Home Ownership for all the Young?
By Kees Dol
OTB Research Insititute, Delft University of Technology, The Netherlands
Work in progress.
Please contact author for citations
Paper to the ENHR Working Group Conference
“Building on Home Ownership: Housing Policies and Social Stategies” November 13-14 2008, Delft, The Netherlands
Article for conference “Building on Home Ownership: Housing Policies and Social Strategies”. November 13 and 14, Delft, The Netherlands.
Homeownership for the all the young?
By Kees Dol, OTB Research Institute, Delft University
Home ownership has increased in many countries due to an often interrelated mix of government ideology, cuts in social housing provision, deregulation of financial markets and preferences of the consumer. During spells of house price increases some politicians may think the capital gains made by the growing population of home owners could be used as an alternative form of pension or old age welfare provision. In such a line of reasoning home ownership may be a strong medicine for the oncoming pension crisis and perhaps even a motive for further cuts in pension or old age welfare provision. In the case of Sweden, Kemeny (2005) suggests that young people have become aware of such ideas and will attempt to enter home ownership at an early stage of their household career. However, in spite of the growth and increasing popularity of home ownership among the general public, for many young people home ownership may not be the best choice in this stage of life. Partners come and go before mister or miss ‘Right’ is found and many young people will grab a series of employment opportunities before they ‘settle down’ at the beginning of their thirties. Such quick changes in the life course may demand flexible housing solutions, rental housing being much more flexible because a move in this specific tenure normally involves relatively small costs. Although buying a dwelling during a time of house price increases can be attractive because any moving costs are easily recovered, a house price fall can lead to a situation where negative equity may severely curb the mobility.
In this paper, we try to establish how the growth of home ownership in The Netherlands has influenced tenure patterns of young people. Under which personal circumstances do they prefer homeownership? Does this comply with the focus on home ownership in Dutch housing policy?
1.1 Introduction
Some Western European welfare states have been going through a process of government retrenchment from the 1980’s and onward. This is many a time expained with the concept of globalization. In order to remain competitive in an increasingly global market, governments reduce their taxational burden to create an attractive business environment for multinational companies. Logically, the downside is fewer possibilities for governments to maintain their well developed welfare systems (see for instance Clapham, 2005). Dutch housing policy provides an example of a sector where very active government involvement, with huge spending, was virtually abolished after 1990, driven by the need for cuts in government spending. After 1995 the housing associations were ‘privatised’ and housing policy turned much more in favour of home ownership. The rate of home ownership has indeed increased from 45% in 1990 to 57% in 2007 (see table 1). Prominent Dutch housing specialists have warned that such a singular policy shift (the term revolution has also been used) towards home ownership might lead to negative outcomes such as residualisation of the social housing sector (see for instance Van Kempen et al, 2000; Van Kempen and Priemus, 2002). Another effect of the new policy might be a decline of affordable housing opportunities for the young; a group which by it’s socio economic position is quite vulnerable. Also the young might be hard hit by housing shortages. Currently the housing sector very much relies on the production of owner occupied dwellings, a sector where demand falls quickly during economic setbacks and as a result production numbers plummet (see Dol and van der Heijden, 2008). Previous to 1990 the government would more or less guarantee housing production by stepping in and providing extra subsidies for rental dwelling production during economic stagnation and thereby keeping the housing shortage at bay. One of the famous last examples of such a policy was during the 1980, when in some years up to 80% of all housing production received some form of government subsidy.
In this article we will investigate possible shifts in tenure patterns of the young after 1990. To get a better idea how we should value any tenure changes among the young, we will have to get some understanding of their tenure preferences: of course an increase of home ownership among the young can only be judged negatively if we can argue that such a development is contrary to the preferred housing situation. This is why we will first present a general overview of the position of
home ownership within post WW II housing policy. This will give us some more understanding as to why home ownership remained relatively low in the Netherlands prior to 1990 (and in fact still is today). Was this low home ownership rate fuelled by specific ideology, by the popular housing preference or by both? Then we will draw up a theoretical framework that allows us to explain home ownership preferences for certain subgroups among the young and put it to the test. Has the rate of home ownership among the young increased in the Netherlands and can we get any idea to what extent this is by their own volition? Or had they rather rented in first instance but moved on to the home ownership sector because of the relative unavailability of decent rental dwellings? Beforehand it must be clear that this analysis is above all an explorative exercise that will hopefully provide a stepping stone for further research.
