded by the Dutch Supreme Court in December 2021 offers the opportunity to move home equity to box 3 taxation together with other investment assets such as private rental properties and second homes (Chapter 1, OECD (2023[6])). At a minimum, the imputed rent rates on owner-occupied housing should be increased to align with other assets to increase fairness and reduce the distortive impact on the market. Further reducing the mortgage interest deduction rate would reduce the tax bias for homeownership, while making housing taxation more progressive (Causa, Woloszko and Leite, 2019[7]). However, the current government has committed in its coalition agreement to not alter the fiscal position of the owner-occupied home. As a result, the current regulation regarding mortgage interest deduction and owner-occupied home allowance remains unchanged. Since the large fiscal outlays in the current framework benefit to a substantial degree better-off households and could be better used to address shortcomings in other parts of the housing market, the government should re-evaluate this position. To reduce financial stability concerns emerging from a correction in the housing market, these tax advantages should be phased out gradually and predictably. In a first step, the government should re-evaluate the mortgage interest deductibility rate introduced with the new tax brackets and focus on phasing out housing support for higher income households and basing it on the home value, for example by capping the amount of mortgage rate payments that can be deducted, as is done in Denmark.
% of GDP, 2022 or latest available year
Note: Data refer to 2022 for Latvia, Luxembourg, New Zealand, Portugal, United States, Norway, Slovak Republic, Lithuania, and Ireland; to 2021 for Poland and Austria. For selected countries, spending data refers to different calendar years depending on the measure: for the Netherlands, 2021 and 2020; for Chile, 2022 and 2021; and for Israel and Croatia, 2023 and 2022. Data for Sweden, Cost Rica, Estonia, Hungary, France, Italy, Slovenia, Japan, Czechia, and Brazil refer to the 2021 QuASH.
Source: OECD (2023), 2021 OECD Questionnaire on Affordable and Social Housing (QuASH).
3.2.2. Improving incentives in both non-market and market rental segments
Rental housing provision in the Netherlands is divided into two distinct segments: the non-market rental segment, comprising rent-regulated housing primarily provided by housing associations, and the private rental segment, where rents are set by market forces (Box 3.2). The non-market rental segment provides housing for about 34% of households (Figure 3.1, Panel A), and plays a vital role in ensuring affordability, but housing associations are increasingly constrained by rising costs and limited financial flexibility. The private rental segment accommodates less than 5% of households, primarily middle- and high-income, but faces low investor confidence due to expanded rent controls and frequent policy changes targeting speculative investment. Addressing the challenges across all rental segments is crucial to expand rental housing supply, improve affordability and create a balanced and sustainable housing market.
The Dutch rental housing market is segmented based on the characteristics of a dwelling and by ownership. A detailed point system based on market value, size, amenities and energy efficiency categorises dwellings into non-market rentals, if they score below a specified threshold, and private rental market dwellings, if they score above the threshold.
Non-market rentals are dwellings scoring below a certain threshold and are regulated with respect to the maximum monthly rent and annual rent increases. Differences in the allocation of dwellings apply based on ownership:
provided by housing associations (social housing): A minimum of 85% dwellings must be allocated based on means-tested income of tenants. In 2024, tenants with an income of max EUR 47 699 for single-person households, and of max EUR 52 671 for multi-person households were considered eligible. The remaining dwellings could be allocated to tenants above those income thresholds.
provided by private investors: Not bound to allocate the dwelling based on the tenant’s income.
Private rental market are dwellings scoring above a certain threshold. Regulation only limits the annual rent increase, whereas monthly rents can be freely set, and tenants can be freely chosen by the landlord.
Source: OECD (2024[8]).
Challenges in the non-market rental segment
The Netherlands employs a detailed points-based system to classify rental dwellings, assessing properties based on market value, size, amenities, and energy efficiency. Dwellings scoring below a specified threshold are categorised as rent-controlled housing, where regulation limits the maximum monthly rent and annual rent increases. Differences in terms of available financing support and allocations rules exist depending on the type of ownership.
