Housing allowances in the Netherlands: Product of a conservative or progressive ideology?

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HOUSING ALLO WAN CES IN THE

NETHERLANDS:

product of a conservative or progressive ideology? BIBLIOTHEEK TU Delft P 2113 6165

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872686 \

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INTERNATIONAL

FEDERATION

FOR HOUSING AND

PLANNING (IFHP)

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HOUSING ALLOWANCES IN

THE NETHERLANDS:

product of a conservative or

progressive ideology?

Hugo Priemus

Delft University Press / 1984

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Published and distributed by: Delft University Press Mijnbouwplein 11 2628 RT DELFT Telephone: (0) 15 783254

Student edition

Cover design: Ben Aalbers, Leidschendam, The Netherlands Typesetting and lay-out: Euroset BV, Amsterdam, The Netherlands Printing: Planéta BV, Haarlem, The Netherlands

Copyright © 1984 by Delft University Press, Delft, The Netherlands No part of th is hook may be reproduced in any form by print, photoprint, microfilm or any other means without written permission from the publisher: Delft University Press.

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79 79

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102 102 102 106 109 111 111 114 119

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INTRODUCTION

Housing is a field in which ideologies thrive. Research of ten proves to play an impor-tant part in the cultivation of certain ideologies and the combating of others. Debates on rent con trol, housing ten ure and income elasticities of the demand for dwellings (to give only a few examples) carry a heavy ideological charge.

By way of simplification one can say that in many debates a conservative and a progressive ideology are opposed. The conservative ideology is that of the free market and thus of limitation of government intervention in building and housing. It advocates private enterprise, free price determination, the abolition of allocation measures and severe cutbacks in the subsidy chaos. The progressive ideology, which is of ten critical of government action, nevertheless has no confidence in the "whims" of the market and bases itself on democratic and politica I supervision with the goal of protecting the position of the "weaker groups". According to progressive ideologists the government should follow a compensatory policy directed towards redistribution of welfare in favour of the weaker groups. The free market merely perpetuates the inequalities in housing. It is incidentally recognized that these inequalities in housing do not stand alone but display links with inequalities on the labour market, in education etc. Nor maya compensatory housing policy be considered in isolation (Duncan, 1977).

Since the end of the Sixties or the beginning of the Seventies an instrument has been in existence in many countries of Western Europe and in the USA which seems to fit into bath the conservative and the progressive ideology: individual rent subsidiza-tion. Conservative ideologists may claim that housing allowances are necessary for the reintroduction of freer market conditions in the rent sector af ter decades of rent control. They may regard housing allowances as a "lubricant for the free market" . Progressive ideologists, on the other hand, could argue that housing allowances form the only financial assistance on a large scale that benefits the weakest groups of residents. Housing allowances fit into a compensatory policy. And yet considerable criticism of housing allowances is encountered in both the progressive and the conser-vative camp. The objection of the left wing is th at individual rent subsidization individualizes the problems of tenants, pi aces the weak tenants in a dependent posi-tion, offers no security for a somewhat longer term and smacks too much of free market conditions. The right wing argues that housing allowances are a form of tied assistance impairing consumer sovereignty, conjuring up an enormous bureaucracy, laying an ever-greater claim to the national budget, having an unacceptable cumulati-ve equalizing effect and consequently forming a subject calling for great vigilance.

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allowances in the Netherlands. In the first part the previous history and the develop-ment of policy upon the introduction of the instrudevelop-ment are described and analysed. The second part is devoted to the elaboration of the instrument in 1975, and the subsequent development of policy. The scope of individual subsidization is featured in the third part. In the fOUl"th part we consider the static and dynamic effects of housing allowances. In the last part we return to the question into which of the ideologies housing allowances seem to fit best. Aspects of implementation have been examined in detail, but are treated only briefly in th is publication. The research reported on in these contributions was performed in 1975 and 1976 (the residents' survey took pi ace in the period 15 September - 15 November 1975) by C.T.J. Lucassen and H. Priem us and was updated by the latter in 1982 during a fellowship at the NIAS in Wassenaar.

The research has been reported on previously in C.T.J. Lucassen and H. Priemus, Individuele huursubsidie; evaluatie van een instrument van volkshuisvestingsbeleid, The Hague (Government Publishing Office), 1977. Considerable information has been taken from the latter report on behalf of this publication.

For comments on an earlier vers ion of this publication the author wishes to thank drs. L.P.M. Emmerich, C.T.J. Lucassen and drs J. Walrecht. The translation is by T.S. Preston. The manuscript was typed by mrs. J.J. van der Schoot and mrs. J.A.M. Koopman. Ir. P. Groetelaers assisted in editing. H. Ruijgrok made the illustrations.

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Comments and suggestions are most welcome. They should be adressed to:

Hugo Priemus

Delft University of Technology Berlageweg 1

2628 CR Delft The Netherlands

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I I

I

PREVIOUS HISTOR Y AND

THE DEVELOPMENT OF

POLICY UP TO 1975

1. Previous history

1.1. Grants to ex-slum-dwellers and depression grants (up

to 1923)

Individual rent subsidization in the Netherlands has a long previous history. In the celebrated Nutsrapport of 1896 (Drucker et al., 1896), which laid the foundation for the Housing Act of 1901, it was assumed that the rentals of new workers' dwellings had to be set in such a way that the construction of these dwellings would remain "financially feasible". Drucker at al., 1896, p. 133: 'If many persons then prove in-capable of paying those rents, a well-organized system of poor relief should concern itself with their fate and make up the deficiency for them as long as the state of incapacity continu es' .

The Housing Act of 1901 utilized the same point of departure in principle, but on 14 December 1905 the Housing Minister, Pierson, laid the emphasis in the Second Chamber of Parliament on possible exceptions. In addition to the principle that the dwellings built by an association should be rented "up to the rentals that may be secured for them", the Government introduced the exceptive provision that this principle should be departed from 'on behalf of persons who, as a result of measures in the interests of housing, had to leave their dwelling and are not capable of bearing the

cost of the above-mentioned rental of a dwelling fit for occupation by their family'.

On behalf of families that had been displaced from slums, rent subsidies had already been granted on this basis in various municipalities before 1914. Af ter 1916 the Government paid out interest rate grants and cost of materials grants so as to be

able to maintain the price level of Ju1y 1914. In 1919 these grants were abolished and

made way for a "depression grant". Van Beusekom (1971) has the following to say about this:

'As far as possible the rents of new dwellings had to be fixed at a level that was in accordance with the changed circumstances. This meant that the rents would be fixed at a reasonable part of the incomes of the tenants which, compared with 1914, had

ris en in many cases. But what is a reasonable part of income ? It was in those days that

people began to speak of a sixth to a seventh. In the same time the objections to this

idea came to light. Even on the occasion of the first letting of new dwellings it is

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difficult to find out the actual income of new tenants. Once the dwellings are occupied, it is practically impossible to keep up with the changes. And, even if this were possible, it is not feasible to evict from the dwellings the families whose incomes rises as soon as the income becomes higher than corresponds to the rent. Above all in times with a fluctuating economic situation th is is all extremely difficult'.

