Why are houses so expensive? And why subsidies might not help

15 April 2026

Why are homes in the Netherlands so expensive? Do subsidies for homebuyers actually help or do they make things worse? UM’s School of Business and Economics’ Max Löffler has some uncomfortable answers.

“Housing is back,” says, Max Löffler, Assistant Professor in the Department of Microeconomics and Public Economics at Maastricht University's School of Business and Economics. He explains that, while the housing market was even declining after the financial crisis in 2008, prices have risen sharply in recent years. For most people, this means higher rents and house prices relative to income. Consecutive governments have pulled several policy levers to solve this problem — with mixed results.

Housing policy is more complex than you’d think

“The policy solution is far from clear,” says Löffler. The problem is further complicated by heterogeneity. “While the Randstad has become prohibitively expensive, you can still buy a home in South Limburg, but there too it really depends on whether you’re looking in the centre of Maastricht or in, say, Kerkrade.”

Löffler himself is from East Germany, and buying a home has never been on his radar before coming to the Netherlands. “In the Netherlands, it seems to be most people’s ambition to own a home, but if you take a step back, you have to wonder if it is the best investment for everyone. Do you have enough money? Would you be better off investing money in stocks?”

Löffler points out what is obvious but also often overlooked: you are tied to your home in a way you aren’t to other investments. “There’s a lot of risk there. You might have to move for your job; you constantly have to renovate and invest into the house.” On top of that, there are a lot of upfront costs for buying a home, from downpayment to taxes, estate agents, and notaries. Yet, homeownership remains a prevalent aspiration, and several policies have been put into place to allow more people to achieve it.

Hypotheekrenteaftrek: (how) does it work?

Take the Dutch Hypotheekrenteaftrek: 47 scrabble points, and a fiscal policy allowing homeowners to deduct mortgage interest payments from their taxable income, reducing the amount of income tax they owe. In principle a lovely idea, because it keeps mortgage payments affordable and allows people to spend more money on buying a home.

“You have to look at who actually benefits from these policies, and what effect they have in practice. A study in Denmark on a similar policy found no change in the homeownership rate, which would have been the intended outcome. They did, however see a decrease in prices once the deduction was cut back.” The policy, in short, heated up the housing market without making it more accessible.

“Supply in the housing market is rather fixed, so policies that create additional demand drive up prices.” A large chunk of Dutch homeowners decided which house to buy based on what e.g. the hypotheekrenteaftrek afforded them. “Once you are on the property ladder, you are locked into a system; property prices factor in all those policies.”

“Supply in the housing market is rather fixed, so policies that create additional demand drive up prices.”

Max Löffler

Startersvrijstelling: benefitting first-time buyers?

A policy Löffler currently researches with an NWO grant is the startersvrijstelling, a tax exemption for starters in the real estate transaction tax, which typically amounts to 2% of the property price. “To help the young enter the market, the government decided to scrap that tax for buyers under 35.” Löffler and his coauthor, UM PhD student Jonas Wogh, compared similar people on either side of the 35-year age cutoff, and found a significantly higher transaction volume among the younger cohort.

A successful policy then? “Well, the transaction volume went up, but not the ownership rate. It likely was a retiming effect, something you often see in such cases.” Buying a house is usually a well-deliberated, long-term decision. People likely waited for the tax-exemption to take effect in January 2021; they simply deferred their decision to buy. “At the same time, many rush to buy before turning 35. Overall, there’s no data to suggest that anyone was convinced to buy — rather than not doing so — just because of the tax exemption.”

Still, at least it benefited those buyers? “The sellers, obviously, were also aware that people under 35 looking for a typical starter home would have a little bit more money to spend.” And thus, the market took its course. “The preliminary findings suggest a significantly stronger price increase in the segment below €400.000, so those homes eligible for the startersvrijstelling. We’ve found that 60-90% of the tax exemption ended up in the sellers’ pockets.” In the end, this policy too caused higher house prices.

Someone ends up paying — why tax isn’t a bad thing

While lower taxes always sound great, this also means less money for the state to spend on its citizens, from healthcare to education or infrastructure. “For the startersvrijstelling, that’s about €20 annually per adult to foster home-buying among those who would have done so anyway. You have to consider that someone always pays — it’s about deciding who pays and who benefits.”

And that is where things get a little troubling. “Effectively, this policy benefits repeat buyers, in particular those selling their starter-home and trading up.” Intended or not, the policy is a surreptitious subsidy for the upper middle-classes, those who have enough money to benefit from the policy, either as buyers or sellers. Whether intended or not, it would not be politically expedient to communicate it as such.

“This tax exemption does nothing for the poorest, who care about shelter, rather than about becoming homeowners. They might benefit from more social housing or income tax reforms targeting the low-income segment.” In his research, Löffler is agnostic about the aims of policies. “As a scientist I don’t endorse a political opinion; I just measure if policies achieve their stated aim, and try to make people understand that there is always a trade-off.”

Does ‘home’ mean shelter or a place of belonging?

So how could the housing market be improved? “Of course, you can’t flick a switch and reform the housing market, but we could decrease subsidies over time. Phasing them out would benefit society as a whole, but might disadvantage some individuals. Net-of-tax interest rates would go up, but what the state saves could go towards e.g. lowering income taxes.”

Still, that would be politically problematic, since our intuitions around housing somehow deviate from those around, e.g. clothes. Shelter is a human right — but is location? Intellectually, the answer must be no, but it seems cruel to have people displaced or locked out by market dynamics. “Take the Randstad: it makes sense for a country to have a cluster of smart, enterprising people, but not everyone can live in downtown Amsterdam. The question is to what extent we want to subsidise that.”

Similarly, protecting sitting residents seems inherently fair, but comes at the expense of those trying to enter the housing market. “You could, and arguably should, protect the renters and prospective home buyers of Amsterdam by making it more expensive for tourists to visit — but even that will have effects on the job market and possibly those same Amsterdammers.” The housing market, it seems, is set to keep heating up — and to be a place of uncomfortable trade-offs.

Text: Florian Raith

“You have to consider that someone always pays — it’s about deciding who pays and who benefits.”