Non-profit housing associations own most dwellings in the non-market rental segment in the Netherlands (Government of the Netherlands, 2024[9]). These associations operate under a public service mandate, offering affordable housing to eligible households, primarily determined by income (Box 3.2). They also address the needs of priority groups, such as the elderly, and contribute to creating liveable neighbourhoods. In return, housing associations benefit from a state guarantee on loans and may receive preferential access to land from municipalities at below-market prices.
Housing associations play a critical role in providing affordable housing for low-income households but have been struggling with insufficient returns to meet rising costs. As a result, dwellings supplied by housing associations as share of total housing stock have declined over time (Figure 3.4). Reforms under the 2015 Housing Act (Woningwet), implemented to comply with EU State Aid rules, likely contributed to the decrease, as it narrowed housing associations’ mandate to providing quality and affordable social housing for people on a limited rental budget, reduced the commercial activities of housing associations, and added a levy on landlords (the latter was scrapped in 2023). These reforms reduced possibilities of cross-subsidisation, weighing on housing associations’ capabilities to expand the social housing stock. Furthermore, rapidly rising costs of construction, maintenance and capped rents make it increasingly difficult for housing associations to invest and develop new housing (Government of the Netherlands, 2024[10]). Measures announced in the 2025 Spring Memorandum 2025 include a rent freeze (Box 1.5), which would add further pressure on housing associations’ financial viability.
% of total dwellings, by provinces
Source: Statistics Netherlands (CBS).
Strengthening the viability of the housing associations is key to maintain and expand the stock of the non-market rental segment. The government’s recent budget (Ministry of Finance, 2024[11]), which sets an impetus on housing development and includes significant funding for housing, will contribute to making affordable housing development financially viable, an important step in the right direction. However, structural issues in the revenue-cost-relation of housing associations need to be addressed as well. The government should ensure that the annual rent indexing for non-rental market housing reflects rising costs so that housing associations can sustain their operations. For that, the points system, which controls the maximum monthly rent and annual rent increases, should reflect cost developments to prevent a divergence between housing associations income and expenses.
Dutch housing associations are allowed to implement income-dependent rent increases for existing tenants, but implementation is challenged by administrative complexities. The underlying law (inkomensafhankelijke huurverhoging) implemented already in 2013 aimed to encourage higher-income households to move out of social housing and make room for lower-income households in need. However, to implement income-based rent adjustment, housing associations must rely on income data provided by the Dutch tax authority, which creates administrative complexities and delays. The government should consider moving to a system where housing associations must set rents on a cost basis. In Austria, for example, the principle of cost recovery is enshrined in the Limited-Profit Housing Act, which sets out the governance principles for Austrian housing associations. Cost recovery entails the calculation of rents based on actual costs, including construction and maintenance (OECD, 2023[1]). This would help to reduce the administrative burden for housing associations that occurs from implementing income-dependent rent increases. To limit affordability concerns due to higher rents, the government could consider compensating low-income households through the existing rental allowance scheme (huurtoeslag) (Table 3.2). However, the impact on work incentives, as well as the fact that this could add to the complexity of the tax-benefits system should be carefully considered (Chapter 1).
The lack of mobility in housing provided by housing associations also reflects the need to address challenges in a holistic way, considering trade-offs with other segments of the rental market. Thus, the government’s ambition to encourage households to move out of non-market rental housing supplied by housing associations as their income improves has not been successful due to limited housing alternatives in the rental market. In addition, incentives to move are small given considerable price differentials between the non-market and the private rental market, which contributes to rationing, long waiting lists and undermines the policy's goal of freeing up social housing for lower-income households.
Non-market rental dwellings provided by private investors are not allocated based on income or priority needs, offering housing solutions for middle income households that are not eligible for non-market rental housing provided by housing associations. However, less than 5% of all non-market rental dwellings are owned by for-profit firms and individual landlords. Investment into smaller more affordable housing units is hampered by low returns as the allowed maximum rents are set by the points system. Moreover, investors aiming to nevertheless invest in more affordable housing units face an even competition with housing associations, who can benefit from state guarantees and the possibility to buy land from the municipalities at below market price.