Hence a pure system of individual rent-fixing was not applied then in the Nether-lands. When fixing the rents for social housing soon af ter the First World War, usually the incomes of the occupants per group were estimated, no more. The rents were then fixed at a certain percentage of that estimated income. However, this too was of only fairly short duration. When the provision of grants ceased at the end of 1923 the rents had to be high enough to cover the operating costs. That is to say, from then on the cost price based rent was charged.

In the practice of housing, rent subsidization had been dropped completely.

1.2. Report ofthe Van den Bergh Committee (1926)

However, in their opinion-forming experts still embroidered for a while on the idea of an individual rent subsidy. Thus for instance in 1926 a committee instituted by the Association of Netherlands Local Authorities and the National Housing Council i.e. the National Federation of nonprofit housing associations.l) (Commissie - Van den Bergh, 1926) published a report in which it was proposed that families with low incomes be given an allowance, the size of which would be fixed every year by a local "housing assistance committee" . This housing assistance ought not to be confined to the families living in social housing (Van den Berg, 1965).

The rents of social housing ought to be grafted on to the "moderate market price", which in general would conform to the amended cost price of the dwellings.

The committee saw three advantages in its proposed system, which for those days was a "revolutionary" one:

1. social justice (assistance goes to those who need it);

2. social education (anyone receiving assistance will know that too and remain aware of the fact);

3. financial and administrative simplicity (by detaching the provision of housing assistance from the operation of dwellings).

The report of the Van den Bergh Committee was favourably received (Van Gijn, 1927) and led to the institution of the Vliegen Committee (by Minister De Geer) in December 1928. This committee published a divided recommendation in 1932 (Com-missie Vliegen, 1932), but thereafter the matter sank into oblivion. For more than 30 years individual subsidization would stay off the politica I agenda. It would be until the Sixties that the idea of individualization of government assistance would receive further attention. 4

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2. The development of policy (1960-1975)

2.1. Decontrol in the Sixties

The growing interest in subsidization aimed at the individual in the Sixties must not be attributed to a political victory by advocates of a compensatory housing policy. On the contrary, throughout Western Europe individual subsidization appeared in the wake of a general pursuit of decontrol of the housing market. It was believed that the greatest housing shortages were a thing of the past, and attempts were undertaken to make rent determination freer and to abolish the allocation measures step by step.

Important experience was gained with this in Belgium (Duwendag, 1967a). In that country decontrol had been put into practice at a very early stage and proved to summon up unexpected problems there. The dia gnosis was soon made: what was lacking was individual subsidization. For decontrol may be accompanied by some times considerable incidental rent increases which may present problems for the tenant. If the tenants in question could fall back on a supplementary rent subsidy, decontrol could be implemented more smoothly. This lesson induced a number of European countries (such as Sweden, Denmark and Germany) to introduce individual rent subsidization in the same period during which a policy of decontrol was being followed there. In the Netherlands too the individual rent subsidy was introduced: by Minister Schut in 1970. The basis for this scheme had already been laid in 1964 by the Alozerij Committee (Commissie Alozerij, 1964).

Since 1901 the idea of an individual system of subsidization had more than once cropped up in the Netherlands (Van Beusekom, 1968: Van der Kaa, 1943, p. 7-8), but in this country too the breakthrough did not come until the end of the Sixties. In the course of the Sixties the idea spread that the system of property subsidies and social housing had reached a deadlock. Although there were genera I complaints about the poor quality of new construction and the great burden on the Exchequer, new social housing nevertheless proved to be beyond the financial reach of the lower-paid catego-ries, despite the property subsidies (Van Beusekom, 1962a; 1962b). More and more pleas were heard for rent harmonization of the stock, encouragement of filtering and improvement of the quality of new construction. Property subsidies missed the mark: many residents who profited from these subsidies seemed not to require th is assistance, whereas the lowest-paid, who we re in greatest need of such aid, were not entitled to these property subsidies in the ol der parts of the stock.

The goal of the new instrument of housing allowances, which had to become part of a policy aimed at the restoration of "normal conditions" (= decontrol), was to channel the assistance to those in need of it. A time was seen in the offing in which property subsidies would no longer be required. New construction would then become expensive, but that was solved by the emphatic presentation of the filtering ideology. In special cases, if it were unavoidable that people with low incomes were to be housed in new construct ion -e.g. as part of the renewal of old districts - individual rent subsidization would bring relief.

The individual rent subsidy was clearly seen as a supplementary instrument clearing the way for decontrol and the abolition of property subsidies. In this process rent harmonization was the instrument that had to simulate a situation which ought to come about in the theoretica I concept of the market of perfectly free competition.

This total concept ion was to reach its intellectual culmination in the policy memorandum of Minister Udink (Udink and Buck, 1972).

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2.2. Alozerij Committee (1964)

On 2 October 1962 the Grant System Committee was instituted by the Netherlands Institute for Housing and Town Planning. This committee published a report in September 1964 (Commissie Alozerij, 1964).

The committee pointed out that in many countries an individual subsidization system had been introduced, usually to supplement a property subsidization system of longer standing. A survey was given of recent developments in Denmark, France, Germany, Britain, Belgium and Sweden, while reference was also made to Ireland, the USA and Australia.

Af ter an analysis echoing the views stated above, the committee concluded that " ... to achieve a reasonable ratio between purchaising power and rent a certain refinement of the subsidy system be considered necessary" (p. 272). The fact that despite income developments many residents not requiring property subsidies, lived in social housing induced the committee to underline the desirability of a correct ion to the existing property subsidies. It stated that ' ... as long as the rental of dwellings is kept below the cost price by means of subsidy there may be good reason to fix different rents for otherwise identical dwellings, if the tenant's income makes th is subsidy superfluous' (p. 273).

The motive for this was not only pursuit of optimum use of subsidy moneys but also giving ' ... an incentive ... for moving on in the existing stock, since it may be expected that the families with higher incomes, who will have to pay a higher rent, will perhaps be quicker to move to another dwelling more appropriate to them' (p. 273). In this connection the committee advocated facilities to render possible the construction of' ... dwellings for the middle class .. .'.

On the basis ofthe considerations outlined above the committee made a proposal for all social housing already built and to be newly constructed. With remarkable ease the committee left the pro bi ems in the other dwellings for rent largely out of conside-ration. Nor did it say a word about owner-occupied dwellings. The committee did, however, consider it desirabie that, in addition to social housing, subsidized private dwellings for rent in the premium-A sector should come under a similar scheme.

