Social housing in the Netherlands enjoys a long and rich tradition. Social housing associations ensure that more than 2.4 million households in the Netherlands have access to adequate and affordable housing. That means almost 40% of all Dutch live in social housing. The history of social housing becomes especially interesting when looking at the housing crisis that existed after World War II. The city needed to develop massive amounts of new housing. Both city and other housing organizations developed real estate at a fast pace. At that time, the government intervened in all parts of housing including the planning, development and pricing policy. In the 1960’s the government begin to realize that civil societies might be able to handle a lot of what the government did. Various forms of privatization took place over the next decades with the final step being the ‘Brutering’ (Grossing and Balancing Agreement) in 1995. Simply put, all the money owed to the government by housing associations was offset by the future subsidies the government would owe the housing associations. The government no longer needed to subsidize the industry which relieved them of a large burden.
After the Brutering, a combination of a strong building economy and the increased freedom led the social housing sector to something of t a golden era of development. Social housing organizations built anything from low income housing to higher income housing. They became active in the development of commercial real estate and also became the primary tool for a municipality to recognize its urban development goals. A lot of good came from the social housing sector including large scale urban renewal and restoration of neighborhoods. At the same time, social housing did not receive heavy regulation. I spoke with Daphne Braal-Verhoog the Director and Geraldien Bruin Manager of the Department of Policy from the Centraal Fonds Volkshuisvesting (CFV). The CFV is the regulating body for Dutch Social Housing. Mrs. Braal-Verhoog explained that everyone benefitted from the real estate developments of the 2000’s. Cities saw large scale projects realized, politicians could point to new buildings and the strength of the building economy. This made it exceedingly hard to implement extra regulation on the industry. Mrs. Braal-Verhoog further explained that Aedes (a lobbyist/advocate agency for social housing) and the social housing industry itself became an extremely powerful lobby and its ability to fight regulation during that period was strong. The CFV lobbied for stronger regulation of the industry but to no avail. Staff at Aedes counters that industry did not fight tighter financial controls but the social housing objective controls that CFV tried to implement. Aedes advisor Arjen van Gijssel informed me that Aedes originated the concept of “Supervision with a Bite” when they realized something was wrong after some of the financial problems came to light. Disagreements still exist on the question of how much the social housing industry fought against regulation in the 90’s and early 2000’s.
Problems in the Sector:
Cracks begin to appear in the armor of the social housing industry around the time of the financial crisis. Major developments in both the economy, EU and the behavior of some social housing organizations started a chain reaction that drastically changed the industry.
- The Dutch Association of Institutional Investors (IVBN) filed a complaint to the European Commission regarding unfair competition in the market. The IVBN believed the housing associations were receiving an unfair advantage. The advantage in short came from state backed guarantees that lowered interest rates on loans and other opportunities like lower cost land prices. The result from this complaint was a between the EU and Dutch government s about what constituted unfair State Aid. The government s finally decided that social housing companies needed to focus their work on developing housing and serving disadvantaged.
2. Outside of the EU ruling, the Dutch social housing sector experienced other issues over the course of the 1990s and 2000’s. The building sector experienced a boom in the 90’s which led to large profits and the net worth of the social housing industry to increase to around 200 billion euro. This growth coupled with the lack of proper checks and balances led to speculation, inefficiencies and in some cases fraud. The professionalization of the industry did not keep up with the growth and it became evident in 2008 that problems existed. As one MP said ‘It was a poisonous cocktail of over-ambitious directors, failing regulation, a lack of clear boundaries and self-regulation,’. Strange cases came to light like the social housing corporation that spent over 250 million euro on fixing the SS Rotterdam, a former ocean liner, as a project of urban renewal. The project went over budget by 220 million euro and spent money on what could have been new social housing units. A social housing corporation boss driving a Maserati as a company car is another example of bad public attention. Mrs. Braal-Verhoog from the CFV said the big game changer happened in 2012. “Vestia, the Netherlands’ largest housing association, lost €2 billion in January 2012 after interest rate swap deals – designed to protect against interest rate increases on variable rate loans – went wrong. The 90,000-home landlord had to raise rents and sell stock to pay €1.3 billion back to the banks and the rest of the sector coughed up €700 million to bail the organization out’. The problems led to a 2012 parliamentary inquiry on the social housing sector. The corresponding responses led to dramatic changes within the Dutch social housing industry which will be discussed in part 2 of this series on Dutch social housing.
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