Central bank suggests increasing taxes on home ownership

The Dutch central bank says an increase in taxes for home owners would be one way of reducing the gap between the cost of renting and the cost of buying a home.

A change in the disadvantaged position of renters would be good for Dutch prosperity in general, the central bank said in a new report.

New entrants to the housing market who have to rent in the non-rent controlled sector are considerably  worse off than people buying a similar property, the bank says. And this means home owners are able to pay off their mortgage and so build up assets.

The bank suggests a number of ways to reduce the gap. These could include further cuts in mortgage tax relief or an increase in the tax on home ownership known as the eigenwoningforfait. This is the percentage of the official value of a property which is added as income in the annual tax return.

A third option would be to change the tax status of home ownership and transfer property to ‘box 3’ which is current reserved for assets. Home owners would then pay tax based on the difference between the value of their home and the outstanding mortgage.

The benefits of reducing the gap between the cost of renting and home ownership would be good for the entire country, the central bank says. In particular, households would have lower debts, assets would be better spread and it would be easier for people to move home.

Central bank president Klaas Knot has for years called for the tax benefits of home ownership to be reduced.