Two myths about Dutch housing construction

Given current demographic forecasts, the Netherlands is expected to need approximately 1 million additional housing units over the coming 10 years. That seems to be a challenge, especially so since housing construction over the last five years has averaged about 60,000 units, or just over half of what the country needs for the years to come. In societal discussions about this, one often hears that an annual constructing of 100,000 dwellings is impossible, among other due to lack of construction workers. But others say that the market will solve this. Neither position is based on facts.

Graph Housing Construction

As always, our graph of the week provides the facts. First, the thick blue line in the graph shows that we’ve done it before: between the early 1960s and the early 1990s, annual production of new dwellings in the Netherlands was between 100,000 and 125,000. The thin red line shows annual construction employment. While that employment has not been constant, it has hovered around 500,000 jobs throughout that period. And it still does! So to get back to the housing production levels we have been used to for 30 years, the current construction workforce should be able to do the job, in principle.

On the other side of the debate, a popular myth is that market forces alone will get us out of the housing shortage. The graph suggests that this too, is questionable. For example, starting in the late 1990s, rents have been progressively liberalized, based on the idea this this would create a strong market incentive to build. Unfortunately, new construction during this phase of market liberalization has fallen, rather than increased. This was also the period in which the central government devolved planning policy to provinces and municipalities, after having created five consecutive spatial master plans between the 1960s and 1990s. As the graph shows, the era of these master plans coincided with mass construction, which has since fallen. It seems that a central government hand is needed if we want to get back to the housing construction levels the country needs.