Table 1 Tenure in the Netherlands 1971-2007 (% of total housing stock)
Social rent Private rent Owner occupation
1947 12 60 28 1960 23 47 30 1965 26 41 33 1970 31 34 35 1975 34 27 39 1980 36 22 42 1985 39 18 43 1990 41 14 45 1995 38 14 48 2000 36 13 51 2005 34 11 55 2007 33 11 57
Source: van Kempen and Priemus, 2002 for 1947-1995; Abf-Research SYSWOV, 2008 for 2000-2007
1.2 Home ownership in Dutch post Second World War housing policy
In the era from 1948 to 1990, the Dutch established a social housing sector that made up about 40% of the housing stock in 1990. Although access was (somewhat) restricted to lower income groups, many people accessed the social rental sector in their early life course at a time when their income was relatively low. Tenure security is strong so one cannot be evicted easily once one has accessed the rental sector. Rent increases for sitting tenants are regulated, making it an attractive alternative for the home ownership sector. So at the beginning of the 1990’s many people from different social groups lived in the social rental sector (see van Kempen at al, 2000). Also many (institutional) investors like pension funds had benefited from the generous brick and mortar subsidies. At the end of the 1980’s the private rental sector made up about 15% of the housing stock. To some extent the affordable home ownership sector also benefited from government subsidies by means of income support (premiums) for a number of years. Works by Van der Schaar (1989) and Van der Heijden et al (2002) show that it was no exception when 80% of all new dwelling construction involved some form of subsidy. The Dutch housing system could at this point be seen as strongly social democratic by means of it’s outcome. However, there has always been considerable attention for the home ownership sector by political parties. By no means do we wish to downplay the role of the social housing system in Dutch society, but much of it’s post WWII evolution seems to have had pragmatic side to it. Much of the government involvement was triggered by the enormous population growth after the war until the 1980’s, the highest of all North-Western European countries (see internet database Eurostat)1. In the post war years, from roughly 1948 to 1960, political coalitions of very
different ideologies, including the ones that by ideology more preferred home ownership such as the Catholics and the Liberals, agreed that the government had to take the lead in housing production (Ramakers, 1992). All worried that commercial builders and investors would focus mostly on the profitable parts of the housing market, leaving an enormous housing shortage and possibilities for malpractice/abuse by landlords (Rackmanism). Such a pragmatic policy view in the first decade after WWII was quite common in other European countries, even in Britain with a much more liberal view on government intervention (see Boelhouwer and van der Heijden, 1992). From the late 1960’s and onward Dutch policy makers have attempted to liberalise the system to a more tenure neutral form by
1 An indexation of the population from 1950 to 2000 shows in 2000 a figure between 115 and 130 for all other countries. The
giving extra attention to owner occupation (van der Schaar, 1989). Another example of such pragmatism is the 1970’s when much of the original religious sectarian affiliations diminished and socialist coalition was in power. An outsider would predict this movement to support social rental housing production even more, but the Department of Housing Minister Gruijters declared that the ultimate goal was home ownership on a Belgian level of two-thirds (van der Schaar 1989). Gruijter’s ambition came at a time when strong economic growth fuelled a high demand for home ownership. A policy towards tenure neutrality gave people the opportunity to choose the tenure of their preference. The deep economic crisis at the beginning of the 1980’s saw an end to the growth of home ownership. After a house price boom at the end of the 1970’s, the house prices plummeted, leaving many of the new home owners in desperation after being laid off, subsequent mortgage payment problems and many compulsory sales with large remaining debts (see Elsinga and Dol, 2003). Because the housing shortages were still high, a right wing government that would normally prefer a lot more home ownership, was responsible for the highest production levels of social housing ever in the first half of the 1980’s (see for instance Van der Heijden and Haffner, 2002, p.14); another example of a pragmatic approach. This short historical description of Dutch housing policy in the 1947-1990 era serves to explain that home ownership previous to 1990 had widespread political support, even by left wing parties, if the general public demanded this. However, home ownership did not have the same status within the political and public perception as in Britain (see for instance Ronald, 2008; Gurney, 1999). All in all, the Dutch housing policy had a social democratic tendency with considerable support for an affordable social rental sector: especially during times of great housing shortages that couldn’t be tackled by private initiative alone. The role of home ownership within Dutch society shouldn’t be underestimated however. It is understandable that some may do however on basis of the outcome, a relatively low rate of home ownership.
