Dutch Government Bans Landlords

With proposed rent control, eviction bans, and changes in applicant criteria, it’s easy to think Minneapolis and St Paul are terrible places to own investment property.

Believe it or not, it could be worse.

Last year in The Netherlands, the Dutch government passed a law that allows cities to ban investors from buying homes for the purpose of renting them. Most of the major cities did just that.

So why does that matter to us in Minnesota?

It’s an example of how a policy like rent control which is passed to address one perceived problem often has a ripple effect and far-reaching unintended consequences.

For example,  many Dutch landlords decided to sell rather than deal with the government. The properties they sold couldn’t be purchased by investors. This gave first-time home buyers the opportunity to buy a house; which is a good thing. However, these homes were typically at lower price points.

Of course, this reduced the supply of rental housing, resulting in higher rent (that supply and demand law and all). In the last year alone rent rose 6% in Amsterdam and 5% in Rotterdam, and are up 15% in Amsterdam and 12.5% in Rotterdam in the last two years alone.

But higher rent isn’t the only unintended consequence of the government’s anti-landlord policy.

Those first-time home buyers fixed up the houses they bought in less desirable neighborhoods. The rehabbed properties caused the neighborhoods to gentrify, thereby becoming more expensive. Expensive neighborhoods tend to also have expensive rent.

The impacts of poor housing policies don’t stop there. The Dutch also have more jobs available than unemployed people. The would-be workers can’t afford to live anywhere near those vacant jobs, due to the lack of affordable rental housing.

Worse yet, next year the government will implement rent control. The government intends to fine landlords who “charge more than the home is worth.” It is estimated this act alone will reduce the monthly rental income of properties affected by 190 euros ($205) per month.

In fact, the Dutch government has become so restrictive that even the International Monetary Fund (IMF) and European Commission have warned the housing policies pose a threat to the country’s development.

Of course, if you were a housing provider in The Netherlands what would you do? As expected, 92 percent of all Dutch landlords are either selling or considering it.

And if they sell, and those properties are purchased by first-time home buyers, there are fewer rental units available, causing rent to go up, and the crisis to heighten further.

Rent control is a failed policy not only in the United States but globally as well.

While I haven’t heard of any local governments planning to ban landlords entirely, the Dutch story does provide a cautionary tale.

Elections have consequences.