FOCUS

Keypoints

Middle rental essential part of Dutch housing market
Segment matches long-term ambitions of institutional investors
Regie-act restricted supply of medium rental
Stability in policy desirable to maintain new construction

Introductie

After years of uncertainty, the Affordable Rent Act was introduced in mid-2024. This gave investors clarity on the regulation of the rental housing market and a new rental segment was created with the middle rent. However, the recently passed bill Strengthening Public Housing Regulation in the House of Representatives seems to put further pressure on the middle rent. This ignores the importance of medium rental for the Dutch housing market and the role that institutional investors aspire to in this segment. Indeed, despite the often challenging business case, mid-tenancy fits perfectly in the long-term objectives of Dutch institutional investors. In addition, mid-rent properties play an important role in maintaining facilities in the big cities, which means institutional investors also contribute socially.

The high demand in the middle segment

In accordance with the Affordable Rent Act, a middle rented house has a rent that is between €900.07 and €1,184.82 (price level 2025). This corresponds to the maximum reasonable rent belonging to 144 and 186 WWS points and thus lies between the social and free sector. There are around 410,000 medium-rent homes in the Netherlands (source: VRO, 2025). These are rented out by corporations, private investors and institutional investors. Within the housing portfolios of institutional investors, more than 60 per cent are medium-sized rental homes.

The primary target group of the middle rental sector is the nearly 4 million middle-income households in the Netherlands. Middle-income households have a gross income between the income threshold for social rent (€49,669 for single-person households, price level 2025) and €89,821 (for multi-person households). Especially in stressed housing markets, the gap between market prices and the amount that middle-income households can actually pay, both for rent and for sale, is large. This is despite the fact that the housing ratio has improved in recent years in both the owner-occupied and rental sectors.

To illustrate, a household with a gross joint annual income of €60,000, comparable to the average salary of a full-time primary school teacher, can get a mortgage of around €260,000 or pay a rent of around €1,400. This is much lower than median purchase and rental prices in cities like Amsterdam (2025) of €560,000 and €1,925 respectively or The Hague of €434,000 (purchase) and €1,670 (rental) (W+H, 2025). Middle-income households struggle to find housing in these housing markets and have to move far outside the region where house prices are more affordable.

"Middle-income households find it difficult to find housing"

The recently published Woon2024 survey shows the high demand for rental housing above the social rental threshold. Of the 1.8 million households in the Netherlands who are actively looking for a home, 14 per cent want a rental home above the social rent boundary, while nationwide these homes make up 10 per cent of the stock. Since this statistic has been kept (since 1998), this percentage has not been this high. In regions such as Amsterdam, Utrecht and The Hague, the housing desire for a rental home above the social rent limit is even higher than the national average at 17 per cent. We also experience this high demand for (affordable) rental housing in practice. For the various new construction projects put on the market by Achmea Real Estate in recent years, there was very strong interest. Thousands of interested parties for just a few dozen properties are no exception here. This is also visible in the vacancy figures from the Dutch residential portfolios of institutional investors, which have been at a historically low level for several quarters now at around 1.5 per cent (source: MSCI).

HOUSING PREFERENCES ACTIVE SEARCHERS

Source: WoON 2024, edited by Achmea Real Estate

Photo: Middle rental housing in Utrecht (Rijnvliet)

Importance of middle rent for society

Middle-rent homes are mainly intended for households that earn too much for social renting, but too little to buy a home or afford a rental property in the free-sector rental market. Due to several reasons, it is of social importance to provide middle-rent housing:

Housing for key professions

Middle rental offers solutions to the shortage of key occupations in major cities. By giving priority to key professions, teachers, healthcare staff or police officers, for example, can live closer to their jobs. This makes it more attractive for these professions to work in the cities and does not put pressure on essential facilities in the cities.

The importance of mid-rent is also endorsed by municipalities and provinces which, in the 2022 Housing Agreements, are devoting a large part of the new-build task to mid-rent. Out of the total number of houses to be built in the Woonakkoord of the G5 regions from 2022 to 2030, 22 per cent were middle rented houses (source: Ministry of the Interior and Kingdom Relations, 2022). Municipalities benefit from a large stock of mid-rent homes so that enough workers can be attracted to maintain essential facilities such as healthcare, education and security.

Flow in the housing market

The provision of mid-rent homes gives middle-income households the opportunity to move on from social rented housing. This frees up social housing and can shorten waiting lists for low-income households. As a result, mid-rent homes are an indispensable link in the housing market.