The government needs to ensure that investments into smaller, more affordable units remain profitable for investors. In the short term, temporarily raising the monthly maximum rent for non-market rental dwellings not provided by housing associations could be considered to make the investment viable. Announcements in the 2025 tax plan, such as e.g. the reduction in the property transfer tax rate for acquiring residential properties not intended for the buyer's long-term occupancy, which will decrease from 10.4% to 8% from 2026 onwards, are a positive step. Further, the government’s Affordable Rent Act implemented in 2024 (Box 3.1), which allows a surcharge on the maximum rent for new builds, goes into the right direction, but should be implemented for all existing non-market rental dwelling owned by the private sector. Higher rents should be cushioned by a more generous, but means-tested, rental allowance. Over the medium-to longer term, the number of rent-controlled accommodations could be narrowed to create incentives for the private sector to complement the efforts by housing associations to provide rental housing for middle income households.
Strict tenant regulation within the rent control system should be reviewed to maintain incentives for the private sector to invest in maintenance and home improvements of non-market rental dwellings. The housing sector is central to achieving climate goals (De Mello, 2023[12]), and while the split-incentive often discourages energy efficiency upgrades, as landlords bear the costs while tenants benefit from lower energy bills, this is partly addressed through the Dutch rent control system. Within the points system, higher scores are awarded to energy-efficient homes, allowing landlords to charge higher rents. However, this incentive does not apply to homes with sitting tenants. If a property is initially rented at or below the rent control threshold, it remains in the regulated sector until the tenant moves out, regardless of improvements that would otherwise increase its score. Adapting the parameters of the points system could help to stimulate home improvements benefitting renter satisfaction and well-being, while also advancing the decarbonisation of the housing sector.
Challenges in the private rental market segment
Dutch housing policies’ focus on raising affordability through regulating the rental market and stringent rent control policies has constrained the development of the private rental sector, which is small, and rents are high. Moreover, frequent changes to policies have increased uncertainty and made investment into rental housing unattractive.
Policy uncertainty about the taxation of private rental properties in box 3 and the development of rent controls has further reduced the investment value of rental units in the mid-price segment. Thus, if the ongoing reform of box 3 takes place, private rental properties will be taxed based on their actual cash return, In addition, the Affordable Rent Act (Box 3.1) that came into force in July 2024 and expanded regulation into the middle-price segment took many private landlords and for-profit investors by surprise. While the government’s ambition was to increase the number of affordable rental units, first numbers indicate that since the Affordable Rent Act was implemented, private landlords have been selling off their property (Netherlands’ Cadastre, Land Registry and Mapping Agency, 2025[13]). While this increased the affordable units available for home buyers, it further reduced affordable rental options. The effects of the Act need to be monitored to ensure that the expansion of rent controls to the mid-price market segment does not reduce supply in the long term.
The private rental market has also been suppressed by municipalities’ ban on buy-to-let housing investment. Moreover, in many municipalities, a self-occupancy requirement has been introduced, especially for newly built homes or homes below a certain price threshold, where owners need to live in the property themselves and cannot rent it out for a specific period, typically three to five years. Finally, since January 2022, municipalities can designate neighbourhoods or housing types where the buy-to-let of existing homes is prohibited, to prevent investors from purchasing homes to rent them out, which has been argued to drive up housing prices and limits opportunities for first-time buyers. However, as these policies stifle supply in the private rental market, the government should consider to gradually phase out the ban on buy-to-let property to allow for investment into the private rental market.
The Netherlands should review housing and investment policies in the rental market. To create a supportive framework for private investment, a transparent long-term strategy should outline the roles for housing associations, non-market rental dwellings provided by the private sector, and the private rental market. Balancing support for housing associations to ensure the provision of affordable housing, with ensuring viable investment incentives in the non-market rental and private rental sector is needed to accommodate households not eligible for social housing. Such a strategy should also clearly define how measures to increase affordability in the short-term, such as rent controls, are to develop once housing supply increases, a necessary condition to sustainably increase housing affordability (see below).
