Climate deteriorating in region too due to ‘limits to growth’ sentiment
The outlook for the housing market in our region is blacker than black. This has to do not only with the nitrogen ruling by the Council of State, but also with the strong regulation pursued by the state and many municipalities. For many projects, there is a high probability of postponement, delay or serious delay. It makes the housing agreements that Housing Minister De Jonge made with the provinces even less realistic. The 900,000 new-build homes through 2030 – 130,000 of them in Brabant – were already more or less on quicksand because many plan sites are not “hard”. The endless wrangling over building sites, as well as huge price increases, labor shortages and energy shortages offer little perspective. Now that a sturdy fence has recently been erected in front of the legal ‘goat trail’ that the government had created to escape nitrogen rules during construction work, the ambitious building program threatens to sink completely into the Dutch swamp.
Just as worrisome is the deterioration of the new construction climate in our own region, where in the largest center municipality (Eindhoven) the intended production figures are not being met year after year, let alone accelerated. Instead of pulling out all the stops to accelerate much-needed new construction with an innovative approach – which we in the region are so good at, after all – our administrators suddenly start doubting what we can handle as a region.
Brainport region Eindhoven has ‘mainport’ status, indicating that our region is essential to the national economy. At long last, a small billion euros is coming from the national government for much-needed infrastructure projects. The cabinet has even appointed – in the person of Klaas Dijkhoff – a booster to prepare the region for the jump in scale needed for ‘further development’. But now we are apparently getting nervous about it anyway. Because there is increasing concern about “limits to growth,” a looming divide in society and large numbers of expats flooding our housing market.
All these years we have asked for additional funds to generate and manage further growth. And now that they have been promised, here and there we even hear the idea of referring ASML to regions where there is more space, a completely impossible thought. ‘The Netherlands is full’ is not allowed to be said by many political parties, but it is apparently allowed for the region, because the highly educated expats – who contribute plenty to economic growth – are taking our homes. Some healthcare aldermen are even worried about the rising number of special education students. They attribute this to the large number of expats, whose children are more likely to be autistic. Surely it would be too crazy to slow down the growth of our high-tech business community for that reason.
Catching up badly needed
Let’s use the growth of ASML – the prognoses have recently been revised upwards – and many other technological companies to make the region better and more beautiful, also in the areas of health care, education, welfare and culture. However, catching up on housing and infrastructure is the first thing that is desperately needed. There is already a huge housing shortage and to accommodate population growth (including expats, yes) at least 62,000 homes are needed in the Eindhoven Urban Area until 2040. Of course, circumstances are not exactly favourable at the moment, with a war in Ukraine and, partly as a result of this, sharply rising prices of fuel and building materials. Not to mention the difficult labor market. But is it then a solution to suggest that the growth needs of ASML and its suppliers should be solved in other regions?
In a region like ours, we should not shy away from these additional challenges. There is a lot of innovation power and capital available in the region, but we apparently do not succeed in combining it to really accelerate. Rather, we put our energy into distributing the scarcity. For example, the Eindhoven City Council recently addressed the question of how to arrange priority in housing allocation for teachers, nurses and police officers. It is a point from the coalition agreement that – as it turned out – will involve further study and discussion. And that, unfortunately, is not going to produce an extra house.
The same coalition agreement calls for an unfeasible mix in the new construction program: 30% social rental, 15% medium rental, 40% social buy and medium-priced buy. After which only 15% remains for free sector housing, the component that often helps make social and middle rental possible. Meanwhile, production figures are disappointing year after year. And at the “acceleration table” – a consultation between municipality, corporation and market parties – there is busy talk, but there is still no concrete result after more than 1.5 years. My prediction is that a requirement of 85% affordable housing will help bring construction to a complete halt. I speak to many project developers and find that preparations for the ambitious plan Internationale Knoop XL (6,500 homes), for example, are at a complete standstill.
Investors head over heels
Minister De Jonge’s approach is also not really helping to achieve results. His plans to regulate a larger part of the rental market through a points system are making the larger investors in the housing industry head over heels. Their projects are often already becoming less financially viable due to huge price increases and long delays. A recent report by CBRE predicts that its regulatory plan – even in watered-down form – will lead to less new construction of rental housing, precisely in a price range that is affordable for agents and teachers, for example. In the case of the existing middle-rent homes that will soon come under the operation of the point system, owners will more often sell when tenants change if the rent is substantially lower. In this way, the minister is achieving the opposite of what he wants.
Governments seem to have a hard time realizing that all the regulation and stacking of many requirements is not a magic potion that gets the housing market moving, but rather a deadly cocktail with fatal consequences for the market. Developers also like to build affordable housing, but if the receipt at the end doesn’t end up in the black, no more construction at all. With economic headwinds, perhaps even storms, looming, they are more reluctant to pursue initiatives. The result: fewer flow-through opportunities and ultimately less affordable housing due to the stringent programmatic requirements. Clearances are imminent, even without nitrogen issues.