Serious doubts about whether House Building Incentive Scheme achieves more and faster house building
The House Building Incentive Scheme is the key financial instrument in the Dutch government’s efforts to tackle the country’s housing shortage. A total of €2.25 billion was set aside between 2020 and 2024 in the form of central government grants to help municipalities build ‘faster, more and more affordably’. However, the Netherlands Court of Audit has found that, in practice, the scheme has not increased the rate of house building and that whether it has boosted the number of new homes built is also subject to serious doubt. However, the scheme has had a clearly positive impact on the percentage of affordable homes in projects financed.
The House Building Incentive Scheme has not enabled homes to be built more quickly, but has increased the share of affordable homes. Serious doubts exist as to whether the scheme is resulting in an overall increase in the number of homes being built.
House building projects receiving grant delayed equally often as rejected projects
One of the conditions for receving a grant under the government scheme is that building must start within three years after the grant is awarded. In other words, all the projects receiving a grant in the first three tranches had to start work in December 2024 at the latest. In reality, however, only 62% of projects had started by that date, while the other 38% had yet to begin. This was almost the same as the delays on projects rejected for a grant during the same period. Of these latter projects, 67% had started by the end of December 2024, whereas 33% had not yet begun. Meanwhile, most of the projects starting without a grant had progressed further than those starting with a grant. These figures indicate that the House Building Incentive Scheme has not resulted in house building projects starting more quickly.
Building work largely starts equally quickly regardless of government grant
| Started | Not started | |
|---|---|---|
| Government grant (82 projects) | 62% | 38% |
| No government grant (15 projects) | 67% | 33% |
Government grant often not the solution for house building project delays
In one in three of the projects with a government grant that the Court of Audit examined, delays were caused by the time taken to complete appeals procedures at the Council of State. Projects can often start only after completion of various investigations, ranging from surveys of noise, ground water and nitrogen to surveys of parking space, traffic access, grid congestion and protected species. Being awarded a grant under the incentive scheme does not avoid lengthy Council of State procedures. In this respect, therefore, making more public money available is not the solution.
Serious doubts about whether incentive scheme boosts house building
Whether projects receiving a government grant would not otherwise have gone ahead cannot be conclusively established. This was also stated by the minister herself in letters to the House of Representatives and endorsed by the Review Committee. It is clear in any event that most of the projects not awarded a grant went ahead nevertheless. Another aspect is the limited capacity available to municipalities and the construction sector, with the result that a project awarded a grant may be at the expense of other projects.
More often increase than decrease in number of homes built in projects, regardless of government grant
| Decrease | No change | Increase | |
|---|---|---|---|
| Government grant (81 projects) | 11% | 48% | 41% |
| No government grant (15 projects) | 27% | 0% | 73% |
Incentive scheme increases percentage of affordable new homes
The incentive scheme has clearly boosted the percentage of affordable homes in newbuild projects. Almost all the projects receiving a grant have continued to meet the minister’s requirement for at least half of the homes built to be affordable. This is in contrast to various projects that did not receive a grant, where the figure fell below 50% and, in two cases, to as low as 30%. This striking difference compared to the percentage in projects receiving a grant is clearly attributable to the incentive scheme. In the longer term, however, there are few guarantees that these homes will remain affordable. Our previous audit from 2022 (‘Tackling the housing shortage’) recommended that the minister should take steps to ensure longer-term affordability. This remains an important point of concern if sufficient numbers of affordable homes are ultimately to be built.
Need for more consistent policy
It is recommended that the House Building Incentive Scheme should be reconsidered or fundamentally redesigned. We see two possible options in this latter respect: a broad-ranging incentive scheme focusing solely on affordability or an incentive scheme targeting a limited number of complex house building projects designated for a specific purpose.
Another important recommendation is for a more comprehensive analysis of the various problems in the house building market. If production of new homes is to increase and accelerate, additional policy will be needed alongside financial instruments such as the House Building Incentive Scheme. Such policies could include shortening the procedures and designating more sites available for building. Although the minister has stated a wish for this, she has since also announced a new tranche of the ‘old’ incentive scheme.