The Netherlands: how to build a million sustainable homes

The real estate challenge

Real estate activity in the Netherlands is focused upon the five cities of Amsterdam, Rotterdam, The Hague, Utrecht and Eindhoven (the Holland Metropole). These drivers of the Dutch economy share an appetite for a collaborative approach to development and driving change in the industry.

At present, however, the absence of a coherent national strategy governing housing and construction means these cities are in competition with each other for investors and resources. It is estimated that one million new homes will need to be built by 2035 through a combination of new build and redevelopment.

The housing dilemma is, in part, a combined product of historically low borrowing rates, the Netherlands’ compact size and its proud green credentials.

With 21 national parks and over 160 nature reserves in a country little more than 40,000 km² in size, the natural and built environments are forced to rub shoulders in a unique alliance.

Lately, this juxtaposition has come undone as the nation’s lawmakers have sought to enforce curbs on harmful nitrogen emissions from construction activity. The effect of this has been to put the brakes on the number of building permits being issued. This has had a profound impact in the Netherlands, which favours a traditional ‘build’ or ‘design and build’ approach to construction.

How to increase the housing supply

To fulfil the Netherlands’ huge real estate potential, regulations must be reworked. This will bring the full spectrum of opportunity within reach of developers and investors. The more entrepreneurial among them have already shown a willingness to innovate, exemplified by Amsterdam’s floating neighbourhoods, built entirely on water.

Being able to build higher in a prefabricated and modular fashion would allow for rapid expansion of the country’s housing stock and deliver quantifiable cost savings that could be passed on to the end user. It would also help to bring the concept of the 15-minute city within reach, where houses, offices and leisure facilities are within walking or cycling distance of each other.

The application of legislated smart green building technologies, targeting the creation of net zero homes, would ensure such projects are brought to market cleanly and constituted as energy efficient, sustainable developments.

With all new Dutch buildings now having to adhere to strict BENG requirements - designed to reduce energy consumption and promote the use of renewables - it must be considered an enlightened approach too.

Placing the supply chain under scrutiny reveals that local construction methodologies in the Netherlands are very traditional, and effectively highly inefficient. Those stakeholders looking beyond the country’s borders for labour and materials, or bringing to bear disruptive concepts to construction, such as Design for Manufacturing, are showing this need not be the case. Equally, those applying alternative approaches to contracting popularised elsewhere, such as the NEC 4 model, are helping to cultivate a culture of risk sharing.

The future landscape

Developers’ current energies appear to be focused on what future office space might look like when the dust settles on the COVID-19 pandemic. Along with investors, developers are seeking insights into whether enforced homeworking will have fundamentally altered the relevance and value of major city centre corporate space. Redevelopment to residential may become a more attractive proposition than new development.

Should fewer workers commute to the metropolises in future, second tier Dutch cities could also present new opportunities for investors interested in housing and flexible office developments.

The Netherlands’ fantastic infrastructure would ensure swift access to the major hubs was there when needed. New transport technologies such as the hyperloop, or the extension of the metro line to Hoofddorp will further enhance connectivity.

Equally, the ongoing demise of bricks and mortar retail, fuelled further by COVID-19, may see lessors embrace re-purposing, rather than holding out for the shop rental returns they once regularly enjoyed.

Opportunity for disruption

As it stands, the Netherlands continues to constitute an attractive proposition for multinationals, despite its small domestic market, due to appealing tax incentives, English being almost universally spoken and the common European market at its doorstep. Brexit further adds to its allure, with Amsterdam in particular reaping the rewards, having overtaken London as Europe’s biggest share trading hub in January 2021. The city also plays host to tech giants Philips, Uber, Netflix and Booking.com.

In tightening building regulations as part of a drive to go greener, lawmakers inadvertently put the brakes on development just when it was most needed. Multi-stakeholder approaches and relaxed controls around height, unit size and sensitively developing fringe greenfield sites will redress the balance and allow for swift building on an industrial scale.

With government, municipalities, developers, construction companies and end-user representatives acting as one, it will be possible to close the gap between housing supply and demand, bringing with it myriad societal and economic benefits. The real estate sector is ripe for disruption and for those with the right innovative mindset prepared to build cleaner, smarter, and quicker, the scope for attractive yields is significant.