Alternatives for first-time buyers

Abstract

The Netherlands has been in a serious housing crisis for the past few years. The current housing shortage is estimated at 315.000 units and house prices have increased significantly. Especially first-time buyers experience a decrease in accessibility to the Dutch owner-occupied housing market, and their position on the housing market deteriorates. The government has implemented several regulations in attempt to increase this accessibility, and organizations have introduced alternative purchase instruments that are designed to increase the accessibility of first-time buyers to the market. Despite all these efforts, access to the housing market remains a serious challenge for first-time buyers.
The accessibility of first-time buyers to the owner-occupied housing market is highly relevant to the functioning of the housing market as whole, since it stimulates the housing market flow. Additionally, the inaccessibility to the owner-occupied market results in households not being able to build equity through homeownership, stimulating a prosperity gap. Although studies have researched the position of first-time buyers on the housing market, as well as provided a comparison between several alternative purchase instruments, there is a lack of research on how these instruments enhance the accessibility of first-time buyers to the housing market and which factors form a barrier in this enhancement. Therefore, this research identifies the factors limiting the access of first-time buyers to the housing market, and establishes through a comparative study the enablers and barriers of four alternative purchase instruments in the Netherlands with regard to enhancing the increase in the accessibility. The identified barriers are transformed into suggestions for alterations of the alternative purchase instruments to increase the impact they have on enhancing the accessibility of first-time buyers to the market. Literature study on first-time buyers, their limitations, and alternative purchase instruments in the Netherlands was complemented with interviews, providing several perspectives on the alternative purchase instruments. The main limitation of first-time buyers in acquiring homeownership is their limited financing capacity. The group of first-time buyers with an income between €40.000 and €60.000 (equal to 1 –1,5 modal income) experience the greatest limitations since their income is too high to be eligible for social rent, but too low to get access to enough financial resources to purchase a property on the owner-occupied housing market. The analysis of the empirical data shows that on the small scale that the instruments are currently deployed in, they are successful in increasing the accessibility of first-time buyers to the housing market since they lower the necessary funding capacity. However, the deployment capacity of the instruments is being influenced by external factors, limiting the ability to increase the deployment capacity of the instruments and therefore the impact on the increase of accessibility of first-time buyers. By making a purchase instrument individual bound instead of property bound, the deployment capacity is no longer dependent on the supply side of the housing market. This also lowers the desire to apply an instrument to the same property for multiple households, allowing households to pay off the instrument’s rights and acquire the bare property rights. Finally, the division of financial benefits should be in equilibrium, meaning that the financial benefits should be high enough on the supplier’s side for the instrument to be viable, but also on the user’s side since financing capacity is the main problem these instruments try to tackle.