The persistent housing shortage in the Netherlands stems from a combination of regulatory bottlenecks, environmental constraints, and unresponsive housing supply. Despite the government’s ambitious target of constructing 100 000 new dwellings annually, supply has been insufficient to meet growing demand. Moreover, the type of housing needs is also evolving. Continuous demographic changes, especially ageing and migration, will add to the ongoing need for smaller and more accessible dwellings.
3.3.1. Streamlining permitting procedures and regulations
A complex regulatory framework governing housing development has been depressing the responsiveness of housing supply over past decades (Figure 3.5), adding to the present significant housing shortages. Complex permitting procedures delay housing construction. Additionally, stringent zoning laws, and environmental policies to mitigate high nitrogen depositions further constrain development (Government of the Netherlands, 2024[14]). These bottlenecks do not only slow down housing construction but also increase costs. In addition, the permitting process has been slowed down in recent years due to uncertainties on how to correctly accommodate nitrogen emissions, which had a dampening effect on the realisation of new construction at specific locations (Chapters 1 and 2).
Housing supply elasticity, %, 1980-Q1 - 2017-Q4
Note: Figures refer to estimates of long-run supply elasticities by country using the CCE MG approach in an unbalanced panel dataset of 25 countries from 1980Q1 to 2017Q4; see Cavalleri., Cournède & Özsöğüt (2019) for details.
Source: Cavalleri, Cournède & Özsöğüt (2019) "How responsive are housing markets in the OECD? National level estimates".
Increasing housing supply depends on the collaboration of many parties, such as landowners, developers and different levels of government, each facing different incentives and constraints. The government announced intentions to work more intensively with municipalities, companies and housing associations to identify, reduce and change the rules and procedures that hold back housing construction. Following a housing summit at the end of 2024, the government announced plans to speed up construction by setting parallel planning as a standard, whereby multiple planning processes, such as spatial planning, environmental assessments, and permitting, are conducted simultaneously rather than sequentially, aiming to reduce the development time from six to two years (Ministry of Housing and Spatial Planning, 2024[15]). Parallel planning will become a standard condition for government programmes to support affordable housing development, including the Housing Construction Incentive (Woningbouwimpuls) (Table 3.4), which is welcome, but should be expanded to be the standard for all construction projects.
Note: All measures are for both affordable owner occupied and rental dwellings.
Source: OECD (2024[16]) ; Ministry of Housing and Spatial Planning (2025[17]).
The national objective of increasing housing construction is welcome, but should be aligned with incentives and capacities at lower levels of government to ensure effective delivery. Municipalities have no financial incentive to allow housing construction on privately owned land as they bear a large part of its economic and political costs, e.g., by having to provide the needed infrastructure or overcoming opposing interests of existing parties against additional buildings. Municipalities do not benefit from an increase in the value of the land, which accrues to the private owner and the higher property tax revenue resulting from new construction is largely equalised across municipalities via the municipal fund. It is therefore welcome that the government announced new incentives for municipalities to encourage new construction through a realisation bonus for municipalities for every completed affordable housing unit. To strengthen the implementation capacity of municipalities, the government is providing a total of EUR 600 000 to municipalities to foster cooperation between municipalities and between government and the private sector, including sharing knowledge, aiming for standardisation in permitting processes and increasing digitalisation (Ministry of Housing and Spatial Planning, 2024[15]). It remains important to monitor that these financial incentives aimed at increasing housing supply are sufficient to increase housing construction (Table 3.4). For the longer term, the government should evaluate whether municipalities’ incentives could be strengthened through the allocation mechanisms of the municipal fund, allowing them to capture a larger share of the extra tax revenue generated when more people move into an area.
