The Netherlands needs to increase taxes on home owners and boost the private sector supply of new homes in order to get the housing market moving again, according to the chief economists from the three biggest Dutch banks, and two professors of finance policy.

Writing in economists journal ESB, the authors argue that the government’s current strategy is based on ‘papering over cracks’ rather than boosting access to the housing market, reducing inequality between tenants and home owners, and tackling prices.

In particular, the government should focus on expanding the supply of affordable housing which falls outside the rent-controlled sector – which has a ceiling of €763 per month – and which is not owned by housing corporations.

They also suggest that local authorities and their residents benefit more from new construction by introducing a tax on the increase in the value of the land which takes place when zoning plans are changed.

This tax, payable by developers, would allow municipalities to finance social goals – such as more social housing – more directly than by setting quotas in development projects. This, they say, will make it easier for municipalities and project developers to negotiate with each other about land availability and sales.

In addition, more housing should be encouraged in areas where prices have risen the most in the past few years, because this is an indicator of future demand.

At the same time, the economists say more should be done to make sure the current housing stock is used efficiently. In particular, various regulations which ban home sharing by more than two adults who are not related should be overhauled, because this can ease the shortage of places to live in the short term.

They also propose making building requirements more uniform, in order to speed up the construction process itself.

Some aspects of the government’s current strategy, such as the plan to regulate the rent of a much bigger proportion of the rental housing stock, is not without risk they argue. ‘It may improve affordability in the short term, but it will not tackle the structural shortfall in affordable rental housing,’ they state.

Another area of concern is the fact that home owners pay relatively little tax, which is why the Dutch are keen to put so much borrowed money into bricks and mortar, the economists say.

This could be partially tackled by treating property as an asset to be taxed when the home is sold. To stop people borrowing beyond their means, which is also putting up house prices, the official recommendations on borrowing – currently 100% of the value of the property – should not be expanded and could even be reduced. Energy costs should also be taken into account in determining how much people can borrow.

‘These reforms are a break with the past and that is why they should be introduced gradually,’ the economists say. ‘But they offer long-term advantages. Home owners and tenants will be treated more equally, house prices will become more stable and the tax on work and other income will come down, so that households can spend more on other things beside their living costs.’

The article was written by Ester Barendregt (Rabobank),  Marieke Blom (ING) and Sandra Phlippen (ABN Amro) together with Arnoud Boot, professor of Corporate Finance and Financial Markets at the University of Amsterdam and Dirk Schoenmaker, professor of Banking and Finance at Erasmus University, Rotterdam.