The committee suggested that the occupants of dwellings coming under the proposed scheme be subdivided into three categories:

a. annual incomes (= gross income of the ma in breadwinner) of 1 9700 (1) and higher;

b. annual incomes of 16000 to 1 9700; c. annual incomes up to 1 6000. (2)

For these categories the following scheme could apply, according to the committee: category A B C annual income 19700 and higher f6000 - 9700 upto16000 grants

existing grants lapse

existing grants are maintained

existing grants can be increased by an additional indivi-dual subsidy

The committee's proposal can be schematized as follows:

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i

based rent individual housing

r---r~~~~~~~~~~

cost

PriCl

8ubsidy property rent

J

property costs

o

Fig. 1: individual subsidy (C) 6.000 (B) 9.700 (A)--7 subsidy individual rent annual income

Schematic representation of the proposal for differentiation in property subsidies. according to the Alozerij Committee (1964)

"As regards the policy with respect to category A, the committee notably had in mind the furtherance offiltering, but it was aware that ' ... the essential effect of this measure on filtering will be of limited importance' (p. 274). Furtherance of filtering called for a complex of measures, whereby the committee considered it important that attention be devoted to ' ... the construct ion of a sufficient number of dwellings suitable for housing the middle classes af ter leaving social housing'.

All the ingredients for later policy proposals, notably those by Minister Schut, may be found in the committee's report: encouraging filtering, introduction of a rent tax or filtering levy, the construct ion of better new dwellings for the middle classes, the limitation of property subsidization, the return to "economic rents" and - for the lower

incomes - the realization of a supplementary rent subsidy.

With regard to the individual rent allowance the committee used two relations, viz. to:

'a. the income of the person concerned and the proportion thereof that he can spend on rent;

b. the rental of the dwelling which the person concerned wis hes to occupy, with the proviso that wishes beyond what is reasonable should not be brought within his reach by means of subsidy' (p. 274). (3)

To implement the points of departure the following were required:

1. fixing "standard" rents, i.e. rentals that must be regarded as affordable at a given income;

2. fixing the part of the rental exceeding the standard rent that the person concerned has to pay himself, and also fixing the maximum amounts for individual rent

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16

t

rent housing eosts

i

15 ratio (f per week) 14 14% " 13 / / 12

_.'

_"

.'

11 _/e",- ₁₃_% 10 / , 9 _,// , 8 " 12% , 7

.

, / 1 6 1 1 1 5 ,I ₁₁_% I 4 I

,

I

standard rent per week

3

.,

_(left-hand_Beale) 2 rent ratio 10% 1 (right-hand seale) 0 0 0 0 0 0 0 0 0 0 ~ annual 0 V') 0 V') 0 V') 0 V') 0 _ineome _(I) 0 ("ol V') t- 0 ("ol V') t- 0 "<t "<t "<t "<t V') V') V') V') ID (C)

Fig. 2: E/aboration ofindividua/ rentfor group C according to the A/ozeri}

Committee (1964) (see Table I)

allowance, in order to set an upper limit to the task of the community' (p. 274-275).

With regard to the first point the committee proposed Table I (p. 275). With regard to the second aspect the committee suggested that in principle two thirds of the difference be made up; one third thus remained for the tenant to pay. With regard to the maximum amounts the committee proposed that the weekly rent to be paid be reduced by not more than f I per f 250 or a part thereof below an annual income of f

6,000.-The arrangement of Table 2 then comes about (p. 275) (4).

By way of illustration the committee gave the following example: Suppose that someone has an income of

f

4900. If he wishes to rent a dwelling of

f

12 per week, he receives - according to Table I-no rent allowance. At a rental of

f

13 he receives two thirds of (f 13-f 12) = f 0,67 and pays f 12.33 himself. For every guilder of rent

increase this rises by the same amount to a rent of

f

19.50 per week. At that amount the allowance to be granted for the income category concerned reaches the maximum

= two thirds of (f 19.50- f 12) = f 5.

Thus for rents higher thanf 19.50 no further aditional rent allowance is given: the subsidy remains f 5. At f 19.50 f 5 is made up, and f 14.50 per week remains, i.e. a

rent ratio of 15.4%

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Table 1: Annual incomes and standard rents (according to the Alozerij Committee, 1964) annual income up to

f

4000

f

4000-4250 14250-4500 14500-4750 14750-5000

f

5000-5250 15250-5500

f

5500-5750

f

5750-6000

standard rent per week

2

f

8

f

9 flO 111 112 113 f14 f15 f16 column 2 as a percentage 011 (highest amount) 3 10.4 11.01 11.6 12.04 12.44 12.88 13.23 13.56 13.87

Table 2: Annual incomes and maximum rent allowances (according to the Alozerij Committee, 1964) annual income 16000-5750 15750-5500 15500-5250 15250-5000

f

5000-4750

f

4750-4500

f

4500-4250

f

4250-4000

maximum rent al/owance per week fl 12 13 14 f5 f6 f7 f8

The committee made the system additionally difficult by emphasizing that the level of the rent allowances should be variabie, depending on the local rent situation.

By income the committee always meant gross income. Utilizing net incomes has great advantages, but in practice is more difficult to establish and check. Simplicity and ease of supervision also induced the committee to take into consideration only the income of the main breadwinner.

The additional subsidy fixed on the basis of th is income is reduced by

f

1 per week

for each member of the family living in the dwelling who is also earning, irrespective of the size of his or her income.

According to the committee, the proposed system ought to be implemented within

the sphere of housing and not that of social work. In suitable cases the interested

parties themselves should apply for the subsidy. The committee considered it advisable

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system, , ... as a result of which allowance can be made for local circumstances of a particular nature' (p. 277).

The committee was of the opinion that the responsibility for practical supervision should also be vested in the local authority. The committee gave expression to the important role of the local authority by dividing the additional costs occurring as a result of the individual rent allowances on a basis of 25% for the local authority and 75% for the State. This concludes the survey of the report of the Grant System Committee, which as early as 1964 laid the basis for the later Supplementary Rent Subsidy Scheme.

During a meeting of the NIROV (the Netherlands Institute for Physical Plan-ning and Housing) on 17th november 1964 (the report was published in Stedebouw & Volkshuisvesting, Feb. 1965, p. 52-65) Umrath elucidated the report of the Alozerij Committee (p. 53-54): 'The basis of our idea is thus that a person whose income exceeds a certain limit or whose rent ratio falls below a certain limit can and must pay at least the unsubsidized rent'. This entailed an incentive (not a compulsion) for filtering. Umrath recognized that the committee had not been able to indicate how many tenants would utilize the scheme. It was, however, clear that the committee had a supplementary scheme in mind: property subsidization remained necessary.

Palmen (Ons Limburg) (p. 55-56) declared himself against individual rent-fixing, having regard to the technica I problems of implementation (annual declaration of income etc.), and preferred a broader relation between rent-setting and income level (the "social housing price" avant la lettre; see Section 2.6).

Mook (the Netherlands Association of House- and Land-Owners) (p. 56-57) feared vacancies in new dwellings for the middle classes and dwellings in the stock, which af ter all would fall outside the individual subsidy schemes. In general the meeting displayed considerable reservations towards the ideas of the Alozerij Committee. In this the idea of the filtering levy encountered considerably more criticism than the concept of supplementary rent subsidization.