Flexible housing market shell

Rental housing in general offers households flexibility. In case of changes in family composition or relationship, rental housing offers a temporary solution.

Besides, apart from a deposit and moving costs, a rental property does not require savings for purchase costs and renovation. Young people in particular change jobs relatively often and are therefore less tied to a location, in addition, young people have a greater need for flexibility ánd often insufficient savings to buy a house. Therefore, we see mainly young people up to 35 years of age moving to a mid-rent house (source: VRO, 2025).

Rental housing is important for the economy

A shortage of rental housing hampers labour market flexibility. Without available (rental) housing, workers are less likely to accept a job far from where they live. International labour migration is also hampered by a shortage of rental housing when expats, due to an often temporary first position in a country, do not want to commit to an owner-occupied house.

Institutions such as the IMF, DNB and OECD as well as several professors previously concluded that Dutch housing market policy is too focused on the owner-occupied sector and social renting. Among 41 OECD countries, the Netherlands has by far the largest social rental sector (36% vs. 8% OECD average) and all but six Eastern and Central European countries have the smallest free rental sector. This limits the share of medium- and free-sector rental housing internationally and hampers housing seekers' freedom of choice.

STRUCTURE OF THE HOUSING MARKET

Medium rental: stable returns, high impact

The median rent is in many cases well below the market rent, especially in strong rental markets such as in the G5. Because the foundation cost of a mid-rent property hardly differs from a regular rental property, the initial yield is dozens of basis points lower than a rental property in the free sector. The new construction surcharge of 10% in the WWS system mitigates this difference somewhat. Still, the permitted rent often remains much lower than the market price. At first glance, investing in a mid-rent property therefore appears to be financially unattractive.

The reforms to the Affordable Rent Act announced in mid-2025 by Minister Keijzer are intended to improve the business case for the middle rented sector by, among other things, giving a heavier weighting to the WOZ value in the number of WWS points a middle rented property receives. This proposal is mainly prompted by the harsh decline in the number of mid-rent homes in the Netherlands due to many private investors selling their rental properties, mainly for tax reasons. However, political support for this proposal is uncertain, making the business case challenging.

However, a number of elements make investing in mid-rent housing interesting for institutional investors:

Attractive risk-return ratio

First of all, despite the relatively low rent level, mid-rent homes have an excellent risk-return ratio. Historical performance in the MSCI index shows that medium-rent housing has a slightly higher long-term total return compared to social and free-sector rental housing. In addition, the Sharpe ratio (on a 20-year basis) for social rental and middle rental is over 10 basis points higher than free-sector rental.

At the same time, the operating risk of a mid-rent investment is also much lower. Returns are more predictable due to fixed rental streams and are indexed at least with CPI. In addition, the operating risk is much lower than the freehold segment, which is also reflected in the development of the vacancy rate. Currently, there is hardly any vacancy in all segments due to the housing shortage and stable economy. Before and during the financial crisis (from 2009 onwards), things were very different. Back then, the vacancy rate in the segment above the mid-rent threshold was many times higher than mid-rent properties. During the Covid-19 pandemic, we also saw an increase in vacancy in the upper segment as expats stayed away. In the mid-rent, the impact was much less. So the middle segment is less vulnerable to cyclical fluctuations.

Given the large target group, it is also Achmea Real Estate's expectation that the vacancy risk of mid-rent housing remains low. With this, it also fits into the long-term horizon adopted by institutional investors.

AVERAGE TOTAL RETURN

Source: MSCI (2025), edited by Achmea Real Estate

VACANCY RATE PER RENTAL PRICE SEGMENTATION

Source: MSCI (2025), edited by Achmea Real Estate

Upward potential

There is also upside potential in the values of mid-rent homes. Many middle-rent projects, in addition to national regulations, have been restricted by municipal regulation for several years. As a result, the initial rent of this property is often set for a specific period of time of usually 15 to 25 years, in addition, the property cannot be priced out during this period. When the end of this period approaches, a jump in returns can be realised. This is because both the higher mutation rent and the possibility of pumping out ensure a higher value of the property. So in the short term, the return is depressed by the restrictions, but once the end of these restrictions is in sight, a jump in value can be benefited.

"By investing in middle rental housing, pension money can be used to solve the housing shortage in the Netherlands."

