Housing affordability in the Netherlands: the impact of rent and energy costs

Abstract

Energy costs have been rising as well as rents, both in the Netherlands and elsewhere, leading to situations commonly described as ‘housing poverty’ and ‘fuel or energy poverty’. A dwelling may be unaffordable on at least two counts: rents or energy costs that are ‘too high’ in relation to income (excluding cases of ‘too low’ income). This paper measures comprehensively for the first time housing affordability of tenants in the Netherlands with respect to rent and fuel in order to gain insight in the ways this ongoing budgetary commitment can be calculated. Starting point is the expenditure-to-income ratio, which is usually used in the Netherlands to represent the affordability of housing consumption. For 2012 its components—incomes, rents and fuel costs—are separated out. The absence of a socially acceptable benchmark for ‘affordable’ versus ‘unaffordable’ housing and the fact that lower-income households pay relatively more on rent and energy than those with a higher income (Engel’s Law) call for an alternative method to measure affordability. The residual income approach is shown to be useful in identifying households with housing and energy affordability problems, once social norms have been established for the relationship between income, rent and energy expenses. It is concluded that even energy expenses by themselves can push households over the affordability threshold, in the situation where rents are considered as affordable.