It should also be monitored that housing development is meeting demand, both in terms of location and type of housing. To recoup rising construction costs, developers tend to build mainly expensive homes, while there are too few affordable homes for low- and middle-income people (Government of the Netherlands, 2024[14]). However, demand for smaller units has been increasing as the size of households has been declining. Already, the share of under-occupied dwellings is high in the Netherlands compared to other EU countries (Figure 3.6), which is significantly higher for people living in owner occupied housing (69%) compared to rental housing (35%) (Eurostat, 2025[18]). The government is revising legislation to give municipalities more control over determining the number, location, and type of homes to be built. A key component is the requirement that two-thirds of new homes are affordable for lower- and middle-income households, both for rent and for sale (Ministry of the Interior and Kingdom Relations, 2024[19]). The revised legislation will allow for flexibility in achieving the aggregate target and will not apply at the development project level, as some locations already have a large stock of social housing.
% of people living in under-occupied dwellings
Note: Comparing data between 2015 and 2023 or latest for the following countries should be done with caution due to break in series (year in parenthesis): Belgium (2016 and 2019), Germany (2020), Ireland (2019 and 2020), France (2020 and 2022), Luxembourg (2016, 2020, 2021 and 2022), Netherlands (2016), Poland (2020 and 2023), and Norway (2021).
Source: Eurostat (database).
Ensuring that the existing housing stock is used efficiently is also important to ensure adequate supply of housing. Currently, 15-20% of new housing comes from repurposing existing buildings. To further expand housing availability, the government plans to review laws and regulations to make better use of the current housing stock. This includes converting commercial buildings into homes, expanding and subdividing existing properties, and making it easier for families to live together and for homeowners to rent out rooms (hospitaverhuur).
3.3.2. Broadening land value capture tools
High land values and increased construction costs make new developments less attractive as housing associations and private investors face difficulties to recoup the costs of new constructions, particularly for affordable housing. Landowners that hold or trade undeveloped properties profit from rising values contributing to inflated land prices (Government of the Netherlands, 2024[10]). The problem is particularly acute in urban areas, where high demand and limited land availability further amplify price pressures.
Further efforts are needed to discourage land speculation. Land value capture tools (Table 3.5) can help municipalities manage rising land prices and generate revenue from housing and infrastructure projects. These tools help recover a portion of the increase in land value that results from public investment or infrastructure decisions, such as zoning changes and infrastructure improvements. They help ensure that private landowners and developers contribute to the costs of public projects that benefit them, while also discouraging speculation and land hoarding. The Netherlands is already implementing an array of land value capture tools (OECD/Lincoln Institute of Land Policy, PKU-Lincoln Institute Center, 2022[20]). Developer obligations are part of the regular planning procedure and strategic land management is a prominent feature of the country’s active land policy. The infrastructure levy, while theoretically in place, is rarely implemented in practice due to disputes over the calculation method. Following recommendations from the recent interdepartmental policy report (interdepartementaal beleidsonderzoek, IBO), the government is considering to charge a one-off levy on the increase in land value ensuing from administrative decisions to change land use into allowing for housing development (planbatenheffing) (Government of the Netherlands, 2024[14]), as for example implemented in Brazil (Table 3.5). This measure should be implemented to reduce speculation incentives. In addition, the government should strengthen rules for land-use changes to be clearer, more transparent and predictable to further reduce speculative behaviour.
The government could also consider the option of introducing a land value tax (grondbelasting) to speed up development. A land value tax, as for example implemented in Estonia, is a recurrent tax on landowners based on the value of undeveloped land and is often considered as economically efficient as it provides incentives to develop the land based on its best use. However, it is rarely put into practice, as it requires a comprehensive up-to date land registry and forward planning of land use at plot level, the provision of a well-resourced and informed valuation profession, and resources to undertake robust valuations which separate the value of land from the value of improvements for developed plots based on highest and best use (Hughes et al., 2020[21]). However, the Netherlands is well-positioned to implement a land value tax due to its strong municipal tax system, established land-use planning framework, and political momentum for curbing speculation and improving housing affordability. Still, a shift towards a land tax would require significant legal and administrative adjustments, particularly to separate land and building values in the property tax system and shift towards a current-use valuation model. Resistance from landowners and developers, who benefit from rising land values, could create political and legal challenges. Additionally, unintended consequences, such as discouraging land sales if tax burdens shift unpredictably, would need to be carefully managed. Thus, a land value tax requires careful planning, legal adjustments, and political coordination for successful implementation (Government of the Netherlands, 2024[10]). The government could evaluate whether a phased approach would be feasible, with pilot programs and clear enforcement mechanisms, to help mitigate these risks and ensure effective adoption.