2.3. Supplementary Rent Subsidies Order: the start

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970-1972)

In 1965 the report of the Society for Political Economy on "The rent problem" with contributions by Andriessen, Hartog and Sandee, was published. This report showed that the idea of individualization of housing assistance was finding adherents. In the report Andriessen advocated a system of individual subsidies alongside that of proper-ty subsidies and associated himself with the report of the Alozerij Committee (Vereni-ging voor de Staatshuishoudkunde, 1965, p. 70). Even then Hartog was arguing in favour of the abolition of property subsidies and of opting on principle for individu al subsidies (ibid., p. 19). Sandee did not go into th is matter and dealt with the question of the de mand for and allocation of dwellings.

At the time when the report of the Grant System Committee was published, P.C.W.M. Bogaers had been in office as Minister of Housing for somewhat longer than a year.

On 24 July 1963 this Iegendary statesman had succeeded J. van Aartsen and within a few months had produced the "Memorandum concerning a pluriform and expansive

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-building policy", which was published on 3 October 1963. All hands had been summo-ned on deck to get the product ion of new dwellings stepped up.

The argument th at had played a part in the pleas for individual rent subsidies, viz. careful spending of government moneys and a certain reduction of property subsidies, receded into the background. Af ter the Economic Institute for the Construction Industry had made it clear that the housing shortage was much greater than had been generally assumed previously (EIB, 1962), eliminating the housing shortage was given top priority in the Marijnen Cabinet and the Ca Is Cabinet, to both of which Bogaers belonged.

The arsenal of property subsidies in all its intensity was thrown into battle to mobilize the supply. The discussion on housing allowances took a back seat. Not until the Schut period (Schut started as a minister in the centre/right wing De Jong Cabinet on 5 April 1967) did the individual rent subsidy come up for discussion again. As part of a policy directed strongly towards decontrol, filtering and improvement of the quality of new construction, the need for a supplementary set of rent subsidy instruments ca me to the fore again. In 1968 the SocioEconomic Council (= consultative body of employ-ers and employed) made a recommendation on the size of the annual rent increases, in which a majority advocated rep la cement ofproperty subsidization in housebuilding by a system of individual grants.

Thanks to the thought devoted to the question by the experts in the Sixties and the experience meanwhile gained abroad, litte more needed to be said about the function and the nature of a rent subsidy scheme. On 1 July 1970, for the first time since the Second World War, a rent subsidy scheme was introduced in the Netherlands, inten-ded for groups of tenants who, having regard to their income, had to pay relatively high rent. The Supplementary Rent Subsidy Order, intended as an experimental scheme, was published in the Netherlands Official Gazette of 5 June 1970, no. 105 and further explained in circulars MG 70-6 of 2 June 1970 and MG 70-8 of 16 June 1970. Only tenants of dwellings for which subsidy had been given after 31 March 1960 qualified for the grants. The point of departure for making the grant was that the tenant should not have to pay more than one sixth to one seventh of his taxa bie income in rent.

The scheme applied to tenants with a taxa bie income of less than

f

15,000.

During the first period (period Ol) from 1 July 1970 to 31 March 1971, 30,993 households made use of the scheme. In respect of all rented dwellings built with government assistance since 1960 (some 600,000, of which 430,000 social housing), th is means a range of application of over 5% (CDV, Annual Report 1970, p. 118-121 ).

In the first year af ter its introduction the scope of the scheme was broadened twice. With effect from 1 July 1971 the scheme was also dec1ared applicable to those cases in which a rent increase as part of the statutory measures for rent harmonization would lead to a relatively high rent ratio (circular MG 71-16 of 29 June 1971). This means that the scheme was extended in principle to all dwellings of local authorities and housing associations throughout the country and to the rented dwellings in the not yet decontrolled parts of the country for which a rent increase of more than 6% was permitted under rent harmonization.

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With effect from 1 January 1972 the scheme's scope was again widened. To stimulate the highly necessary improvement of the old housing stock, for those cases in which drastic improvement led to an increase in rent the scheme for supplementary rent subsidy also became applicable with effect from that date. In th is connection a drastic improvement was interpreted as meaning an improvement the costs of which were at least

f

10,000 per dwelling. This measure applied to the following categories of dwellings:

dwellings that were improved with financial assistance from the State;

dwellings of housing associations and of local authorities that were improved irrespective of whether special financial assistance was given for the improvement by the government.

The local authorities were informed about this by circular MG 71-29 of 29 December 1971.

The scheme was thus initially confined to specific groups oftenants and was applied on a very modest scale at first. In the beginning the scheme emerged as a fairly unimpor-tant, modest, rather specific provision which had little effect on the overall develop-ment of housing, more or less eomparable with the Ameriean Experidevelop-mental Housing Allowanees Program.

While a diseussion on the broad outlines of housing policy got started, the Supplementary Rent Subsidy Order underwent a development of its own, largely in detachment from this discussion.

2.4. The Hartog Working Party and the Udink

Memorandum (1972)

In 1971 a new cabinet took office: the centrejright-wing Biesheuvel Cabinet, which succeeded the likewise centrejright-wing De Jong Cabinet. Van Beusekom (1971) established that a "striking resemblance" on the nature of the housing subsidies could be detected in the party programmes. The three progressive parties (the Labour Party - PvdA - the Democrats 66 - D'66 - and the Radicals - PPR) wanted to "replace subsidies per dwelling by subsidies per occupant". The three confessional parties (the Catholic People's Party - KVP - the Christian-Historical Union - CHU - and the Anti-Revolutionary Party - ARP) advocated "the granting of individual rent subsidies (not to the dwelling, but to the occupants)". The programmes of the Conservative People's Party for Freedom and Democracy - VVD - and the Democrat Socialists 70-DS'70 - contained the same point. Between eight parties, which together oceupied 134 out of the 150 Second Chamber seats, there was on this point a farreaching degree of politica I consensus.

It was not until 19 April 1972 that the housing allowance was placed in a mueh wider framework and the importanee of this instrument was emphasized mueh more stron-gly. That date saw the publieation of the Housing Memorandum of B.J. Udink and K.W. Buek, who had succeeded W.F. Schut on 6 July 1971 (Udink and Buek, 1972). In this memorandum the dynamic cost price based rent was introdueed as a principle, i.e. when fixing the initial rent the rent increases to be expected later were already anticipated. This dynamic costing of benefits and costs enable Udink to launch the proposal to do away entirely with property subsidies for new dwellings, to increase

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---~--- - -~

-rents all round by 20% and to switch to an extensive but still supplementary system for individual rent subsidization. In this the Udink Memorandum followed the recom-mendations that had been made in the first report of the Hartog Working Party. (5) The objective towards which the instrument of housing aUowances had to be directed was simply that the government ca me "to the aid" of those who could not pay the " economie price". The working party considered a system of fuU individual subsidiza-tion acceptable only "as a marginal phenomenon". Only as such could it funcsubsidiza-tion optimally (p. 26). The Hartog Working Party had in mind " ... an amount to be borne by the tenant himself of one sixth to one seventh of his taxa bie income" (p. 29) as a norm. With regard to the standard rent ratios applicable at that time to supplementary rent subsidization, the working party - having regard to the real improvement in income since the introduction of the scheme - wanted to increase the standard rent ratios by I point, as a resuIt of which they would vary from 13.9 for incomes below /8000 to 17.7 for th income categories from /14,000 to /24,000 (upper limit). The subsidy percentage (that part of the difference between rent and standard rent that is subsidized), which was 90% for the lowest-income categories should, in the opinion of the working party, gradually be reduced to nil for incomes of /24,000 and over.

