A billion euros in public money do not necessarily lead to more houses

Poor justification of incentive scheme; risk of crowding-out

The Dutch central government released €1 billion in 2020 and 2021 as an incentive for municipalities to build more houses. The Netherlands Court of Audit has concluded that it is uncertain whether the measure will actually lead to more houses. The reasons given for the government’s financial incentive are weak. The minister does not have reliable information on whether more affordable houses will be built more quickly. The new government intends to provide a further €1 billion through its House Building Incentive Scheme

Cover Aanpak woningtekort

The former Minister of the Interior and Kingdom Relations (BZK) claimed that nearly 140,000 houses had been built thanks to the scheme. In our report published on 23 June 2022, Tackling the Housing Shortage, we write that there is little justification for her claim. In response to our audit findings, the new Minister of Housing and Spatial Planning wrote that he would tighten up certain aspects of government policy. The House Building Incentive Scheme, he wrote, would remain a key element to encourage house building throughout the Netherlands.

93 building projects awarded government grants

The House Building Incentive Scheme was the third Rutte government’s flagship measure to tackle the rising housing shortage. It was decided to launch the scheme in 2019. In the 2 years that followed, 93 building projects proposed by municipalities were approved for the government grant. Ultimately, municipalities were awarded €855 million.

Houses would have been built without government grants

The results booked by the government’s €1 billion incentive scheme since 2021 are poorly substantiated. The information municipalities report to the minister is not reliable enough to calculate the scheme’s impact. The intended impact of building houses more quickly takes no account of crowding-out: housing projects that are not awarded a grant have to be carried out later or be cancelled, partly because of the shortage of skilled construction workers, materials and civil servants. According to the Court of Audit, there is a real risk that the government’s House Building Incentive Scheme financed projects that would have gone ahead without grant funding. There are no hard figures yet, as all the projects still have to be completed.

Shortage and grant funding per housing market region

Figuur woningtekort Engels

The House Building Incentive Scheme provides no hard guarantees that subsidised housing in the middle of the rental market and the owner-occupied market will remain affordable for a wide section of the population in the longer term. In its report, the Court writes that the minister overstates the scale of the housing shortage as an absolute figure. The scale of a municipality’s housing shortage was not a decisive criterion to qualify for the incentive scheme. Municipalities with relatively small housing shortages were also awarded grants (see map above). The grant per house is relatively small, less than €5,258 in about half of the cases. Such grants run the risk of being little more than a gift: nice for the municipality but otherwise of no discernible benefit. On some projects, however, the grant ranged from €12,000 to more than €15,000 per house. To be eligible for such a grant, the houses had to be completed within 3 years. Most municipalities therefore proposed newbuild projects that were already at an advanced stage of preparation.

‘Precise additional effect of the incentive cannot be calculated’

In his response to our audit report, the Minister of Housing and Spatial Planning wrote that it was impossible to conclude that the House Building Incentive Scheme as such had not contributed to house building. He said he would keep a close eye on the affordability of subsidised housing.

We have serious doubts that the House Building Incentive Scheme will have the intended results in its current form. The minister should at least present the scheme’s impact in a plausible manner. If it is decided to continue the scheme, the recommendations we make would limit the inefficient use of public money.