The announced rent freeze for social housing in 2025 and 2026 will have large-scale, unnecessary effects on the social rental sector. Due to the rent freeze, the housing association sector will lose €2 billion in rental income, and according to Capital Value, the value of corporate-owned properties will decline by 8.5% in 2025, with investment capacity decreasing by €47.5 billion. As a result, the housing shortage is expected to rise to 453,000 by 2027. However, the societal benefits of the rent freeze are very limited: social housing tenants will pay only €20.73 less per month in 2025, and the central government will still compensate housing associations for part of the lost rental income through the continued payment of saved rent allowance. Capital Value therefore advises a more targeted approach, whereby low-income households receive an additional subsidy, and the construction of new social housing remains at the necessary level.
Housing shortage to rise to 453,000 by 2027 due to rent freeze
Value of housing association properties to fall by 8.5% due to rent freeze
The announced rent freeze for social housing in 2025 and 2026 will have disastrous consequences for the housing association sector and the housing shortage. As a result of the rent freeze, associations will receive approximately €2 billion less in rental income over the next two years than originally anticipated. This will directly impact their investment capacity, preventing many planned expansion and sustainability projects from going ahead. In addition to the direct loss of rental income, the negative effect on borrowing capacity—which is based on market value—plays an even greater role. According to estimates by Capital Value, the market value of socially rented complexes will decline by 8.5% by December 31, 2025, due to the rent freeze. Sector organization Aedes indicates that the borrowing capacity of housing associations will decrease by €47.5 billion over the next five years as a result of the freeze. A similar effect occurred in 2023 following the one-off rent reduction for low-income households. According to an evaluation by the Ministry of Housing and Spatial Planning, that rent reduction—amounting to approximately €56 per household per month—caused rental income losses of €397 million across the sector and reduced its investment capacity by €8.3 billion. Ultimately, low-income households paid only €24 less in rent per month, because the housing allowance was also reduced. This shows that even a small rent reduction can have very large side effects.
Compensation for rental loss in Spring Memorandum ineffective, housing shortage to increase to 453,000 homes by 2027
To compensate for the reduced rental income, the 2025 Spring Memorandum includes a ‘social housing investment reserve,’ allocating €270 million for 2026 and €405 million for both 2027 and 2028. However, because this total compensation of just over €1 billion is paid out as a subsidy, it cannot be included in the determination of the market value of association-owned properties. Therefore, the decline in borrowing capacity remains despite the compensation. As a result, the National Performance Agreements made just four months ago can no longer be honored. Sector organization Aedes has consequently withdrawn from these agreements. This is extremely unfortunate, as housing associations in the Netherlands have been contributing significantly to the addition of affordable housing. Due to the impact on borrowing capacity, the sustainability improvements of social housing will slow down, and according to Aedes, 170,000 fewer social rental homes will be built by 2035. Consequently, the housing shortage will increase more sharply to 453,000 by 2027. In the years beyond, the targets for (social) housing construction will also not be met.
Moreover, there is an additional threat to larger new-build projects, which typically include a substantial proportion of social housing based on municipal requirements. If the housing association sector can no longer act as the buyer of these units, projects containing mid-market and private sector rental homes may also fail to proceed. Therefore, the impact on housing production could be even greater than the figures currently cited by Aedes suggest.
Housing association tenants to save around €20 per month in 2025
Thanks to the rent freeze, tenants of housing associations will pay less rent in 2025 and 2026. In 2025, the average “rent discount” will amount to €20.73 per household per month, rising to €34.53 per household per month in 2026. Because the rent freeze applies to all social housing, not only low-income tenants and expensive ‘misplaced’ tenants benefit, but also middle-income households and approximately 238,000 low-rent ‘misplaced’ tenants profit from the measure. The central government also benefits from the measure through lower housing allowance expenditures: due to the reduced rents, €492 million per year will be saved on allowances in both 2025 and 2026.
Capital Value’s solution: provide targeted subsidies for low-income households instead of a generic rent freeze across the entire sector
The negative effects of a rent freeze are disastrous, while the benefits for social housing tenants remain limited. Capital Value therefore advocates an alternative solution: by directly allocating available funds to assist low-income households, a much more targeted impact can be achieved without the negative consequences for the entire social rental sector. This approach would also align with the additional €1 billion reserved for the housing allowance in the Spring Memorandum. Deploying a targeted subsidy for low-income households instead of a generic rent freeze has the following advantages:
- Housing associations will not be adversely affected, meaning the National Performance Agreements remain achievable;
- New construction of social rental homes and mixed housing projects can continue, preventing the housing shortage from increasing further and even allowing it to decline;
- The sustainability improvements of the housing association stock can continue;
- ‘Misplaced’ tenants will not receive unnecessary subsidies;
- The government will receive more VAT revenues if the negative impact on new construction is avoided;
- The sell-off of existing social rental housing will not be further encouraged;
- The government will maintain more stable policy, avoiding a breach of trust among the signatories of the Housing Summit and preventing further deterioration of the (international) investment climate.
Arjan Peerboom, CEO of Capital Value, states: “The rent freeze is a ticking time bomb for the housing market. The consequences for housing associations, and for the construction and sustainability of social housing, are unprecedented. It would be wise to choose only a targeted subsidy for low-income households, because the generic rent freeze measure will lead to an explosive increase in the housing shortage. The construction of affordable rental homes will suffer severe blows that will affect us for many years to come.”
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