At the end of 1970 this would amount to 250.000 to 300.000 eligible households with acall on the budget of/250 to/350 million per year. The Hartog Working Party assumed here that those receiving aid under the General Assistance Act would not be covered by the scheme. According to the working party, this group did not have primarilya rent problem but rather an income problem. Udink and Buck agreed with the recommendations of the working party: the report "indicates ... a clear way" (p.30).

They wished to consult further on the exact level of the standard rent ratios and on the percentage reductions. However, they were of the opinion that the norm for the lower incomes should be lower than for those with a greater ability to pay.

On one point Udink and Buck clearly differed from the Hartog Working Party. They were not inclined to exclude from the genera I scheme for individu al rent subsi-dies occupants receiving benefit under the General Assistance Act (p. 32). With regard to subsidy policy in relation to the owner-occupied sector the ministers suspen-ded their point of view until the Hartog Working Party had submitted its final report.

However, Udink and Buck did make an important declaration of principle: 'It

stands to reason that for owner-occupied dwellings too the size of the subsidy should be adjusted to the circumstances of the owner-occupier' (p. 32). This intention was later to recede into the background and to be concretized to only a very modest extent in the introduction of "protected" owner-occupied dwellings in the Rent and Subsidy Policy Memorandum (1974).

The Udink Housing Memorandum (1972) elicted in the Dutch professional press a fundamental debate on the role of the government on the housing market (Stichting Postdoctoraal Onderwijs in het Bouwen, 1973; Priemus, 1981). Was the simulation of the market af ter the fashion of Pareto, as advocated by Udink and Buck, the most desirabie sol ut ion to the problem ? There was considerable opposition, both from the proponents of a freer market, who found dynamic costing unacceptable, and from those who had formed a different idea of goverment intervention on the housing market.

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2.5. The Housing Advisory Committee (1973)

While the professional press was tackling the Housing Memorandum, the Biesheuvel Cabinet feil. As aresuit, the Second Chamber never got round to debating the Udink Memorandum. On 11 May 1973 the centrejleft-wing Den Uyl Cabinet assumed office. The new ministers at the Department of Housing and Physical Planning, J.P.A. Gruyters, M.P.A. van Dam and J.L.N. Schaefer, received on 4 july 1973 the recom-mendation of the Housing Advisory Committee on the Housing memorandum, which recommendation was submitted to the Second Chamber on 29 august 1973 (Raad voor de Volkshuisvesting, 1973). This recommendation also covered the second report of the Hartog Working Party, which had meanwhile been published but on which no Government point of view had as yet been formulated (Tweede Rapport van de Werkgroep-Hartog, 1973).

The Advisory Committee rejected the 20% rent increase proposed by Udink and Buck and the proposal to abolish property subsidies, preferring a mixed form by which the initial rent could be adjusted to the modal income of the typical employee. To achieve this "social housing price", property subsidization would have to act as a balancing device. In this way, according to the Advisory Committee, not the economic but the social aspect was the point of departure of the policy. Moreover, this resulted in a more flexible set up than that suggested by the Hartog Working Party.

The Advisory Committee had objections to the enormous volume of individual subsidization in the set up of the Hartog Working Party. In its second report the working party had calculated that by 1976 some 500.000 tenants would qualify for an individual subsidy (Tweede Rapport van de Werkgroep-Hartog, 1973, p. 18). The Advisory Committee proved apprehensive oftechnical problems in implementation of the system and wondered whether " ... applications for subsidy cannot be dealt with in a simple way, so that they do not have to go through as many channels and thus are attended to more quickly" (Raad voor de Volkshuisvesting, 1973, p. 7). In th is connection the Advisory Committee pointed to " ... negative sociopsychological effects bound up with granting housing allowances on such a large scale" (p. 7-8).

Nevertheless, the Advisory Committee considered a genera I system of housing allowances necessary in addition to the property subsidies" ... in order to support the categories of residents who are not able within these limits to find a dwelling of sufficient quality at a reasonabie rent ratio" (p. 14).

The Advisory Committee advocated extending the individual rent subsidy -which was then confined to dwellings built since 1960, to dwellings of -which the rent had been raised by rent harmonization and to improved dwellings - to all rented dwellings. The Advisory Committee therefore opted for " ... a mixed form of subsidies, by which on the one hand the scope of the system ofhousing allowances is widened, but on the other a more effective and more efficient policy can be followed with regard to the system of property subsidies" (p. 14). A minority of the Advisory Committee feared the elimination of the private investor. Like Udink and Buck, they advocated a gradual abolition of property subsidies and introduction of a general system of housing allowances (p.16).

14

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2.6. Rent and Subsidy Policy Memorandum (1974)

The recommendations of the majority of the Housing Advisory Committee may be found in the Rent and Subsidy Policy Memorandum that Gruyters, Van Dam and Schaefer submitted to the Second Chamber on 20 august 1974. Udink's dynamic costing was maintained, but adapted on a number of fundamental points. Property subsidization was not abolished. Dynamic costing was introduced, but the result of the caIculation did not form the rent. The reasoning was the other way round. It was the wish to apply to - austere - new construction a rent level within the reach of the typical employee. This was ca lied the principle of the "social housing price". At an initial annual rent equal to 5% of the building-plus-land costs, th is principle could be realised. If this could not be attained via dynamic costing, the remainder would be made up by property subsidization. Property subsidization th us acted as a balancing device.

The marginal cost rule was largely modified. Not the costs of the last unit added but the costs of new construction minus property subsidy were a cri ter ion of the price level in the stock.

The 20% rent increase that Udink and Buck had proposed lost its significance wh en the property subsidies were maintained. It was important that the new ministers had not wanted to have the development of rents directly determined by the increase in building costs (as Udink and Buck did) but to have th is development determined by the government. As aresuIt they retained an essential instrument of rent policy that Udink and Buck had already tossed out. The new ministers proposed that housing allowances should apply to all rented dwellings (Gruyters et al., 1974, p. 97-10 1).

As compared with the Hartog Working Party, they reduced the standard rent ratios for low incomes to 10%. Owing to the fact that the standard rent ratios for higher incomes were not reduced (6) the "progression" with respect to the standard rent ratios was intensified.