Social impact

Besides a stable financial return, mid-rent homes are an excellent fit with the social responsibility taken by institutional investors. By investing in mid-rent homes, pension money can be used to solve the housing shortage in the Netherlands. Mid-rent homes will thus become available to middle-income earners, which also includes members of large pension funds. In addition, this can improve the flow in the housing market. In doing so, institutional investors make a positive social impact. In the short term, the investment volume in healthcare real estate is expected to remain relatively stable. The rise in interest rates and high inflation seem to be over, contributing to a more stable investment perspective. It now remains to be seen how investors and initial yields will react to these developments. With the possible stabilisation of initial yields, conditions seem to be improving for non-Dutch institutional investors to slowly get involved in investment activities again in 2024. A delaying factor for recovery is the limited availability of investment projects, especially as healthcare institutions also seem to be partially stalling for other reasons. Nevertheless, underlying demand from the user market remains strong, and good projects can be attractive long-term investments for investors on market terms. For these projects, competition between investors is fierce.

Photo: Middle rental housing in Amsterdam (Justus)

Legislative proposal limits supply of mid-rent

In July 2025, the bill Versterking Regie Volkshuisvesting (Strengthening the Management of Public Housing) was passed in the House of Representatives. The bill should give governments more options for steering the numbers, types and locations of future housing construction. Here, of the 100,000 new homes to be built annually at regional level, two-thirds must be affordable, 30 per cent of which must be social housing. Through a motion, a further requirement was added that 25 per cent must be affordable owner-occupied housing (up to €405,000). One-third remains for the free sector. The latter part is free to be filled in between renting and buying. Because the vacant values of houses are currently about 25 per cent higher than the market value in rented condition, it is obvious that a large part of this share will go to the owner-occupied sector.

Of the 66 per cent affordable housing, 30 per cent will go to social and 25 per cent to affordable buy. This leaves only 12 per cent left for middle-rent housing in each housing deal region. The demand for mid-rent homes is highest in the G5 and some other big cities so the restriction to 12 per cent will be felt here in particular. The exact details of the motion have yet to be worked out but the maximum number of mid-rent homes that can be programmed is expected to fall by 30-50 per cent to less than 10,000 homes per year. This is if the full housing ambition is met, something that has failed in recent years.

DISTRIBUTION REGIONAL HOUSING PROGRAMMING IN REGIE-ACT

Source: Ministry VRO (2025), edited by Achmea Real Estate

At the same time, during the National Performance Agreements, housing corporations committed to building thousands of mid-rent homes per year, rising to 5,000 mid-rent homes annually from 2030. To this end, housing corporations will be helped by upcoming European policies that will allow the provision of state support for the construction of mid-rent. This will allow housing corporations to secure loans for the construction of medium-rent housing. However, the task of housing corporations for new construction and sustainability of social rent is already large so it is questionable whether housing corporations will save the middle-rent target.

Institutional investors, on the other hand, have in recent years expressed their intention to invest billions in affordable rental housing in the Netherlands. According to a survey by Capital Value, institutional investors would like to invest €12.7 billion in Dutch rental housing from 2025-2027, largely in new construction. This would amount to around 13,000 rental homes per year, the majority of which would be in the mid-rent sector. For institutional investors, the Regiewet means that opportunities to invest in medium-rent homes will be limited to a few thousand homes per year, especially in the stronger housing regions. This while willingness to invest has grown sharply in the past year. Consequently, by 2025, institutional investors have already invested heavily in medium-rent homes. Achmea Real Estate alone has already committed on behalf of its clients to more than 2,000 rental homes by 2025. The majority of these fall in the middle rental sector.

Conclusion: stability desired

Achmea Real Estate has been investing in regulated middle rental on behalf of its institutional clients since 2018, well before the Affordable Rent Act came into view. It shows that mid-rent has been fitting into institutional investors' portfolios for years, helping them achieve affordable housing. Although the risk-return ratio for investments in middle-rent housing is currently good and investment appetite high, there remains a lot of uncertainty in the rental market with regard to regulation. In the upcoming national and local elections, the housing market will again be an important issue. In this respect, it is important to remove uncertainties as much as possible and maintain institutional investors' willingness to invest in the middle segment. Institutional investors have a long-term horizon, which requires a stable policy. Minor adjustments to laws and regulations are sometimes necessary to update existing rules and keep them workable. But restricting investment options, as in the Regulation Act, create uncertainty that could worsen willingness to invest in new-build rental housing. As a result, billions of available Dutch pension money for the construction of (middle) rental housing risk flowing away to foreign property markets.

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