Get rid of this unfair tax break to help the housing crisis


There is a Dutch tax break that is utterly unfair. It discriminates against people who don’t have it and for the lucky ones reduces their tax bill enormously, giving them the room to live in a house they can’t really afford. It’s responsible for warping the Dutch housing market, pumping prices, helping make it impossible for young people to find somewhere to stay.

I’m not talking about the 30% ruling. That is a tax break which currently allows 102,000 new arrivals (up to 4% of them Dutch) to cut their tax bill for up to five years.

I’m talking about mortgage income tax relief, the hypotheekrenteaftrek, a 30-year-long tax break for every home owner in the Netherlands.

While there is support in the form of rent controls and benefits for those on low incomes, there is no government subsidy to help people on middle incomes pay their rent. But the Dutch government is still granting a tax break – an effective subsidy – to people who can afford to be on the housing ladder, a perk that has been abolished or slashed across most of the EU. The British got rid of this unfair market “distortion” back in 2000.

For years, Dutch central bank De Nederlandsche Bank has been telling the Dutch to scrap the hypotheekrenteafrek for the same reasons. The European Commission too. The Dutch have the most generous tax break for home owners in Europe. The net effect: people can and do borrow more.

Since house prices match what people can pay, and what people can pay is pumped by what they can borrow, and what they can borrow is pumped by this subsidy, the effect is to inflate house prices.

Earlier this year, an IMF working paper found Dutch house prices went up by the most in Europe in real terms during the pandemic bubble and that the Dutch have Europe’s highest average household mortgage debt.

There’s a government national guarantee for cheaper houses, the NHG, meaning people won’t carry forward a debt if they are forced to sell with negative equity. That might sound good in principle but what it does is shift the risk of these loans to the taxpayer (as well as the incentive to stop house prices correcting).

And what else happens when you are mortgaged to the neck? You don’t or can’t save for proper house maintenance. In the words of Jeroen Buitenhuis, an expert from insurer Centraal Beheer, which recently published an investigation into the state of property, “a lot of people live in their home as though they are renting it”. This may be why there is a foundations crisis brewing across the country with a million homes in need of major renovation according to home owner association VEH.

At a recent meeting of people with an interest in the house market all kinds of voices – developers, mortgage lenders, house hunters, estate agents – agreed that the mortgage tax break had to go because it distorts the market. One major party, the GroenLinks/PvdA, has the balls to put phasing out the hypotheekrenteaftrek on its manifesto for the November election.

And yet we are seeing in local and national newspapers and hearing from campaigning politicians the notion that someone else is responsible for the high house prices in the Netherlands, and that another tax break is responsible.

I have a lot of respect for Pieter Omtzigt. And I think that he too has a strong respect for facts. So, when the leader of the Nieuw Sociaal Contract, who is leading in some polls, blamed expats with the 30% tax ruling for the execrable housing situation in Amsterdam in a debate, I tried to delve into the facts.

While the government, despite repeated requests, seems unwilling or unable to release the most up-to-date numbers, the most recent estimates suggested there were 11,350 people in Amsterdam with the 30% ruling each year. This figure, an average of the period of 2009 to 2015, represents just over 2% of Amsterdam’s households now (as it did then).

The facts

Research by Dialogic broke down the situation in 2015 – before new rules came in to limit the 30% ruling to five years and to the level of top government salaries.

Although some people with the ruling, recruited from abroad for a specialist job that cannot be filled from the Netherlands, are paid huge salaries, many are not.

Of them 7.5% were academics, with the tax break easing the meagre allowance from their university and without the luxury of being able to live at their parents’ homes. The median income for people with the 30% ruling according to Dialogic research was €52,000, certainly not a low salary but no fortune either; 32% earned up to €40,000 a year, which is roughly the Dutch modal income now.

Indeed, the cause of the housing crisis in the Netherlands is manifold but also rather simple. There has not been enough building. The country’s population has increased and since 2014, according to the CBS, immigration has had a role in this. The Netherlands has grown since then by around a million people, and there’s clearly a debate to be had about how the Dutch economy is fuelled in future and by whom.

However another reason for the current 390,000 shortage in homes is the increase in people who want to live in smaller households or alone. It’s unclear whether this is purely from desire or issues like council measures to make house sharing more difficult.

Social housing

The rental market is distorted with protection for social housing, which represents a large proportion of the total stock, making the ‘free market’ far too expensive but leaving thousands of people with no choice but to pay. (Often, of course, to Dutch landlords.)

And meanwhile home owners have this completely unfair tax break and the astonishing, imprudent possibility to borrow 100% (or more!) of the home’s ‘value’.

Maybe expat blaming wins some votes. International residents of the Netherlands, if they don’t speak Dutch, can’t listen to the debates and they may not have a vote, although they do pay tax.

By all means, change the Dutch system of tax breaks and reform the 30% ruling, as Dutch MPs on Thursday voted to do. Clearly people on high salaries don’t need to get 30% of their income tax free and if they do choose to live here – with the high tax burden and high standard of living – they’ll make that choice. Some jobs will probably disappear so the change may even decrease the overall tax take, but that’s a political decision.


Dutch politicians have repeatedly fingered other countries for things that have gone wrong in recent years. Omtzigt has blamed “Anglo-Saxon” ideology for the free market trend in the Netherlands. The mayor of Amsterdam blames Thatcher and Reagan.

This is nonsense. The Dutch may have been inspired by trends in other countries but the way they chose to implement them is solely their own responsibility. And the Dutch, at the end of the day, created the 30% ruling to help fill jobs and boost national prosperity.

So don’t just blame “the expats” for the housing crisis. The next government, which will probably include Omtzigt, needs to look clearly in the mirror, take responsibility and sort it out.

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