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Dutch housing market locked, 'someone has to pay the price' | Jona van Loenen

A descriptive image The Dutch housing market feels like a game of musical chairs where the music has stopped, but the prices keep soaring. Starters feel hopelessly locked out, while homeowners watch their equity balloon into astronomical figures. In a fascinating discussion on "De Nieuwe Wereld," economist Jona van Loenen dissects this gridlock, arguing that the familiar mantra of "we just need to build more houses" dangerously misses the point.

The Real Driver: It's Not a Shortage, It's the Money

Van Loenen challenges the conventional wisdom head-on. While a housing shortage certainly exists, it's not the primary villain driving prices into the stratosphere. The real culprit? The sheer volume of cheap capital and financing that has flooded the market for years.

He points to a crucial finding, also highlighted by De Nederlandsche Bank (DNB): house prices are much more closely tied to the financing capacity of buyers than to the housing supply. In simple terms, houses don't have a fixed price; they cost whatever the bank is willing to lend a buyer. When interest rates were historically low, borrowing capacity skyrocketed, and housing prices dutifully followed suit. We didn't just bid against each other; we bid against the maximum mortgage we could possibly get.

The Uncomfortable Truth: A Generational Wealth Transfer

This mechanism has created a massive, unspoken transfer of wealth.

  • The Winners: Older generations who bought homes decades ago for a fraction of today's prices. They've seen their property values multiply, creating immense, often untaxed, wealth. Their homes have become less of a place to live and more of a financial asset, a piggy bank of epic proportions.
  • The Losers: Young people and starters. They are now forced to take on colossal debts to buy the same product—a roof over their head—that was once affordable. They are, in effect, paying for the wealth of the previous generation.

This isn't just an economic issue; it's a societal one. It creates a deep rift between the "haves" and the "have-nots," where the "haves" are often older, and the "have-nots" are the young who are supposed to build the future.

Radical Solutions for a Broken System

So, how do we break the deadlock? Van Loenen doesn't offer easy answers. The title of the conversation says it all: "someone has to pay the price." The accumulated wealth is not imaginary; it has to land somewhere. The potential "radical solutions" discussed are politically explosive but economically necessary to consider:

  1. A Significant Price Correction: Allowing house prices to fall would make them more affordable. However, this would be painful for those who recently bought at the peak and could put banks in a difficult position.
  2. Taxing Housing Wealth: Implementing a fair tax on the massive capital gains from rising property values could help rebalance the scales and fund affordable housing initiatives.
  3. Rethinking the Role of Pensions: Pension funds, with their trillions in assets, are major players in the capital market. Their investment strategies contribute to the very asset inflation that makes housing unaffordable for the next generation of pensioners.

The conversation ultimately reveals that the housing crisis is not a simple problem of supply and demand. It's a complex crisis of capital, debt, and generational inequality. Without confronting the financial incentives that got us here, simply building more houses will be like pouring water into a leaky bucket.

Watch the full conversation here (in Dutch):

Huizenmarkt op slot: "iemand moet de prijs betalen" | #2010 Jona van Loenen