One of the reasons why housing construction lags behind need is the scarcity of affordable building land. A parliamentary majority and the recent coalition agreement speak in favour of introducing a planning gain levy and a land tax to address this problem. The Centrum voor Onderzoek van de Economie van de Lagere Overheden (COELO) and the Erasmus Studiecentrum voor Belastingen van Lokale overheden (ESBL) investigated how these levies could be introduced in the Netherlands, and whether this will promote housing construction. On behalf of the ESBL research centre, Arjen Schep, Professor by special appointment of Local Government Taxes at Erasmus School of Law, and Robert Kastelein, scientific researcher, contributed to this research report.
The researchers conclude that a planning gain levy could (in time) be very helpful in making housing projects affordable. A planning gain levy is a tax levied on the increase in the value of land as a result of a changed use. Before construction can start, the landowner has to pay planning gain levy on the increase in land value. As a landowner starts taking into account the planning gain levy, the land price decreases. This makes housing projects more profitable. Municipalities can also use the proceeds for housing projects in which operations are then still not closed, or subsidise projects with more affordable housing or with better quality if desired.
With a land tax, landowners can be financially incentivised to develop developable land. Two variants of land tax have been studied: a general land tax and a land tax specifically on buildable undeveloped land. A general land tax also affects land that has already been built on. As a result, it is less suitable for kick-starting undeveloped construction projects. A specific land tax on building land with residential use can work. However, as it is rare for housing construction to stall for speculative reasons, this variant too will not accelerate housing construction in many places.
Both the planning gain levy and both elaborated variants of a land tax are feasible but require careful design. Introduction of a planning gain levy also requires transitional arrangements. This report deals with this in detail, thus allowing the new cabinet to start working on it immediately.
The study was commissioned by the Ministry of Finance. The report was presented to the Lower House on 21 June 2024 at the same time as the report "On land you can build" by the Interdepartmental Policy Research Working Group on Housing and Land.