The dawn of a new era came during the second half of 1980’s when the Dutch government observed that it’s budget for housing policy had rapidly increased. Secondly the housing shortage was perceived to be almost tackled while several housing demand surveys demonstrated that an increasing number of the middle classes were aspiring to home ownership. The new policy document Volkshuisvesting in de jaren ‘90 (housing in the 90’s) took these subjects as a departure point. According to van Kempen and Priemus (2002) this policy clearly set out privatization tendencies and the need to cut budgets. The market had to take over new construction: no more loans, brick and mortar subsidies running subsidies and premiums. From now on about 80% of the new dwellings constructed were owner occupied, in line with the perceived demand for more home ownership. Furthermore the social housing associations were privatized. From an efficiency viewpoint the distribution of affordable rental housing became much more strict. Later on, in 2000 liberal state secretary of housing Remkes insisted that the housing associations sell of about 50.000 rental dwellings units per year but this objective in practice failed because demand turned out to low. Remkes had no legal means to force the now independent housing associations to sell of their stock with generous discounts like Thatcher had done in the UK. The need for budgetary discipline notwithstanding, the Dutch government never abandoned it’s indirect support of the home ownership sector: full mortgage interest deduction to home owners. Projections for 2009 by the Ministry of finance estimate the sum to be about € 10 billion while housing allowances for renters sum up to about € 2 billion. Although tenure neutrality is formally supported in most policy documents from the 1990’s and onwards, it seems a hollow phrase when certain groups only have access to expensive private rental dwellings and as a result move into home ownership because the housing costs in this sector are much lower (by mortgage interest tax relief). Essentially for the above average income groups, home ownership is the only ‘rational’ tenure choice. And because the population has still increased more than expected from the 1990’s, the housing shortage has increased with possible repercussions for the young.
Home ownership has from the beginning of the 1990’ s been promoted quite singularly in the Netherlands. Much of this may have been according to the wishes of the large middle classes. However, we might argue that such a focus on home ownership could curb the housing opportunities for young people. In the next section we will draw up a theoretical framework that predicts home ownership preferences of the young in this modern era. After that we will take a look at actual home ownership preferences and the actual outcomes to test this framework.
1.3 Theoretical framework: the relations between life courses of the young and tenure
Shifting home ownership preferences in time?
A general notion could be that home ownership preferences may not be stable through time. First of all, Boelhouwer and van der Heijden (2005) state that home ownership preferences may increase with growing prosperity of modern nations. To be more specific, a greater number of households just have enough additional income above their subsistence level to take on the risk of maintenance of the house and/or to take on the risk of payment fluctuations because of changing interest rates. Secondly, many children of the post war baby-boomers grew up in (a new generation of) home owning families: we could expect some normalisation of home ownership (see for instance Henretta 1984, cited in Mulder and Wagner, 1998). Thirdly, specifically after the 1990, a relative decline social housing sector and strict distribution of the cheapest parts of the stock to the lowest incomes might lead to concentration of low incomes in social housing (see for instance van Kempen and Priemus, 2002). Such a process may ultimately negatively influence housing preferences for social rental housing among the general public. For the case of Britain, Rowlands and Gurney (2001) found that a stigmatised status of the social housing sector already exists among children. Many of the interviewed children stated that they would not live in a social housing estate. Finally we can return to the relation between government retrenchment and home ownership with Jim Kemeny’s work. In 2005 he suggested that as the Swedish government reduced old age welfare spending spending, the current generation of young may scramble for home ownership as to provide themselves with an asset at their retirement age: either in the form of (housing) income in kind or a collateral for taking out a reverse mortgage to finance private welfare provision. Summing up, we see a number of idea’s on the relationship between home ownership and the young, most of these expecting an increasing preference for home ownership in time. It is however beyond the reach of this paper to put all these ideas to the empirical test. We will focus on some empirical material that actually measure general trends in tenure preferences and tenure choices for the Dutch young after the policy break in the beginning of the 1990’s. In the next section we will provide a more detailed theoretical framework on the relation between tenure and specific life course trajectories of the young: of course the young are not a homogenous group and tenure preferences may vary.
