How housing associations lose their value: the value gap in The Netherlands

Abstract

Purpose -This paper aims to present a model that analyses the value gap, the difference between vacant possession value and tenanted investment value, for the houses of Dutch housing associations. The paper also aims to explore why the value gap is a structural phenomenon in The Netherlands and why it is an important factor contributing to the malfunctioning of the housing market. This gives an interesting expansion of the value gap theory. Design/methodology/approach -By using the well-known concept of user costs and using market equilibrium as a reference, the model quantifies the influence of six factors that cause the value gap. This is done for The Netherlands in total and for each of the 452 housing associations separately. Findings -The value gap between the owner-occupied and the rental sector is immense. This is especially the case with the rented houses owned by the housing associations, constituting one-third of the total housing stock. The vacant possession value of these houses is on average e151,000; the reported tenanted investment value is no more than e33,000. Important factors that are responsible for this gap are, on the one hand, the fiscal subsidies in the owner-occupied sector and, on the other hand, rent control and the policy of the housing associations characterised by a low rent level and high maintenance and management costs. Originality/value -This is the first paper that analyses and quantifies the factors contributing to the value lost by Dutch housing associations' operations.

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