A balancing act: Reforms to tackle the Dutch housing crunch

To ensure affordability, the government should rebalance tax incentives, reform the rent control system, and make it easier to build.

By Daniela Glocker and Nicolas Gonne, OECD Economics Department

The Dutch housing market is under pressure. Young families trying to buy their first home face high housing prices, while long waiting lists for accessing the limited supply of social and other non-market housing leave many tenants burdened by high rents in the private market. Despite past government’s ambitious goals to build 100 000 new homes each year, affordable housing options remain elusive for too many, as discussed in the latest OECD Economic Survey of the Netherlands.

Three issues stand out: a tax system that is biased towards homeownership, rent controls that squeeze the private rental sector, and persistent barriers that hold back the supply of new housing. Addressing these will be key to creating a more affordable housing market.

Tax breaks for home ownership fuel demand — and prices

For decades, generous tax incentives have made buying a home in the Netherlands more attractive than renting (Figure 1). Homeowners can deduct mortgage interest payments from taxable income, face low taxation of the imputed rental value of their property, and first-time buyers benefit from transfer tax exemptions. These perks boost demand and push up prices. While the mortgage interest deduction has been trimmed in recent years, it remains large by OECD standards. Meanwhile, other investments like rental housing or financial assets face higher effective tax rates.

This imbalance widens wealth gaps between owners and renters. Households who can buy benefit from lower real housing costs over time, while renters face rising rents and fewer pathways to build wealth. In 2022, the median mortgage cost as a share of income was far lower than the rent burden for many tenants, especially those on lower incomes. 

A gradual rebalancing is needed. Reducing the mortgage interest deduction further, aligning the taxation of owner-occupied housing with other assets, and capping tax breaks for high-value homes could help. This would have the added benefit of easing fiscal pressures and maintaining strong public finances. Doing so gradually would reduce the risk of housing market correction, while freeing up resources for more targeted rental support.

Bottlenecks weigh on housing supply

Even as demand remains high, the supply of new housing struggles to keep up (Figure 2). Regulatory bottlenecks, long permitting times, limited land availability, and rising construction costs all contribute to a sluggish response, compounding the detrimental effects of persistent labour shortages on increasing the housing stock.

While past governments aimed to build 100 000 new homes each year, actual delivery often fell short. Complex planning procedures are a major obstacle, including due to strict zoning rules and environmental constraints. Measures to curb nitrogen emissions add further delays and push up costs.

This means too few homes are built, especially affordable, smaller dwellings for low- to middle-income households. Local governments often face conflicting incentives: they bear the costs of new infrastructure and services for growing communities but may see limited benefit from higher property values or new residents.

Some promising steps are underway. “Parallel planning” — allowing different permitting steps to happen at the same time — could shorten approval times. The last government agreed to provide financial bonuses for municipalities that deliver enough new homes, which will help align local and national goals.

But more is needed. Local authorities should have better tools and clearer incentives to make land available and unlock sites for housing. For example, well-designed land value capture instruments can help communities share in the benefits of rising land prices and reinvest in infrastructure and services.

Rent controls squeeze the private rental market

While tax breaks make buying an attractive option, strict rent controls make renting out on the private market less so. The Netherlands has a large non-market rental sector, mostly run by housing association, but the private rental market is small and shrinking.

Rent controls aim to keep housing affordable for low- and middle-income households. But frequent policy changes and tighter rules have made private investors wary. The 2024 Affordable Rent Act expanded rent regulation into the mid-priced segment. While this protects some tenants, it also reduces the incentive for private landlords to build or maintain rental homes. Many private landlords have started selling their properties to occupant-owners, further shrinking private rental supply.

A balanced approach is needed. Excessively tight rent controls should be relaxed to leave room for investment. Adjusting how rent caps are set, ensuring they reflect rising costs, and allowing modest rent increases for new builds could help. More predictable, stable rules would also reduce uncertainty for investors.

At the same time, strengthening the role of housing associations is vital. These organisations provide affordable homes for millions but face rising costs and tight financial rules. Updating funding and regulation to ensure they can maintain and expand supply is crucial.

A more balanced housing market for the future

Housing is central to people’s well-being and the economy’s resilience. A housing market that locks out new buyers and limits where people can afford to live weakens growth and deepens social divides.

The Netherlands has the tools to break this cycle. By steadily rebalancing tax incentives, reforming the rent control system, and adjusting permitting and related processes to make it easier and faster to build new homes, policymakers can deliver more affordable housing for everyone.

For more facts, figures and policy recommendations from our 2025 Economic Survey of the Netherlands, please visit the Netherlands economic snapshot page.

REFERENCES

OECD (2025), OECD Economic Surveys: The Netherlands 2025, OECD Publishing, Paris, https://doi.org/10.1787/2dd1f4aa-en.