Expanding housing valuation system through Affordable Rent Act proposal

The continuous rise in rents and housing prices and the dire shortage of housing has caused much political turmoil recently. The Minister of Housing and...

Share the article

The continuous rise in rents and housing prices and the dire shortage of housing has caused much political turmoil recently. The Minister of Housing and Spatial Planning is therefore taking action by now regulating middle rent in addition to social renting. To make this happen, the Minister has launched a bill for consultation: the Affordable Rent Act. The implications of this possible new law are outlined below.

Extension of housing valuation system

For some time now, rental housing in the lower price segment has been subject to the housing rating system. Under this system, the so-called point system applies, under which the rent that the landlord may charge is capped by – in short – the characteristics and quality of the property. The purpose of this system is to keep rents affordable for low-income tenants and prevent housing shortage abuse. Under the current system, if the rent is higher than allowed under the point system, the tenant can go to the Rent Commission, which then issues a binding ruling. The housing valuation system applies to homes with (in 2023) a maximum initial rent of €808.06 and a maximum of 145 points. If the rent amounts to a higher amount, and the property has more than 145 points, the property falls into the free sector.

If the Affordable Rent Act is passed, the housing rating system will also apply to homes up to 186 points. The rent for housing in this segment may then be a maximum of €1,021.02, depending on the number of points. This maximum rent will only apply to new leases. Existing contracts will be spared. In turn, this does not apply to rental contracts relating to independent living space with a rent that was higher than the rent allowance limit when the rental contract was entered into, but which, on the basis of the point system, should actually have been covered by the already existing housing valuation system. For these contracts, the new housing valuation system will simply apply, albeit only one year after the Affordable Rent Act takes effect.

As was the case previously for regulated rent, the maximum rent will be indexed annually. In addition, the housing valuation system is being modified so that more points can be awarded for a low energy label. Homes to which more than 186 can be assigned will continue to fall under the free sector.

New construction

The bill could jeopardize ongoing housing projects. Such projects are long-term. Developers of current projects have not been able to take the bill into account in their operations, while it is clear that the revenue model in mid-rent housing is under pressure by the bill. Aware of this issue, the Minister wants to regulate that for middle-rent homes completed after Jan. 1, 2024, and whose construction started before Jan. 1, 2025, a 5% surcharge will apply on top of the maximum rent until 10 years after completion. This means that for 10 years, those newly built homes may be charged 5% more rent than would be allowed under the new housing valuation system.

Administrative fines

In addition to the expansion of the housing valuation system included in this bill, penalties for non-compliance are also introduced. This means that landlords can now face an administrative fine if they do not comply with the maximum rent discussed above. Municipalities will be responsible for enforcement and imposing administrative fines.

Want to know more about this bill? Then you can contact a real estate specialist.