3.3.3. Increasing labour supply and productivity in construction
Addressing labour shortages in the construction sector is necessary to deliver on the required increase in the housing stock. The job vacancy rate in the Dutch construction industry is 6.7%, the highest level in the EU in the third quarter of 2024 (Eurostat, 2024[23]), corresponding to about 25 000 open positions (Statistics Netherlands, 2024[24]). Ensuring the availability of medium skills is key. Using data-driven analysis to identify critical skill shortages in the construction sector and designing targeted labour market policies to address them, such as training or improved job placement, can help alleviate workforce gaps. Easing conditions for labour migration in sectors and occupations facing structural shortages could help, including by eliminating the labour market test for shortage occupations, as recommended in the previous Economic Survey (OECD, 2023[6]).
Increasing productivity in the construction sector is also important, as high construction costs can weigh on the financial viability of construction projects. The development of standardised dwellings can support scale economies, possibly informed by audits on construction costs (Box 3.3). Modular construction, whereby building components are prefabricated offsite in manufacturing facilities before being transported and assembled onsite, can contribute to higher construction productivity. Green modular innovations can also reduce the cost of greening the housing sector, thanks to modular renewable energy systems, modular bathroom pods, and modular photovoltaic roofs (van Oorschot, Halman and Hofman, 2021[25]). The government stated its intention to leverage modular construction to make housing construction faster, more affordable, and more sustainable (Government of the Netherlands, 2024[14]). The authorities should rapidly detail policy measures to promote modular construction. These could include modularity requirements for social housing developments, fast-track approval track for permitting modular construction, or awareness campaigns to educate developers, municipalities, and the public on the speed, cost efficiency, and sustainability of modular homes.
To address rising construction costs, Germany set the Commission on Construction Cost Reduction (Baukostensenkungskommission) in 2015. The Commission developed 71 recommendations for the federal, regional and municipal governments, housing and construction industries, planners, researchers and others. Recommendations for policy-makers included: i) conducting a mandatory impact assessment of housing costs for all drafts of laws, regulations and standards; ii) harmonising existing building regulations, approvals and quality requirements, for instance by adopting model building regulations, iii) improving the evidence base of construction costs, drawing on completed construction projects, observation of cost influencing factors, contribution of innovative manufacturing processes; iv) setting minimum and uniform standards for social housing; and v) defining quality standards for simplification and rationalisation. The recommendations were followed up by setting up a special office to support implementation and the strengthening of standardisation and an expanding share of modular building. The increase in construction costs has been slightly lower in Germany than the EU average since 2015.
Source: OECD Economic Surveys: Ireland 2025 (OECD, 2025[26]).
Increasing housing supply is a necessary condition to raise affordability across the different segments of the housing market. However, reducing the housing shortage will take time, and therefore a longer-term strategy is needed, that not only focuses on measures to increase supply, but that also outlines the policy path for measures that support affordability. In the context of a tight housing market, affordability measures, such as rent controls, can be seen as essential for protecting vulnerable households. Yet, they can unintentionally discourage private investment into rental housing and further reduce the rental market segment in the longer term. Similarly, measures to raise the affordability of homeownership through generous tax subsidies and a borrower friendly mortgage market can inflate demand and thereby raise prices.
To balance these competing goals, the Dutch government should outline a policy path for housing to strengthen the rental market as well as the gradual reduction of fiscal support for homeownership. As the Dutch housing market is highly regulated and complex, policy changes are challenging as any reform will create both winners and losers. This calls for careful planning, clear communication, and strategic timing. It will be important to gradually phase out market-distorting policies, while continuous efforts to increase housing supply are needed to sustainably achieve housing affordability.
