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Since the financial crisis reached its lowest point in 2013, the number of private investors in the Dutch housing market has been growing. Their large market share is a new phenomenon in the Netherlands and concerns exists that inequality in the housing market is growing as a result. Who are these investors? How is their rise impacting the market? How can we develop effective policy in response? Urban geographer Cody Hochstenbach received a Veni grant from the Netherlands Organisation for Scientific Research to study this phenomenon.

Picture of house and money

Inequality in the housing market has become an important theme in the Netherlands. With the average purchase price of a home being around 300K and long waiting lists for affordable rental housing, the accessibility of the housing market is under pressure. Especially for those with lower incomes and younger generations, it is becoming increasingly difficult to find affordable homes or build wealth through home ownership.

The rise of the private investor

Since the financial crisis reached its lowest point and house prices took a steep dive, private investors have been buying up an increasing share of homes on the market. ‘This is a new phenomenon in the Netherlands,’ Hochstenbach says, ‘since the private rental market had actually been shrinking for the past hundred years or so. While the rise of the private investor could potentially have a major impact on the accessibility of the housing market, we don't yet know exactly what that impact will be or who those private investors are.’

Housing corporations versus private investors

The fear of increasing inequality in the housing market has to do with another role played by these investors.

  • Whereas housing corporations increasingly serve the least-wealthy groups in society, private investors are presumably focused on households that can afford steep rents, i.e. those with higher incomes, but also groups of students.
  • Unlike institutional investors, private investors deal mainly with existing construction – meaning they add no new housing units to the supply and, in all likelihood, drive up the current scarcity and prices even further.
  • Private investors remove houses from the total market supply, making it difficult for younger generations (among others) to accumulate wealth through home ownership.

In other words, a greater role for private investors could prove detrimental to the accessibility of the housing market. ‘Still, we currently don't know exactly who these investors are, how they make their investments and what the impact of their investments is,’ Hochstenbach explains. ‘It's about more than just the affordability and accessibility of housing – this also touches on issues of spatial inequality and the wealth gap.’

Using Statistics Netherlands data to map out private investments

Hochstenbach intends to map out the private investors and their capital flows using detailed data from Statistics Netherlands (CBS). He explains that the Netherlands is unique, both in the microlevel at which information is recorded and in the quality of that data. ‘As a result, we are able to link information concerning city of residence, home ownership and capital at an individual level. This provides extremely precise insight – much better than that available in countries like England and America, where a lack of data leaves researchers no choice but to focus on the structural context, such as the broad political economy of a given city or country.’

A diverse group

Hochstenbach is interested in the overall composition of the group of private investors. He calls the group quite diverse. ‘We see people with local ties and those who live in another city; people who are looking to invest in the short term and those who invest the long term; people who have a strategic plan going in and those who just kind of stumble into it, like sellers who hang on to their former home for a while in order to rent the place out.’ What we do know is that most of them only own one or two buildings.

‘The group undoubtedly includes some landlords with the best of intentions, as well as speculators and slumlords looking to turn a quick profit. Good intentions or no, collectively speaking, private investors have an impact on the housing market that we must understand in order to effectively tackle the inequality in that market,’ Hochstenbach concludes.

Policy and the housing market

The role of private investors in the Dutch housing market is a top priority on policymakers’ agendas as well. While there is a willingness to intervene, no consensus between political parties exists as of yet. Some of the parties in the current cabinet are firm believers in the free market and view private investments as favourable capital injections for the housing market.

For Hochstenbach, the main question involves where exactly this private capital is being invested. If it were being used for new, potentially affordable homes, this could be viewed as a positive development; however, if that capital were to remain tied up in existing real estate property, it will do nothing to solve the current problems within the housing market.

dr. C. (Cody) Hochstenbach

Faculty of Social and Behavioural Sciences

GPIO : Urban Geographies