The relationship between household characteristics and housing preferences of the young
Had we lived in the 1950’s and 1960’s we could construct a relatively simple theoretical framework for the housing preferences of the young. Researchers like De Jong Gierveld et al. (2001) for the Netherlands and Clapham (2005) for the UK refer to this era as one in which life courses were highly standardized. Clapham (2005) points out that in this ‘Golden age of the traditional family’: “young people typically left home, married and started families within a short space of time” (Clapham p.187). For the Dutch case tenure preference for these young people were quite simple: the overwhelming majority wouldn’t even consider owner occupancy because of the unavailability of mortgages for the ‘common man’ and the high risk involved. Owner occupancy among young people was only available for smallholders by means of self building or for the (children of the) very rich. People had a tenure choice that didn’t go beyond social or private rental dwelling. During the second half of the 1960’s life courses of people gradually started to change. In this regard, several sociologists refer to a change from standard biographies to choice biographies (see Elchardus and Smits, 2006; De Jong Gierveld et al., 2001). Choice biographies refer to a much more diverse life course, based on personal choices. An example of such a life course may be leaving the home, living in a student house, cohabiting, living alone again, returning to the parents for some time, cohabiting, having a child, divorce etc etc. One may refer to a semi-standard biography as a form in between the traditional standard life course and the highly individualized virtually unpredictable life course in choice biographies. The semi standard pathways are indeed fragmented but some general routes are distinguishable. Elchardus and Smits (2006) report on a fundamental difference in opinions whether to view the modern life courses as one of choice biographies or whether we should modify this and talk of semi-standard biographies. Empirical finding by Elchardus and Smits (2006) in Belgium, reveal a great extent of (semi-) standard trajectories, while other authors seem to persist in defining modern life courses as perfect choice biographies. We will not try and get involved too much in this debate, but we think it is quite safe to assume that for many of today’s young Dutch, at least a semi standard trajectory would apply, but scores of very exotic trajectories would exist beside these indeed. Many young might make a series of shifts in their life course before getting in a more predictable trajectory such as starting a family by the time they reach their thirties. Clapham (2005) illustrates such a view by speaking of a number of
motorways, the motorways depicting a number of general trends in life courses, while there are also smaller tracks with little traffic (Clapham, p. 33). Of course with regard to life courses not only household careers apply. One could also think of young people who seize a number of job opportunities within a relatively short time span before they have found the job that fits them best (job-hopping). Also because of increasing flexibilisation of employment, some young people may be dependent on a number of short term contracts in this phase of life, resulting in spells of unemployment and considerable income variations.
The particular relevance of this life course literature to our research, is the understanding that there are very flexible households and relatively stable households. With regard to housing we might then speculate on flexible housing solutions that some young people would need, while others are inclined to settle and do not need flexibility. People who have a rather traditional semi-standard life course can make due with one dwelling in their early life course and perhaps an upgrade during the expansion phase of their household. People who are highly mobile with regard to employment and by household type, make a series of moves. This contrast between flexibility and stableness, has according to Feijten and Mulder (2002) a tenure dimension. Feijten and Mulder (2002) theorize on a connection between ‘short-stay housing’ and ‘long-stay housing’. Long-stay housing refers to housing for couples who make the (long term) commitment of starting a family, the specific dwelling type being a (single family) house in the owner occupied sector2. Owner occupation is specifically connected to long term
commitment because of long term loans, maintenance of the property etc. Also owner occupation should involve some dedication/commitment because the financial commitment is not easily undone (Mulder and Wagner, 1998) The costs involved with the purchase of a home are high and may not easily be recovered by a price increase of the property if the owner moves after just a couple of years. Short-stay housing is related to single people who have a low level of commitment, of course mostly only to themselves. Such people would rather rent then own because renting gives them more flexibility (just return the key to the landlord and leave). Feijten and Mulder do not explicitly state why young single people would necessarily need the flexibility of a rental dwelling. Of course a rental dwelling is easier to leave than an owner occupied dwelling and may be better fit for short stays. When moving after a few years one does not have to get involved (again) with the business of having to sell the place at a good price and paying high fees to estate agents. “But why always short stays for single people?” one might argue. Are there no young single people who of their own volition intend to stay single and make a long term commitment to a long stay house, either a small single family house or an apartment? The reason may be an implicit normative idea that connects singles and short stay. Elchardus and Smits (2006) argue and also empirically validate, that a majority of people still think in terms of the traditional life course, although they do not always live up to this. The majority of young single people would, from this viewpoint aspire to have a relationship and cohabit or marry in due course. Although Elchardus and Smit’s findings are based on Belgian data, we assume these are valid for other Northern European societies. With these findings we can argue that many young single people have relational aspirations in mind, so the buying of a house, which may have to be left within a few years, may not always be a very wise option for young singles. Lastly, in line with Mulder (1993), we can also note that young single people may want housing flexibility because they will be able to seize any job opportunities further afield. While people in high-commitment households may in theory also be eligible for long distance moves toward interesting job vacancies, they may not want to seize the opportunities because of the local ties of other household members.