Nowhere in the Rent and Subsidy Policy Memorandum was the objective formulated to which the instrument of the individual rent subsidy was directed. It was, however, c1ear that major corrections of course had been made with respect to the Udink Memorandum:

I. Udink regarded the individual rent subsidy as the instrument par excellence for making it possible to caIculate an "economic price" and to continue with decon-trol. The instrument was aimed at coming "to the aid" of those with less ability to pay. For Gruyters et al. decontrol was no longer the prospect towards which policy was directed. For the first time thought was being given to permanent regulation of the price of housing - at least in the rent sector - also independently of "special" circumstances.

The property subsidies had to serve to keep the rents for new dwellings permanently within the reach of the typical employee. Individual rent subsidies were added to bring these rents also within the reach of people with an income lower than the typical one. More generally, the endeavour continued to be aimed at countering extremely high rent ratios.

2. An important aspect was that Gruyters et al. also coupled to the individual subsidy a filtering levy - rejected by the Second Chamber - by which "too" low rent ratios were also corrected. The aim of th is was a "better" distribution of living accommodation among residents. Housing allowance and filtering levy

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r _ _

. . . . 5 ' F , _ _ ,p · - r' _'," _Mr·'

together would have an overall effect on the individual housing costs and the distribution ofliving accommodation. As a result of this the individual determina-tion ofhousing costs lost its supplementary nature, which had been emphasized so strongly by Udink et al.

3. In the opinion of Gruyters et al. the dividing line between property and individual

subsidization was beginning to blur. The newly announced procedure via the

tenant (in which the tenant pays over to the landlord the rent less the subsidy and the landlord receives the housing allowance from the State) was intended mainly to tore down in the eyes of the tenant the distinction between the two forms of subsidy so strongly emphasized by Udink et al.

4. In the Rent and Subsidy Policy Memorandum an obvious departure from pre-vious policy came to light by the introduction of the concept "income rents".

Af ter an explanation of the si ze of the standard rent ratios Gruyters et al. noted:

'The above entails infact that a system of income rents is introduced for the tenants who - even af ter property subsidization of the dwelJing - would still have

too heavy a burden to bear - at least in comparison with others -if they had to pay

the housing costs in fuH themselves. After all, for not too expensive dwellings it

willdepend solelyon income (up to an annual rent of f3600; in 1975-1976, Pr.) as to what amount will ultimately have to be paid for the use" (p. 99).

If for a moment we leave out of consideration the fact that the principle expressed here

was considerably impaired in the elaboration of the scheme, we note that it was evidently the intention of the ministers to give a new function to the individu al rent

subsidy. The familiar relation between housing costs and housing quality was

exchan-ged for the relation between housing costs and income. It did not strike Gruyters et al.

that such a revolution might introduce the need for an adapted distribution policy of

dwellings.

While with Udink et al. individu al subsidization had been primarily aimed at impro-ving the functioning of the housing market, with Gruyters et al. any reference to better functioning of the housing market was absent in this connection. The latter fosters the - incidentally incorrect - assumption that Gruyters et al. regarded individual subsidi-zation to a not inconsiderable extent as an instrument of incomes policy, directed

towards the redistribution of welfare between people with higher and lower incomes.

With regard to individual subsidization the Rent and Subsidy Policy memorandum formulates the following points of departure:

1. With respect to the rent subsidy scheme applicable at that time, the ministers proposed to extend the scheme to all rented dwellings.

2. Furthermore, to a greater extent than had been the case until then, the rent remaining after subsidization should - according to the ministers - in general be a lower proportion of income according as that income is lower.

3. A third correction that the ministers wished to apply was to allow tenants receiving benefit under the General Assistance Act also to qualify for individual rent subsidy (p. 97). (7)

4. A fourth measure promised by the Memorandum was the introduction of a

maximum rent limit" ... to prevent abuse of the subsidy scheme" (p. 98).

5. A fifth point of departure is the intention to reckon from the level of the minimum

wa ge. 'The old-age pension for elderly couples, taking into account relevant

differences in the field of taxes and social insurance, is also at that level". 16

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As standard rent ratio for the lowest paid 10% of the taxa bie mimimum wage was announced (p. 98). (8)

6. A sixth point of departure to be found in the memorandum was the

f

3600 limit above which reductions would be applied to the housing allowances.

7. Seventhly, the standard rent ratios were adjusted. The following list of standard rent ratios was given (p. 99):

Table 3: Standard rent ratios according to the Rent and Subsidy Policy Memorandum 1974

TaxabIe income in guilders (1975 situation) standard rent ratio (%) minimum wage (1)

minimum wage (I) - 15.000 15.000 - 16.000 16.000 - 17.000 17.000 - 18.000 18.000 - 19.000 19.000 - 20.000 20.000 - 21.000 21.000 - 22.000 22.000 - 23.000 23.000 - 24.000 24.000 - 25.000 10 11.4 12.8 14.2 15.6 17.0 17.3 17.6 17.9 18.2 18.5 18.8

(I) Or related benefit (old age pensions, widows' and orphans' pensions, genera I

assistance). The minimum wa ge for 1975 was estimated at approx

f

14.000.

8. An eighth point was the announcement of a separate scheme for young persons living on their own, to appear in the announced "Memorandum on the accommo-dation of persons living alone" (later expanded to twoperson-households) (p. 99).

9. As the ninth point the procedure via the landlord was announced, with which some experience had already been gained as part of the combating of vacancies and the special supplementary rent subsidy. The ministers counted on the coope-ration of local authorities, housing associations and large private housing-mana-ging institutions, not on that of smaller private landlords (p. 100).

10. Finally, the memorandum voices the expectation that, notably by broadening the scope (in respect of dwellings and occupant), .... the number of subsidized persons, which is now about 150.000, wil! gradually be about doubled from 1975 onwards" (p. 101).

In addition to the "ordinary" rent subsidies, the instrument of rent acclimatization grants (= special individual rent subsidies by which in a number of years - 3 or 5 - a decreasing part of the difference in rent between a dwelling left and a dwelling occupied in a move, or the jump in rent in the case of improvement of a dwelling, is subsidized) was furlher improved, as were the allowances for the costs of removal and furnishing, whereas the special supplementary rent subsidies for occupants of dwel-lings built with the aid of the Pension Insurance Advance Levy Fund lapsed (9) (p. 101-104).

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We shall not further consider these special rent subsidies, not the sensational proposals for a filtering levy which failed to win over the Second Chamber (p. 104-107).

The individual subsidization existing in the Netherlands since 1975 is a special case in the midst of the large number of conceivable forms of housing allowances. In our opinion the following characteristics must be emphasized:

1. The housing allowances are paid out only if the actual rents exceed certain limits.

The subsidies are therefore entirely coupled to the housing sector. The allowances are in general higher according as income is lower and the rent higher (up to a certain maximum). The higher the rent the higher too the tenant's own contribu-tion.

2. Since 1975 in particular the housing allowances have been embedded in a system of rent con trol covering practically the who/e rent sector. In th is context there need be no concern about possible rent reactions.

3. The housing allowances apply to the whole rent sector; the owner-occupied sector is excluded from individual subsidization (apart from income limits which are adhered to with regard to premiums granted for new purchased dwellings). 4. In determining the size of the subsidy other varia bles than income and rent play

no part. There is thus no connection with dwelling size, dwelling quality, size of the household etc.

