Backgrounds Annual rent increase 2024

The House of Representatives rejects motions on freezing or limiting rent increases 

On Tuesday, February 13, the House of Representatives rejected several motions calling for freezing or limiting rent increases at housing associations. It is good that the House recognizes that corporations must be able to continue with sustainability and new construction of social housing. 

The National Performance Agreements (NPA) stipulate that rents for social housing will increase this year by 0.5% less than the average wage development (5.8%). This ensures that most tenants spend relatively less of their income on rent. The rent for housing owned by corporations may therefore increase by 5.3% this year.  

 

Research by Nibud shows that even then the part of the income that people pay in rent actually decreases. Tackling the energy crisis and the housing crisis remains an important goal for housing associations. However, it is important to realize that less rental income also means that less can be invested. For example, if corporations increase rents by 1% less in 2024 (4.3% instead of 5.3%), this could eventually lead to 20,000 fewer social rental homes that can be built.  

It is therefore a delicate balance between affordability for tenants and the opportunity to invest in sustainability and new construction.   www.aedes.nl   

 

In the run-up to the vote on the motions, Aedes published the article below. It explains the importance of the agreed rental development and why increasing the rental allowance is much more effective in supporting tenants with the lowest incomes.  

 

Dates  

'We cannot afford for the government not to comply with the rental development agreed in the National Performance Agreements. That would put an end to the ambitions for sustainability and new construction of social rental housing. Corporations must be able to count on a reliable government that fulfills its agreements," says Martin van Rijn. Aedes therefore urges the House to continue the rent increase set out in the National Performance Agreements (NPA).  

 

Rents fall relative to wages and benefits 

The National Performance Agreements (NPA) stipulate that rents will increase 0.5% less than the average wage development (5.8%). This agreement was made to ensure that most tenants spend a relatively smaller part of their income on rent.  

That is why the rent for housing owned by corporations may increase by 5.3% this year. Research by Nibud shows that the part of their income that people pay in rent does indeed decrease.  

 

See the calculation examples in this article. 

 

Tackling the energy crisis and housing crisis  

Aedes chairman Martin van Rijn: 'The housing association sector has done a lot in recent years to keep rents affordable. For example, the average rent increase in 2023 was only 0.1% because 600,000 households received a significant rent reduction of an average of 60 euros per month. This is on top of the rent freeze and rent reductions from 2021, appropriate allocation and the fact that corporations only ask on average about 70% of the maximum permitted rent.  

We want to continue to tackle the energy crisis and housing crisis as quickly as possible.' 

  

Less rental income means less investment 

(Construction) costs are also increasing for corporations because materials become more expensive and interest costs and wages rise. The calculations show that 'turning the rent knob' has a major impact on the investment scope of housing associations.  

 

For example, if corporations increase rents by 1% less in 2024 (4.3% instead of 5.3%), this means that 20,000 fewer social rental homes can be built in the long term, leaving just as many households out in the cold.  

 

Less rent increase largely does not benefit the tenant 

It may seem illogical, but lower rent increases only improve the financial position of tenants (with rent allowance) to a very limited extent. A rent freeze or a lower rent increase is mainly beneficial for the government. If the rent decreases, the housing benefit will decrease accordingly. Of every euro less rent increase, almost 2/3 goes to the government and only 1/3 to the tenant.  

The striking thing is that the lower a tenant's income, the less the tenant benefits from a lower rent increase or rent freeze. Moreover, this does not only affect tenants with the lowest income, because people with a middle income in social housing also benefit.  

 

Increase in housing allowance 3 times more effective 

That is why an increase in the housing allowance is much more effective. This entirely benefits the lowest incomes, including those who rent in the private sector. An increase in the rental allowance is much more targeted and 3 times more effective than a lower rent increase. And corporations can then continue to invest in much-needed new construction and sustainability and maintenance of their properties. 

 

 

Calculation example tenant X with rent allowance 

At the end of 2023, Tenant He receives 178 euros in housing allowance, making the net rent 422 euros. The net rental ratio – net rent / income – is 19.5%. 

 

On January 1, the net disposable income of this tenant X will increase to 2,246 euros. The rent is still 600 euros. The rental allowance will increase, including a reduction in the personal contribution by more than 30 euros per month, to 219 euros per month, which reduces the net rent to 380 euros. The net rental ratio is then 16.9%.  

 

On July 1, 2024, the rent will increase by 5.3% to 632 euros per month. The rental allowance will therefore also increase to 240 euros per month, making the net rent 392 euros. This is therefore still 30 euros lower than the net rent at the end of 2023. The net rental ratio is then 17.5%. 

 

This calculation example shows that tenants with rent allowance will pay less net rent in 2024 than in 2023, both after the rent allowance increase on January 1 and after the rent increase on July 1. If you look at the rent ratio, it is even considerably less.  

Naturally, the above example depends on the precise increase in income, rent and whether you receive housing allowance.  

 

Calculation example tenant Y without rent allowance 

Tenant Y has a net income of 2,848 euros per month at the end of 2023 and a rental home with a rent of 808 euros. He does not receive housing allowance. The net rental ratio – net rent / net income – is 28.4%. 

 

On January 1, the income of this tenant Y will increase to 3,034 euros net per month. The rent is still 808 euros. The net rental ratio is then 26.6%. 

 

On July 1, 2024, the rent will increase by 5.3% to 851 euros per month. The rental ratio is then 28.0%. 

 

This calculation example shows that even people without housing benefit will spend a smaller part of their income on rent in 2024 than in 2023, even if the rent increases by 5.3% on July 1. Of course, this depends on the exact increase in income and rent.  

 

NB: The above calculation examples are based on the Nibud report 'Affordability of the maximum rent increase in 2024'.  

 

Source: www.aedes.nl and www.nibud.nl