We wish to make clear that in the real world, access to home ownership is to a great extent dependent on income. Many couples just have more purchasing power on the housing market, based on double incomes. In this paper we however focus on the distinction between one person and multi-person households without much specific attention to income. We acknowledge that housing outcomes, the tenure that people live in, may be quite influenced by the single or multi-person divide. However, we wish to see what preferences these people have regardless of income. Studies on the ownership rental divide with data before 1995 that also include income in the analysis do show an income effect but also show strong differences in the parameters for single and multi-person households (van Kempen et al, 2000). So even within the low income groups there is a divide between singles and multi-person households; as it is also within the higher income groups. The
2 Feijten and Mulder explicitely link this to single family dwellings but this applies much more to the specific nature of the Dutch
empirical part of Feijten and Mulder’s research (2002) also establishes the expected pattern, single people living in rental apartments rather than buying, while couples are strongly connected with home ownership. In this explorative study, we will keep our focus on the singleton and multi-person divide. Feijten and Mulder’s study uses data from a survey conducted in 1992. We are interested whether we see any different patterns evolving after this year. As already pointed out, 1995 marks the year when Dutch housing policy made a radical change away from heavily subsidized social rental policy towards more owner occupation. We are interested in possible changes in the housing situation of young households after 1995. Our main hypothesis is the following:
Although the general trend has been towards an increase of home ownership, young under 30 singles have remained predominantly renters because they want the flexibility. (This also implies there is not much evidence for theses like normalization of home ownership or Kemeny’s ‘scramble for home ownership among the young thesis’.)
1.5 Data and method
To get an overview of housing outcomes of young people after 1992 we will use four successive Dutch Housing Demand Surveys, 1994, 1998, 2002 and 2006. These Surveys are commissioned by the Dutch Ministry of Housing to get a representative overview of specific developments. Main theme’s are housing preferences and demand, recent moves by households, affordability, housing quality etc. The survey of 1998 is the largest with almost 103.000 interviews of private households while also several thousands of potential home leavers were interviewed. The surveys of 1994, 2002 and 2006 have between 50.000 and 65.000 interviews. With these data we will be able to give a good quantitative summary of housing outcomes for households from just before the big policy change of 1995 towards relatively recently (2006). If we refer to the age of the household, the reference person for households with two adults is the male. With two adults of the same sex it’s the eldest of the two. A second source of data is based on a local research conducted in 2007 by OTB in commission of housing association Aramis in Roosendaal, a town in the South of the Netherlands, close to the Belgian border. This particular piece of research involves group discussions and in-depth interviews with home leavers about their preferences and experiences on the local housing market. We selected two different groups: one of young persons intending to move from the parental home and a second group of young people who had already moved from the parental home in the last two years. Two group sessions of five people each were held. For the in depth interviews we talked with 18 people The ages of the interviewees ranged from 20 to 27, four of them being above 25. Although the Roosendaal research was not originally intended as a project to generate knowledge to be published for the international academia, quite unexpectedly some of the results did give us deeper insights in the backgrounds of several quantitative studies on tenure choices by the young, such as Feijten and Mulder’s. At least young people themselves articulated their underlying motives for tenure preferences.
A little background information on Roosendaal: about 60.000 inhabitants in the southern province of Brabant. The city has a transport/railway heritage. It is the last stop before the border on a railway line that connects the core economic area of the Netherlands (The Randstad) with Antwerp, Brussels and Paris. Many people worked for the customs offices and international shipping companies. Like in any city in the Netherlands, Roosendaal currently has a substantial social rental sector of about 30%, and even higher in the past because of the need to house people that were employed in the railway sector. However, home ownership is relatively high in this part of the Netherlands, perhaps because of the Catholic heritage. The home ownership rate in Roosendaal itself is 62%, much higher than cities in the Randstad area.
1.6 Results
Tenure preferences of young households.
For an overview of tenure preferences we focus on the under thirties. We divide the under thirties into two age classes: the under 25s and from 25 to 30 years. We expect the second age group (25-30) to be in a further phase of their life course so tenure preferences may have evolved somewhat. Needless to say we will break down these age groups into singles and multi-person households to test the validity of our theoretical framework. For an extra reference/benchmark we also show the development of housing preferences among households from 31 to 55 years.
Table 2 shows a couple of general outcomes. First of all, the preference for home ownership among singles is substantially lower than with multi-person households in all three age categories. Secondly, There seems to be a sudden leap upwards in the preference for home ownership among all the age groups in 2006. This might be attributed to the general economic prosperity and the house price increases in this year. Periods of house price increases may attract more demand by people who wish to profit from the upward market (speculative demand) or by people who had a dormant preference for home ownership and now wish to buy a house because otherwise they might not be able to afford a suitable house in the near future (see Boelhouwer 1999). Apart from under 25 singles we do not see a leap in home ownership references in 1998 for the two under 30 age classes, another era when house prices also boomed. We do see this speculative effect among home ownership preferences in the 31 to 55 age group.