5. There are no minimum qualitative requirements with regard to the dwelling. The specific nature of the Dutch housing allowances should be borne in mind when appraising the question of which part of the internationalliterature on housing allowances and rent rebates is relevant to the Dutch situation.

2.7. New objectives

?

Speakingofthe basis for rent subsidies, Van den Berg (1965, p. 611-662) remarks that the government precribes in the public interest a minimum level of satisfaction of housing wants. In this connection Drees (1963) states that the only sound argument in favour of subsidization is that without a subsidy the occupants would be left with too little money for other expenditure than rent. Though the latter formulation runs parallel to the former one, it seems less felicitious. For there is the danger that the occupants, partly by underrating the importance of good housing, reach too low a level

of housing, which may entail negative external effects.

Van den Berg (1965, p. 662) rightly remarks that a rent subsidy given for the reason stated cannot be of a size which is unchangeable or fixed for a long time. Having regard to the goal, the subsidy will have to vary with the income position, the circum-stances of the household and the rentals. From the preceeding sections it is evident that the individual rent subsidization performed a different function for Gruyters et al. than for Udink et al. From a means of first aid in decontrol the individual rent subsidy developed into an instrument aimed at redistribution that had to raise the rel at ion between housing costs and income above the relation between housing costs and quality.

(27)

And yet the function of individual rent subsidization with Gruyters et al. is not c1ear. Arnoldussen and Van de Ven (1977, p. 81-82), who relate the expansion of the individual rent subsidy in 1975 to the stagnating production encountered by the Den Uyl Cabinet, remark that the Rent and Subsidy Policy Memorandum by Gruyters, Schaefer and Van Dam is not very c\ear about what is aimed at with the individu al rent subsidy. The absence of explicit objectives confronts the observer with problems. The impression exists that with regard to the individual rent subsidy we are concerned with a case in which the instrument, af ter having been derived from a number of c1ear goals, proceeded to lead a life of its own, independently of the original goals, with those responsible failing to formulate the current goals of the instrument. Some suspected the ministers of using the individu al rent subsidy as an instrument in the service of the old objective of Udink et al. The decontrol pursued had simply acquired a somewhat different appearance; instead of rent decontrol there was decontrol by astrong increa-se in the number of owner-occupied homes.

Although there are certainly symptoms that support this view, we are of the opinion that the individual rent subsidy must be placed in the framework of new objectives.

main objective _{affordable housing for all}right to good,

t

objective fair distribution _{fair distribution of housing} accommodation

-4-

of

hO"'1'O'"

i

distribution po1icy(?)

Î

J

~ .5 Fig. 3:

statie effect dynamic effect

market of owner occupied

dwellings (7) rent policy

points system

-.l

property. subsidies

1-individual subsidies

Hierarchy of objectives to the housing market effect of property subsidization and individua/ subsidization (as evident/y intended in the Rent and Subsidy Po/icy Memorandum 1974)

(28)

We believe that these objectives cannot be excJusively linked to individu al subsidiza-tion, but to subsidization of housing in general, in which dimensions of both property subsidization and individual subsidization are concerned.

Apart from the - important - functions of property subsidies on the house building market, one can attach to the combination of property and individual subsidies (incJu-ding the rent acclimatization grants) as a housing market goal, as intended in the Rent

and Subsidy Policy Memorandum (1974), the following goal: making "good"

dwel-Iings affordable. also for the lower-income categories.

This goal is motivated by the positive external effects and the merit character of good

hou sing. As aresuIt the subsidy instrument is in direct relation to the main principle of

housing policy: the right of everyone to a decent dwelling. Subsidization is aimed at converting the recognized need for housing into an effective demand.

The individual component in subsidization is aimed in particular at the acbievement of equal opportunity on the housing market. In view of tbis its intention is to eliminate, or at least reduce, the negative effects of the skew income distribution on the freedom of choice on the housing market.

A redistribution of housing costs is in any case an intended effect of th is instrument. A

redistribution of dwellings may be the result: here the relation to distribution policy is

under consideration.

The goal of the individual rent subsidy is not to practise incomes policy via housing.

The opposite is rather the case: subsidy instruments serve to protect a sector in which necessities of life are involved against the negative effects of - great - differences in income which prove to exist and wil! continue to exist for the time being. Though the

subsidies have an income-redistributing effect which must be taken into account, it

seems to us incorrect to regard that effect as a goal.

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11 ELABORATION OF THE

INSTRUMENT AND THE

DEVELOPMENT OF POLICY

AFTER 1975

3. Elaboration of the instrument (1975)

3.1. Introduction

Apart from the filtering levy Parliament adopted the Rent and Subsidy Policy Memo-randum 1974. The foundations were thus laid for a thorough adaptation of the Supplementary Rent Subsidy Order, which up to then had been changed on minor

points only.

On 19 March 1975 Secretary of State Van Dam sent a letter to the Second Chamber (10) with which he submitted a memorandum entitled "Individual rent subsidization; convers ion of the points of departure into a subsidy tabie" , and a memorandum "Individual rent subsidization; some further thoughts". In exemplary fashion the memoranda indicate how the proposed subsidy table for period 07 (1975-1976) had been set up and how it was planned to tackle a number of problems already identified at that time, such as the progression effect (see Section 3.3.) and the sawtooth effect (see Section 3.4.)

In the description of the way in which the instrument of rent subsidy was elabora-ted, we shall for the time being take the above-mentioned memoranda as our basis and

thus the system as applied in period 07.

The principal differences between the scheme prior to 1 July 1975 and that af ter 1 July 1975 are summarized in Tabel 4 (Centra I Directorate of Housing, Jaarverslag

1975, p. 83). Before 1 July 1975 the scheme was known as the Supplementary Rent

Subsidy Order; after that date it was ca lied the Individual Rent Subsidy Order.

3.2. Percentage reductions and standard rent ratios

The system forming the basis of the subsidy table is exposed in Table 7, taken from the memorandum "Individual rent subsidization; convers ion of the points of departure into a subsidy tab Ie" . (11) By way of comparison we also present Table 5, showing the development of standard rent ratios and percentage reductions between 1970-1971 and 1974-1975, Table 6, in which Hübner and Muller (1974) show how the system was set up in period 05 (1974-1975), and Tabel 8 as uitimately applied in period 07 (1975-1976).

