The functioning of the municipal-land market has an effect on the residential-construction market. The Netherlands Authority for Consumers and Markets (ACM) will launch a study into the municipal-land market. On the basis of a preliminary study, commissioned by ACM, professor Erwin van der Krabben of Radboud University in the city of Nijmegen argues that the municipal-land market has many shortcomings that affect the functioning of the residential-construction market.
Martijn Snoep, Chairman of the Board of ACM, explains: “On the housing market, everything is connected to everything else. However, one thing you can be sure of: you can’t build anything without having the land to build it on. We will thus launch an in-depth study into the role that the municipal-land market plays in the shortage of new homes.”
Both the municipal-land market and the residential-construction market exhibit characteristics of imperfect markets. Entry into the residential-construction market may be impeded by market power enjoyed by landowners that also develop. Land ownership is protected by law. Landowners automatically also acquire the development rights. Since only a limited number of market participants have the financial resources to take strategic positions in the municipal-land market for new residential construction, these market participants may thus gain market power. ACM’s in-depth study will focus on that potential market power. Considering the fact that the functioning of the municipal-land market and that of the residential construction market are closely intertwined, the functioning of the former market thus affects construction output. Local situations (per city or region) may differ considerably as these markets are typically local and regional in scope.
Plans on the shelf
One of the issues that ACM wishes to study in greater detail is the fact that landowners sometimes do not execute their residential development plans straight away, which are called ‘stalled sites’. It is estimated that approximately one in four of such plans are not used. What dynamics play a role in that context, and what is needed for those plans to be executed?
Residential construction: government policy and financial viability
Municipal and provincial policies affect the residential-construction market. In places where municipalities follow an active land policy, problems may arise because of the different roles that the municipality has: both the referee as well as a player on the pitch. In addition, there are limited opportunities to take financial advantage of zoning-plan changes. That may have an impact on the financial viability of residential development plans. ACM also wants to study in greater detail what government interventions could help boost construction output.
Ensuring that markets work well
ACM’s mission is to ensure that markets work well for people and businesses, now and in the future. A housing market that functions inadequately is a problem for many individuals. That is why ACM will assess whether it can play a role in ensuring that this market can function better. The preliminary study of Erwin van der Krabben, professor of Property Development at Radboud University, has given ACM reason to launch a follow-up study. With regard to the housing market, ACM is, for example, also conducting an investigation into rental websites, and has previously also taken action against unlawful agency fees.
12-11-2021 Preliminary study conducted by professor Erwin van der Krabben of Radboud University (in Dutch)