A narrower focus on the young age groups shows that the home ownership preference for the under 25’s is indeed the lowest, but more than doubles from 1994 to 2006. The home ownership aspirations for the under 25 multi-person households is substantially higher, but does not increase at a very high rate, from 45% to 52%. For the 25 to 30 year age group, we see a striking stability in the preferences for both the singles and the multi person households in the timeframe 1994 to 2002. About a third of these singles prefer home ownership. A vast majority of the multi-person households between 25 and 30 years, whishes to enter home ownership. Summing up with regard to preferences, the theoretical framework on singles and multi-person households works out reasonably well. A minority of singles prefers home ownership. However, we see an increase with age suggesting that a number of singles might go for home ownership and the long term commitment on a later age. Secondly we have to keep in mind periods of strong house price increases. Such periods may make home ownership as short stay housing more attractive because transaction costs are easily recovered. We see some of this speculative effect back with the preferences of the above 30 singles in 1998 and 2006. For the young we do see a leap in the preference in home ownership in 2006 but not so much in 1998. For the time being we will interpret this as a leap caused by the good economic prospects and rapid house price increases. The future will put this specific development in more perspective.
In the theoretical part, we also referred to some ideas about a presumed increase in preferences among the young for home ownership. We do see an increase in 2006, but at this point we cannot interpret this as part of a long term increase as a result of normalization of home ownership processes among the under 30’s. It would also be quite daring to suggest a scramble for home ownership by the young like Kemeny (2005) suggested. We will elaborate on specific motivations for home ownership as reported by young people themselves in the next section.
Table 2 Preferred tenure of households intending to move
1994 1998 2002 2006 Under 25 Single 11% 20% 17% 23% Multi-person 46% 45% 42% 52% 25 to 30 years Single 34% 36% 37% 51% Multi-person 68% 68% 66% 73% 30 to 55 years Single 39% 51% 38% 46% Multi-person 66% 71% 66% 70%
However, we should keep in mind that these are the preferences of people who intend to move. It may give some prediction of the actual movement of young households, but the chances of succeeding also depend on the situation on the housing market. For instance in a context where not many rental dwellings are available, part of the people who initially preferred a rental dwelling may actually move to the owner occupied sector. In the next paragraph we investigate the actual housing outcome for the young: which tenure position do singles and multi-person households have and which developments have taken place in the course second half of the 1990’s until 2006?
Housing outcomes for the young
Before we turn to the housing situation of young people who live in independent dwellings we might have to say something about the so called ‘Hotel Mama’ phenomenon: young adult people living in the parental home. There has been quite a bit of debate as to whether we should interpret such a thing as a voluntary situation or whether this has to do with structural influences housing market shortages. Many stories in the Dutch popular media may strongly suggest there is such a thing as a housing market starters problem. One of the strongest indicators for such problems would be a strong increase in the rate of adult people living in the parental home. Although the general pressure on the housing markets has not been relieved due to stagnation of housing production, it seems that young people still seem to be able to find their way out of the parental home. From 1995 through 2006 we see a stable rate of adult children living in the parental home (table 3). So we see no indication whatsoever that we should allow for phenomena like the ‘parasite singles’ in Japan. In Japan the rate of people from 25 to 29 years living with their parents increased from around 25% in 1980 to more than 40% in 2005 (Hirayama and Ronald, 2008).
Table 3 Rate of adult people living in the parental home by age group (in %).
Year 20 to 25 years 25 to 30 years
1995 50 15
2000 50 15
2006 48 16
Source: Statistics Netherlands
We now devote our attention to the housing outcomes of the young who live in independent dwellings. Table 4 shows the tenure by household type in 1994 to 2006. In line with housing preferences we see a much lower home ownership rate among singles: but the rate increases by age. However, comparing the percentages of table 1 and table 2 we see that especially in the youngest age group there are relatively more people who aspire to home ownership than there are actually in home ownership: especially in the below 30 age group. On a national Dutch level it does not seem like there is a situation in which people are more or less pushed into home ownership.
The development of the home ownership rate by age group shows a somewhat varying pattern. First of all the home ownership rate of the single under 25’s has remained stable at a very low rate of under 10%. For the singles in the age groups from 25 to 30 years the home ownership rate increased substantially although it still does not reach above one third of the total group. With regard to the multi-person under 30 households home ownership shows a substantial increase. Looking a bit further towards the older age group from 30-55 we see that already in 1994 the percentages of home ownership preference (table 1) and the actual outcome (table 2) are more in line. Also in the actual outcome for the 30 to 55 age group, the home ownership for singles reaches just above 33 (it has actually increased somewhat) while a vast majority of families own homes.