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Table 4: Major differences between individual subsidization before and af ter 1 July 1975

which dwellings qualify?

max. amount of subsidy max. income limit max. rental min. rental recipients of general assistance benefit spouse's income income of children living at home central heating single persons below the age of 30 2)

payment of the subsidy via the landlord

supplementary rent individual rent subsidy

subsidy

1 Apri/1974 -1 July 1975 1 July 1975 -1 July 1976 only certain categories

/1860 /22,000 no maximum /1250

do not qualify taken fully into account

taken partly into account / 240 deduction from the rental qualify not applicable in principle all rented dwellings /3360 /30,000 /5400 I) /1490 do qualify taken partly into account

not taken into account not taken into account

qualify only if they were receiving subsidy on 30 June 1975 under the sup-plementary rent subsidy scheme; a separate scheme for th is group has been announced

applicable as an

experiment in 32 designat-ed local authorities

1) This limit does not apply to the following categories:

1. old people in selfcontained (old people's) rented dwellings;

2. handicapped persons living in dwellings which have been drastically adapted to

the handicap;

3. tenants of dwellings that were restored with a subsidy from for instance the organization for the preservation of monuments;

4. particularly distressing cases;

5. tenants receiving rent subsidy on 30 June 1975 under the supplementary rent subsidy scheme who would, however, loose th is subsidy under the new scheme as a result of the rent limit of /5400 may still qualify for a grant under the scheme for

a period not exceeding three years.

2) By single persons below the age of 30 is meant single persons who have not yet

reached the age of 30, are not married or have not been married and do not qualify for an income tax allowance for children.

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Table 5: Standard rent ratios and percentage reductions in the supplementary rent subsidy 1970-1974

Income categories standard rent ratios percentage reductions

(guilders per year) 1970 1971

1972 1973 1974

1970

1971 1972 1973 1974

% % % % % % % % % % Less than 7,000 13.8 10 7,000- 8,000 14.2 12.9 12.3 15 10 10 8,000- 9,000 15.0 14 12.3 12.3 20 15 10 10 9,000-10,000 15.5 15 13.5 12.7 11.9 25 20 15 10 10 10,000-11,000 15.9 15.5 14.7 13.8 12.9 30 20 20 15 10 11,000-12,000 16.3 16 15.3 14.75 13.9 35 25 25 20 15 12,000-13,000 16.6 16.3 15.9 15.3 14.8 40 30 30 25 20 13,000-14,000 16.6 16.7 16.3 15.9 15.3 45 35 35 30 25 14,000-15,000 16.7 16.7 16.7 16.3 15.8 50 40 40 35 30 15,000-16,000 16.7 16.9 16.6 16.2 50 45 40 35 16,000-17,000 17 16.8 16.5 50 50 45 40 17,000-18,000 17 16.9 16.75 50 50 45 18,000-19,000 16.95 16.85 50 50 19,000-20,000 17 16.9 50 50 20,000- 21,000 17 50 21,000-22,000 17 50

source: Internal memorandum (No. 392-1974)

Central Directorate of Housing and the Construction Industry Socio-Economic Research Division, 7 November 1974.

A comparison of the tables reveals (in addition to the changes already mentioned in Section 2.6.) the following phenomena:

1. In period 07 (1975-1976) the income range is further extended (fromj22,000 to

j 30,000 as maximum).

2. The standard rent ratio for the minimum wage has been lowered from over 11 % to 10%.

3. The flowing trend of the standard rent ratios in period 05 is replaced by a trend represented by a straight line with a kink in it betweenj 18,000 andj 19,000 (see Fig. 4).

4. For the lower-income categories the progression in standard rent ratios increases somewhat.

5. For the minimum wa ge the percentage reduction (for rents of less than j 3600) is reduced from 10% to 0%.

6. For the lower-income categories in particular the maximum rent limit is raised considerably. On the other hand, this ceiling acquires an inexorable nature in period 07: anyone who pays more in rent gets no subsidy (in period 05 the subsidy did not increase further above the rent ceiling, but one did remain entitled to subsidy).

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Table 6: Approximation of the basis for the subsidy table applicable in period 05 (1974-1975) (according to Hübner and Muller, 1974)

Taxabie income standard standard percentage minimum maximum

rent rent

in guilders ratios Ij amount in reductions rent rent

% guilders level level

Less than 10,000 11.252 1125 10 1250 3175 10,000-11,000 12.9 1350 10 1500 3225 11,000-12,000 13.9 1600 15 1750 3225 12,000-13,000 14.8 1850 20 2000 3350 13,000-14,000 15.4 2075 25 2225 3500 14,000-15,000 15.9 2300 30 2450 3650 15,000-16,000 16.3 2525 35 2800 3900 16,000-17,000 16.5 2725 40 3025 4225 17,000-18,000 16.7 2925 45 3350 4450 18,000-19,000 16.9 3125 50 3600 4800 19,000-20,000 16.9 3300 50 3775 4850 20,000-21,000 17.0 3475 50 3975 5050 21,000-22,000 17.0 3650 50 4125 5100

1) Calculated from the category mean

2) Calculated from

f

10,000.

7. The progression in the percentage reductions remains, but the percentage reaches its maximum at 33 (instead of 50).

8. Instead of one percentage reduction two are applied. Above a rent of

f

3600 an

income-independent percentage of 35 applies.

It may thus be concIuded that, though between period 05 and 07 the range of

application of the scheme was greatly extended (to all rented dwellings, to higher incomes, with for the lowest-income categories a lower standard rent ratio and a percentage reduction of 0), the systematics of the scheme actually did not undergo any fundamental change.

It may, however, be mentioned that, through the introduction of an additional

percentage reduction and the extension of the table to a higher maximum for both rents and incomes, the system had become more complicated.

The idea behind the percentage reductions was above all to introduce the quality

of the dwelling into the scheme in a roundabout way. It was assumed that rent was

largely a reflection of quality (in rent adjustment policy, on the other hand, the

discrepancy between rent and quality was the point of departure). It was considered

fair that housing costs depended not only on income but also on quality, with the

proviso that housing costs were higher according as the quality (= rent) was higher

and with the further proviso that tenants with higher incomes feit the effect of a higher quality somewhat more strongly than tenants with lower incomes.

A second factor was that the introduction of percentage reductions could make a 24

Housing allowances in the Netherlands: Product of a conservative or progressive ideology?

HOUSING ALLO WAN CES IN THE

NETHERLANDS:

" " " l1li

"I

c

INTERNATIONAL

FEDERATION

FOR HOUSING AND

PLANNING (IFHP)

HOUSING ALLOWANCES IN

THE NETHERLANDS:

product of a conservative or

progressive ideology?

Hugo Priemus

Delft University Press / 1984

Student edition

CONTENTS

74

79

79

83

97

INTRODUCTION

I

PREVIOUS HISTOR Y AND

THE DEVELOPMENT OF

POLICY UP TO 1975

1. Previous history

1.1.

Grants to ex-slum-dwellers and depression grants (up

to 1923)

1.2.

Report ofthe Van den Bergh Committee (1926)

I

I

I

.

I

2. The development of policy (1960-1975)

2.1.

Decontrol in the Sixties

2.2.

Alozerij Committee (1964)

i

r---r~~~~~~~~~~

PriCl

J

o

t

i

.'

.'

.

,

.,

f

f

f

f

f

f

f

f

f

f

f

f

f

f

f

f

2.3.

Supplementary Rent Subsidies Order: the start

(I

970-1972)

f

f

2.4.

The Hartog Working Party and the Udink

_.'