Rent increase reaches historical low in July

22/11/2005 14:00

In recent years rents in the Netherlands increased by some 3 percent annually. In 2005 the annual rent increase, traditionally effective from 1 July, was 2 percent, the lowest rate since 1959.

Rents go up and down with inflation

Every year most rents are readjusted. Since 1978 the regular increase becomes effective in July. Most contracts include a clause to the effect that the rent increase is linked to the inflation rate published by Statistics Netherlands.
Usually, housing rents thus go up and down with inflation, but this is not a hard and fast rule. At the end of the 1970s and in the early 1980s rents increased firmly, because inflation was high. In 1982 rents increased by no less than 8.4 percent, while inflation was 0 to 4 percent lower. Between 1984 and 1991, when inflation rates were low, annual rent increases wavered around 3 percent.

Rents and inflation in July
Rents and inflation in July

Rent policy restructured

In 1991 the rent increase was nearly 6 percent as a result of measures taken by the Lubbers III government. In ‘Tussenbalans’ the government decided to impose a long-term rent increase of 5.5 percent and at the same time to discontinue subsidies for the maintenance of post-war dwellings. In future the landlord would be accountable for the costs of maintenance.

Rent increase below inflation rate in the period 2000–2002

Until 1991 rents more or less kept up with the rate of inflation, although rent increases were on average one to three percent above the inflation rate. After 1991, and particularly after 1993, the gap between rent increase and inflation rate was narrowed. In 2000 the annual rent increase was below the level of inflation for the first time. This also applied to 2001 and 2002. In these years rent increases were linked to the average inflation rate over the previous five years. Because the inflation rate was low in those years, the annual rent increase was lower than the inflation rate of that year.

2004: direct link

In 2005 the maximum rent increase landlords are allowed to charge is directly linked to the inflation rate over 2004. The rent increase should not exceed the inflation rate by more than 1.5 percent. The rent increase in July 2005 by 2.0 percent is above July’s inflation rate of 1.6 percent, but nevertheless the smallest rent increase in almost half a century.

Arjan Gras