Again, in a strict sense the Feijten and Mulder framework is valid, although we do see an increase in the actual home ownership rate among 25 to 30 year singles. Multi-person households seem to have benefited a lot from the growth in home ownership. From the data presented over here, on a macro level, we do not get the impression that households were more or less pushed into home ownership because of lacking alternatives. The reason for this are the preferences which indicate that there may still even be more room for home ownership than the actual rate. But still, further research will have to establish this. We might still come across individual cases or groups that are more or less pushed into home ownership because they do not qualify for affordable rental houses. This may especially true for some of the 25 to 30 year singles. On the other hand, home ownership isn’t as exotic
anymore to the young and may have attracted a new consumer group of young singles who can afford it and are willing to take the risks involved.
Table 3 Rate of home ownership by age group and household type 1994 - 2006
1994 1998 2002 2006 Households to 24 years Single person 8% 8% 9% 9% Multi-person 21% 34% 31% 33% Households 25 – 30 years Single person 18% 22% 28% 29% Multi-person 45% 55% 58% 59% Households 31 – 55 years Single person 32% 31% 35% 38% Multi-person 63% 68% 71% 72%
Source: Dutch Ministry of Housing, Housing Demand Surveys 1994, 1998, 2002 and 2006
Extra empirical validation for the relation between household type and home ownership among the young
We are still left with one big question however. The theoretical framework constantly presumes that single people predominantly wish for a rental dwelling because of the flexibility. In literature reviews we haven’ t come across any study in which young people themselves confirmed these assumptions (the author’s flaws taken into account). We were quite surprised when we found a general clue when we weren’t even explicitly looking for it! In the Roosendaal research we talked to potential and recent starters about tenure and other housing preferences and their specific motives for such preferences. The discussions had an open, semi structured pattern. No questions were specifically geared towards home ownership and a possible relation with future financial aspects such as the building up of assets and relationships with possible breakdown of pension/welfare systems.
To our surprise, the respondents almost exactly articulated Feijten and Mulder’s framework on long stay housing and short stay housing. In the opinion of almost all respondents home buying is something when you form a couple or when you get married and start a family. “Buying a home implies a big investment, sometimes you will have to do some refurbishing in the house and such an effort isn’t very worthwhile if you leave after just a couple of years.” Also they implicitly referred to the costs of moving. “If you rent a house you can return the key any time you want, while that isn’t so easy when you have your own house. You will first have to see whether it sells well.” With regard to rental dwellings they made the relation with singles. Most respondents would come out with phrases like “if you’re single you rent, because it is much more flexible and you never know what comes up”. The ‘what comes up’ phrase strongly suggests that these people are open to any chances with regard to possible relationships. Many of the singletons seem to keep in mind that they will eventually meet someone to settle down with. Such ideas are also elaborated in the study by Elchardus and Smits (2006) who stated that although actual behaviour of people shows that many people do not follow the standard trajectory anymore, it doesn’t imply that they do not aspire to a standard life course trajectory. During the in-depth interviews some of the respondents moderated the ideas on short stay rental housing and long stay home ownership. Some stated that young singles with enough money could just as well buy a house. Others stated that they would rather rent than own, even if they would commit themselves to a long term relationship. Especially matters like maintenance didn’t seem an engaging prospect to these specific respondents. In general however, these findings would safely lead to the conclusion that for singles, even in a community like Roosendaal with a strong tradition of home ownership, renting would be most preferred just because of the flexibility.
A second dimension on possible preferences on home ownership would be the prospect of accumulation of assets in the form of home ownership. During the group discussions respondents enthusiastically told the stories from their peers or relatives who already owned a home about the enormous profits they had made. “Friends of mine bought a house in the golden era3 and the value of
the house doubled. A house is a good investment indeed”, one respondent put it. Such statements may be strongly related to good housing market prospects at the time (in 2007). House prices still
increased and it seems like many young expect that they can make a profit. As we saw in table 2, home ownership preferences increase during a time of house price increases. Other respondents referred to the idea of repayment of the mortgage because then “the house is totally yours”. We have to repeat that we did not specifically ask for any ideas about future pension provision and the role of home ownership. We didn’t get such suggestions from the respondents. Although people mentioned the prospects of repaying the mortgage and possible price increases, they did not make an explicit link with having extra money for their old age in this respect. We thus do not get the impression that young people in the Netherlands deliberately scramble for home ownership because of worries of their future pension provision.