In the short term, the government should review who carries the financial burden of ensuring housing affordability. Thus, in the rental market, housing associations and the private sector carry the financial burden through limits on the maximum monthly rent that can be charged. The government should evaluate options to ensure housing associations charge cost-reflecting rents and allowing to temporarily raise the maximum rent ceilings in the non-market segment owned by the private sector to ensure their investment is viable. To mitigate affordability concerns, the government should increase means-tested rental allowances. Policies directly targeting affordable rental housing should also be reviewed and aligned with respect to investment incentives created through the tax system.
In the medium to longer term, and conditional on housing supply increasing, the government could consider strengthening housing associations’ role in providing housing for low-income households. This would require regularly reviewing tenants’ eligibility criteria for non-market rentals provided by housing associations. Current income thresholds for being eligible for non-market rentals provided by housing associations are above the median income, opening the sector to large parts of the population (OECD, 2021[27]). Instead, eligibility should be limited to households for which the provision of housing on below-market terms is necessary out of socio-economic considerations. In addition, eligibility for non-market rentals is only assessed by housing associations at the time the rental contract is signed, and therefore any income improvements thereafter are not considered. Although housing associations can raise rents based on income as discussed above, regularly reviewing eligibility could help to better allocate non-market rentals to the ones most in need. Based on regularly reviewed eligibility, two alternatives are possible: First, households that no longer qualify for below-market rental housing could be required to pay market rent while remaining in their allocated apartment, allowing them to maintain social connections in the neighbourhood. Lower-income households would then be allocated to different housing. Second, households that no longer meet eligibility criteria could be required to move out, freeing up the apartment for lower-income households. However, either approach is only feasible once there is an adequate supply of affordable rental properties both within and outside the non-market rental segment.
References
[7] Causa, O., N. Woloszko and D. Leite (2019), “Housing, wealth accumulation and wealth distribution: Evidence and stylized facts”, OECD Economics Department Working Papers, No. 1588, OECD Publishing, Paris, https://doi.org/10.1787/86954c10-en.
[12] De Mello, L. (2023), “Real Estate in a Post-Pandemic World: How Can Policies Make Housing More Enviromentally Sustainable and Affordable?”, Revista Hacienda Pública Española, Vol. 244/1, pp. 111-139, https://doi.org/10.7866/hpe-rpe.23.1.5.
[18] Eurostat (2025), Share of people living in under-occupied dwellings by tenure status - total population [ilc_lvho50c], https://ec.europa.eu/eurostat/databrowser/product/page/ILC_LVHO50C.
[23] Eurostat (2024), Job vacancy statistics by NACE Rev. 2 activity - quarterly data [jvs_q_nace2], https://doi.org/10.2908/jvs_q_nace2.
[10] Government of the Netherlands (2024), Op grond kun je bouwen - IBO woningbouw en grond [You can build on land - IBO housing and land], https://open.overheid.nl/documenten/9a9d6067-0b34-40ba-b542-6c7954266cfc/file.
[14] Government of the Netherlands (2024), Regeerprogramma [Government Program], https://www.rijksoverheid.nl/regering/regeerprogramma/.
[9] Government of the Netherlands (2024), Rented housing, https://www.government.nl/topics/housing/rented-housing.
[21] Hughes, C. et al. (2020), “Implementing a land value tax: Considerations on moving from theory to practice”, Land Use Policy, Vol. 94, p. 104494, https://doi.org/10.1016/j.landusepol.2020.104494.
[11] Ministry of Finance (2024), Begroting 2025 - XIII Economische Zaken [Budget 2025 - Economic Affaires], https://www.rijksfinancien.nl/memorie-van-toelichting/2025/OWB/XIII/onderdeel/3151099#.
[17] Ministry of Housing and Spatial Planning (2025), Startbouwimpuls [Start-up construction incentive], https://www.volkshuisvestingnederland.nl/onderwerpen/startbouwimpuls.
