New Housing Act in the Netherlands as per 1 July 2015
5 mei 2015
In March 2015 the Dutch senate approved new legislation for housing associations in The Netherlands. The new Housing Act (Nieuwe Woningwet) will come into effect as per 1 July 2015 and defines the core tasks and activities of housing associations, i.e. providing affordable housing to people with a low income.
Within the new Housing Act, a strict separation between social activities and commercial activities has been made. Housing associations have to focus their future activities on Services of General Economic Interest (SGEI) or have to meet the strong restrictions made by the national government and the European Commission for activities in the commercial sector (non-SGEI). In order to better understand the new regulations and the effect they will have on the Dutch housing market, we have summarized some of the key elements below.
Operational split (separation) of SGEI (DAEB) activities and non-SGEI (non-DAEB) activities
The new legal framework for housing associations dictates an operational split between existing social activities and commercial activities. This means that housing associations will need to divide their social and commercial activities into separate 'entities' either legally or administratively. Consequently, the 'commercial' entity has to operate under market conditions. New commercial activities are only allowed after a strict market test. Only the smaller housing associations, with an annual turnover below 30 million Euros, have lighter separation requirements.
(Re)financing non-SGEI activities
The new Housing Act forces housing associations to look to the market when (re)financing their non-SGEI activities. Under the new rules, housing associations will no longer be able to (re)finance non-SGEI activities with a loan guaranteed by WSW*. The Government and European Commission believe that (re)financing non-SGEI activities with loans guaranteed by WSW leads to market disruption enabling housing associations to secure cheaper loans than private market parties. Only the first loan for the new non-SGEI entity can be internally provided by the SGEI entity of the housing association. In the future, housing associations will have to attract market-based (re)financing for activities classified as non-SGEI, making the housing association sector a potentially attractive market for banks. In 2014, CFV (Centraal Fonds Volkshuisvesting) created an overview of non-SGEI property owned by housing associations, showing that the current volume of property classified as non-SGEI on the basis of market-based let property represents approximately EUR 13.8 billion.
Valuations based on market value
Every year housing associations are obliged to draw up an annual report. Under the new regulations on financial reporting, housing associations are mandatory to determine the value of their property on the basis of market value instead of going-concern value, which was more common practice for the sector. This accounts for the entire portfolio of the housing association. This change in financial reporting will lead to more transparency in the market and more market-knowledge within housing associations.
Stakeholders will gain more influence
Stakeholders like municipalities and tenant organizations will gain more influence on the business operations of housing associations. Housing associations and municipalities will have to make performance specifications/contracts about their goals and tasks. Tenant organizations will also be more involved in the general management of the housing associations. Housing associations are obliged to consult both parties more often about their (future) activities. Communication with stakeholders will be of increased importance.
New supervisory body
In order to supervise the tasks of all housing associations, a new supervisory body will be established, the Authority Housing Associations. This supervisory body will be responsible for financial supervision as well as supervision on governance and integrity of housing associations.
Background information
The Dutch social housing sector
The Netherlands has known the largest social housing sector within Europe. Of all homes in the Netherlands (approximately 7.5 million), approximately 42% (3,200,000 homes) belong to the rental sector. Housing associations own the largest share of the rented homes (2,300,000). 94% of these homes can be categorized to the regulated sector. The current monthly rent for a home determines which of the two markets a rental home belongs to. As from 1 January 2015, rental homes with a monthly rent of EUR 710,68 and lower are considered regulated. Rental homes with a higher rent are considered non-regulated. For more information, please read the research report: An analysis of the Dutch residential investment market.
*WSW
WSW provides guarantees to lenders granting loans to housing associations for social housing projects and other properties with a social or public function. These guarantees enable housing associations to borrow on favorable terms. WSW has a solid security structure, and the guarantees it provides are very highly regarded. The world's leading rating agencies, Standard & Poor's and Moody's Investors Service, have awarded WSW of AA- and AAA, respectively. At the end of 2012 WSW had guaranteed loans totaling around €87.4 billion.