Journalist Hans de Geus became a slum farmer. He wrote a book about his guilt about this and about the problems in the housing market. Out and about through Amsterdam-Zuidoost with a ‘salon socialist’.
For a moment, the rattle of the passing metro 54 drowns out the words of Hans de Geus. In front of the residential building in Amsterdam-Zuidoost where he owns an apartment, he tells how he used to laugh at peers who were feverishly busy with house hunting. About the friends who clung to a ‘lead mortgage burden’. In 2008, when the financial crisis broke out, the economist and freelance journalist knew himself safe from economic hardship, as a simple tenant of a canal house of the Amsterdam Stadsherstel.
The financial markets commentator was quite right on the RTL Z screen. With the housing market, as with the economy, it would go down for years to come. Until the housing market picked up again surprisingly quickly – and prices skyrocketed. Laughing was no longer possible. In fact, as a father of two young children, he fell into “existential panic.”
It was time for a desperate attempt to save his family’s financial future. Although the Netherlands was portrayed as the country of small income differences, the wealth differences increased rapidly. With the housing market as a crazy engine.
His children should not end up on the losing side of that social divide, he decided. Those dear boys, landlords’ eternal slave slave? Worker ant of the toll guards of built-up land? History must be able to take a different course, right?
His income as a stock market commentator and the money from an inheritance were no longer enough for a mortgage for a large owner-occupied home in Amsterdam. But he could borrow money for an investment home in the Bijlmer. It had to be okay with the repayment, because the rents had already risen considerably and he immediately applied for a permit for housing parts. Place several tenants in the house and the investment will pay off even more.
For example, he bought three apartments in Southeast. It got easier and easier. But he never forgot that one viewing day in 2017, when he shuffled through an apartment for sale with other interested parties. Do you see that family there, with those two children, his broker asked. “They don’t stand a chance.” That moment grabbed my throat, he says, standing in front of one of his houses. How could he justify this slum milking for himself?
It started about thirty years ago, De Geus analyzes in his book How I became a slum landlord – the result of his study of housing investment, but also of his personal struggle with the phenomenon. He points to the promotion of home ownership and the broadening of tax benefits and mortgage options for the buyer. Deregulating banking and rampant home loan growth. Add to that the liberalization of the rent and the picture is clear to him.
Today’s housing market is the poisonous fruit of the conservative-liberal belief in the blessings of a free, self-regulating economy and small government. Even the low interest rates, which have caused house prices to explode, can be traced back to this line of thought. The housing boom is the nasty and disruptive result. The promise of freedom and prosperity has only been fulfilled for a small group; those who got on the real estate train on time. The rest stayed behind on the platform – for example the self-employed who are struggling with their income, insurance and pension in a liberalized labor market.
The government itself also has a hard time with it, such as the municipalities. They had to keep up their own pants. Of course they use their land as a money machine, De Geus sees. They prefer to sell that land for expensive private new construction, for which the buyers will also pay property tax. A corporation can pay less for the same land and will probably also attract more social tenants to your municipality – who more often rely on other forms of municipal support.
The housing costs of the Dutch are now among the highest in Europe. This certainly applies to the youngest entrants to the housing market, who rent from private individuals in the major cities. They pay half of their income in rent. If saving is successful, house prices will rise even faster. As if they were walking up a descending escalator, their owner-occupied home remains out of sight – a typical imagery of De Geus.
It is becoming easier for housing investors, he now knows. Due to the liberalization of the rental market they can demand more rent. Financing costs have fallen, thanks to the historic decline in interest rates. So on a viewing day in Amsterdam-Zuidoost, an investor whistles to beat that one family that is also interested in that owner-occupied home. He cannot buy the house, but may then have to rent it.
De Geus waves to the young tenants who have a drink in the evening sun on his balcony. He does not know them, the contacts all go through a broker. It is precisely young people who go house hunting without the support of wealthy parents who already sensed the dichotomy, he says. We did not realize it for a long time due to reassuring reports about the low income differences in the Netherlands, but a new caste of wealthy people has emerged, a group to which he wants to belong thanks to his investment offensive.
They are people with their own homes or real estate entrepreneurs, who see the value of their property increase and pay hardly any tax on all that profit. In our flexible service economy, they allow themselves to be pampered by the hopeless caste, writes De Geus in his book, which has to sweat to afford the high rents.
In the housing market, these young people have to compete not only against wealthy older people, but also against rich peers. They outbid them with the help of their jubilee net, the 100,000 euros that a parent can donate tax-free to a child for the purchase of a home. Those who stay behind can choose: are they going to pay rent to such a parent with an investment property or to their fellow millennial?
This inequality will only increase, De Geus expects. Due to the unregulated trade in real estate and land and the free pricing in the rental sector, but also due to the low taxation for the property owner. The young slumlord himself does not owe any tax on his rental income – which he receives privately – and the increase in value of his rented houses. If he sells it again, he puts any profit in his pocket untaxed.
In addition, inheritance tax in the Netherlands is relatively low, while income from work, work that benefits the world, is heavily taxed. For example, according to De Geus, there is hardly any social correction to the rapid capital growth due to property ownership. The children of tenants will soon pay their rent to the children of the landlords. Housing inequality passes from one generation to the next. More housing poverty leads to more inequality and vice versa. And so we all end up losing out, because the more unequal the society, the poorer.
A For Sale sign hangs on a facade around the corner. That apartment will soon be gone, De Geus expects. At the bottom of the pyramid, a new group of buyers is always presenting themselves, who continue to feed the rise in house prices to the top. If the machine stutters for a moment, De Geus sees that the mortgage standards are again adjusted upwards, such as the increase in the loan amount for a working couple. He thinks that we will have to wait for a correction to house prices for a generation that can no longer or will no longer pay those prices. Or on a sale of big houses after the death of the baby boom generation. Perhaps that will result in a price drop and a small correction of the housing poverty.
It is actually time for a kind of money purge, as in 1945, when the then cabinet wanted to get rid of the profiteering from the Second World War. But above all, start as soon as possible by limiting the financing options, reducing the transfer tax from 2 to 6 percent, also for starters, and above all, taxing assets and inheritances much more heavily.
That is much more important than the call to build-build-build. We confuse expensive housing with a shortage of housing, says De Geus. Of course, the demand is high and we can build a lot more, especially in the cities. But prices rose especially when financing options were expanded. There will always be a demand for more and bigger. Cheaper industrial construction is fun, but it only makes the underlying ground more expensive, relatively speaking. House prices will not fall as a result. We just borrow and pay as much as we can.
With his book and his plea for reform, he has now been able to curb his feelings of guilt as a home investor. Of course he is that salon socialist, who can be blamed for being a good dick on the left, but in the meantime filling his pockets on the right. But does his heartfelt call for more taxation not cut his own flesh – and does that not make his call extra convincing, perhaps even a little noble?
Moreover: all pension funds invest in homes, so in fact we are all slum landlords. Can you ask a hard-working self-employed person to refrain from doing so on ethical grounds? He is not going to change the system by setting himself up as cannon fodder. In the end, he prefers to sit at the table rather than be served as a snack.
Before walking away to the metro station, to return to Amsterdam-Center, Hans de Geus remembers that one comment from his purchase broker, then on that viewing day. He made short work of his doubts with a striking remark: “Well, it’s a tough world.”
How I became a slum lander. About inequality and housing poverty. Hans de Geus; World Library; 288 pages, 20 euros.