[15] Ministry of Housing and Spatial Planning (2024), Kamerbrief over Sneller bouwen, bestaande gebouwen beter benutten en [Letter to Parliament: build faster and make better use of existing buildings], https://open.overheid.nl/documenten/3b304827-1555-4b80-8196-1c84040207d5/file.
[3] Ministry of Housing and Spatial Planning (VRO) (2024), Wet betaalbare huur [Affordable rent act], https://www.rijksoverheid.nl/documenten/kamerstukken/2024/10/18/kamerbrief-inzake-stand-van-zaken-wet-betaalbare-huur (accessed on 4 February 2024).
[19] Ministry of the Interior and Kingdom Relations (2024), Kamerbrief over Wetsvoorstel versterking regie volkshuisvesting [Letter to Parliament on Bill to strengthen direction of public housing], https://www.rijksoverheid.nl/documenten/kamerstukken/2024/03/07/kamerbrief-over-wetsvoorstel-versterking-regie-volkshuisvesting.
[13] Netherlands’ Cadastre, Land Registry and Mapping Agency (2025), Woningmarkt 4e kwartaal 2024: meer verkopen, meer koopstarters [Housing Market 4th quarter 2024: more sales, more first-time buyers], https://www.kadaster.nl/zakelijk/vastgoedinformatie/kwartaalberichten/kwartaalberichten-woningmarkt.
[26] OECD (2025), OECD Economic Surveys: Ireland 2025, OECD Publishing, Paris, https://doi.org/10.1787/9a368560-en.
[5] OECD (2024), Affordable housing database - HC1.2. HOUSING COSTS OVER INCOME, https://webfs.oecd.org/Els-com/Affordable_Housing_Database/HC1-2-Housing-costs-over-income.pdf.
[8] OECD (2024), Affordable housing database - PH1-1 Policy instruments and level of governance, https://webfs.oecd.org/Els-com/Affordable_Housing_Database/PH1-1-Policy-instruments-and-level-of-governance.pdf.
[16] OECD (2024), Affordable Housing Database - PH5.1 Measures supporting affordable housing development, https://www.oecd.org/en/data/datasets/oecd-affordable-housing-database.html.
[1] OECD (2023), Brick by Brick (Volume 2): Better Housing Policies in the Post-COVID-19 Era, OECD Publishing, Paris, https://doi.org/10.1787/e91cb19d-en.
[6] OECD (2023), OECD Economic Surveys: Netherlands 2023, OECD Publishing, Paris, https://doi.org/10.1787/dbda2baf-en.
[2] OECD (2021), Brick by Brick: Building Better Housing Policies, OECD Publishing, Paris, https://doi.org/10.1787/b453b043-en.
[27] OECD (2021), OECD Economic Surveys: Netherlands 2021, OECD Publishing, Paris, https://doi.org/10.1787/dd476bd3-en.
[22] OECD (2017), The Governance of Land Use in the Netherlands: The Case of Amsterdam, OECD Regional Development Studies, OECD Publishing, Paris, https://doi.org/10.1787/9789264274648-en.
[20] OECD/Lincoln Institute of Land Policy, PKU-Lincoln Institute Center (2022), Global Compendium of Land Value Capture Policies, OECD Regional Development Studies, OECD Publishing, Paris, https://doi.org/10.1787/4f9559ee-en.
[4] Statistics Netherlands (2025), Stock of homes and non-homes; mutations, function, region, https://opendata.cbs.nl/#/CBS/nl/dataset/81955NED/table?ts=1744703714205.
[24] Statistics Netherlands (2024), Vacancies; seasonally adjusted, https://opendata.cbs.nl/statline/#/CBS/en/dataset/80474eng/table?ts=1738935744506.
[25] van Oorschot, J., J. Halman and E. Hofman (2021), “The adoption of green modular innovations in the Dutch housebuilding sector”, Journal of Cleaner Production, Vol. 319, p. 128524, https://doi.org/10.1016/j.jclepro.2021.128524.