1.7 Conclusions and discussion
Until the beginning of the 1990’s the rate of home ownership (45%) was relatively low in the Netherlands, with a large social housing sector (40%) and a smaller private rental sector. Even the private rental sector and parts of the home ownership sector had received generous brick and mortar subsidies. In the 1980’ s it had already become clear that the costs of the large social housing sector were running out of control; most of this due to open end future running subsidies dedicated to the social housing sector. We may however also see the government retrenchment as pragmatic: large sections of the Dutch general public aspired to home ownership. Home ownership was absolutely not something exotic in the ideology of some of the important parties at a time when the globalisation thesis had not even seen the light. Liberals, Protestants, Catholics and even segments of the labour party were warm supporters of home ownership. However, from 1947 until 1990 the Dutch housing policy had always had a social democratic side to it. Starting in the 1990’s the Dutch housing policy menu wasn’t served with a generous social democratic topping anymore. Whereas in the 1980’s a right wing government reacted to a large housing crisis with extra direct building subsidies, we question whether such days will ever return.
As we see home ownership increasing rapidly, we ask ourselves were the maximum home ownership rate is for the Dutch situation without forcing people into home ownership because of lack of other opportunities. In general for the Dutch situation it seems sensible to make a distinction between singles and multi-person households, the singles frequently going for rental and families aiming for home ownership. Several studies have established such a relation: Feijten and Mulder presenting a study in which they found that this relation is valid. The suggested reasons for such relations have to do with the distinction between short term and long term commitments for respectively singles and multi-person households. Singles like to remain flexible and as a result turn to renting which (especially in the Dutch situation) has limited movement cost. For multi-person households longer commitments are made (whether they are broken or not) so buying a house is an interesting option. Feijten and Mulder’s study use data until 1992: we wished to get some more insight in tenure patterns after this year because of a radical shift in government housing policy took place. From the beginning of the 1990 the government broke away from supporting the large social rental sector. Home ownership has increased from 45% in 1990 to 56% in 2006. We investigated the tenure preferences and housing outcomes for young households to see whether we could find any first evidence of tenure patterns that do not really fit the expected pattern: a majority of singles preferring and actually living in the rental sector while families more opt for the owner occupied sector. First of all we validated the general theoretical framework: singles prefer home ownership to a lesser extent than families. We do see some increase in the home ownership preference however. The second theme is the question whether we could after 1990 find evidence that certain groups access home ownership because they have no other option. The answer in general is no: the rate of home ownership has grown among both singles and family households but this seems to be in line with preferences. At the starting point of our research, 1994, it turned out that the preference for home ownership was in general higher than the actual outcome for almost all subgroups. In 2006 the outcome seems more in line with the home ownership preferences. Such seems to be a rather satisfying outcome: the general picture shows a higher rate of home ownership without any evidence of a for instance the English situation where many singles move into home ownership because of normalisation, lack of other alternatives or stigmatisation of the social rental sector.
A couple of remarks should be made however: this paper has been explorative and shows a general picture of preferences and outcomes among the young. Some housing regional and urban housing markets in The Netherlands are problematic with regard to access of the housing market in general. Individual stories from young people in the popular media about bad access to the housing market remain. Some reports suggest that the better off households and even singles turn to the owner occupation because lack of access to the ownership market.
A very engaging result was that Feijten and Mulder’s framework was validated during group discussions and in-depth interviews with young people. The framework has been validated on basis of statistical analysis many a time. This time young respondents made exactly the same connections spontaneously: singles and renting versus couples and home ownership.
What may be the most interesting thing for the future is the speculation to what extent home ownership may rise in the future. Many demographic projections point towards more singles in the future. As the current policy is singular towards home ownership, we should always be aware that not everyone intends to move into home ownership. A situation like in Britain, where social housing is seen as an inferior tenure may gradually evolve in the Netherlands. Of course private rental is an option, but it is expensive compared to home ownership in the current situation. The private rental sector can hardly compete with owner occupancy because the owner occupant has the advantage of the mortgage interest tax relief. In such a case singles may still be pushed into home ownership while it wasn’t their first preference.
Finally it would be extremely interesting to sort out how the theoretical framework by Feijten and Mulder works out in other countries. What happens with singles in countries where home ownership is much larger. For instance, do many young single Brits buy homes while they had rather start off with a rental home in their early life course? Do young single Italians stay at home because of lack of rental alternatives or is the specific local cultural attitude towards single young households different?
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