The fact that young couples can no longer buy a house without the help of their parents and that an affordable, decent rental home is becoming increasingly unattainable has become an old problem. “But the striking thing is that the middle class is now also coming under pressure,” says Professor Johan Albrecht (UGent). He calculated who can still afford a rental or owner-occupied home today and how much budget Flemings have left after they have paid their housing costs.
How bad is the current situation with affordable living in Flanders? prof. Johan Albrecht (UGent and Itinera) calculated to what extent the extreme energy prices, the record inflation and rising interest rates of 2022 threaten affordable housing for families.
Prof. Albrecht based his calculations on the average net income per group of 375,000 fiscal households.* For each average family income, he examined to what extent the increase in housing costs put pressure on the budget.
A higher income after indexation partly compensates for the increased rent, but then there is the increase in the energy bill and the bill for the shopping cart.
Renting: who is in the danger zone?
For those who rent, he calculated how much of the income remains after paying the rent and consumption costs. Not much, it turns out, for the lowest family incomes. With a rent of 725 euros per month (the average rent at the beginning of 2020) and 150 euros in consumption costs, the average incomes of 1,122 and 1,476 euros leave only 22 and 41 percent of the monthly income, respectively. Less than the 60 percent that is needed to live a worry-free life.
With a rent of 800 euros per month with 250 euros in consumption costs (the current average rent after a year and a half of the energy crisis), an additional group is in the danger zone, those with an income of 1,772 euros per month.
“Wages also rose during the energy crisis, partly due to indexation. A higher income after indexation partly compensates for the increased rent, but then there is the increase in the energy bill and the bill for the shopping cart. Renting a very energy-efficient new-build apartment is not cheap, but you will enjoy a low energy bill.
In addition, there are also many old, energy-intensive homes in the rental market. In the second half of 2022, we were confronted with exceptional energy prices. Anyone who considered renting such a house and started looking for an energy contract had to fear an energy bill that would be much higher than roughly 250 euros per month. This makes living in such a house very problematic in practice, even when the rent itself may be better than expected.
Fortunately, energy prices have fallen sharply since then, but they are still more than twice as high as in 2020. It remains striking that affordable housing is now also coming under pressure for part of the middle class,” says Prof. Albrecht.
Buying: new construction vs existing home
Buying is also becoming more difficult for more and more families. In the case of new construction, the higher interest rate and the stricter credit conditions as a result of inflation in particular throw a spanner in the works. Without their own input, a semi-open new construction project now appears to be feasible for only 11 percent of Flemish families (fiscal households), compared to 16 percent when interest rates were still low. The dream of your own small new apartment (less than 75 m2) is now only 28 percent accessible, compared to 32 percent before.
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An existing home? In addition to the higher interest rate, the higher energy consumption of older homes and the renovation obligation introduced from this year also have an impact there. The purchase of an existing terraced house/semi-detached house with a median price of 295,000 euros is only achievable for 24 percent of the families without their own input. Before the rise in interest rates, 32 percent of households were able to finance this purchase. For households with a personal contribution of 75,000 euros, accessibility fell from 45 percent to 35 percent.
New instruments
prof. Albrecht undertook his study at the request of the construction federation Embuild Vlaanderen, which makes a number of proposals to the Flemish government to make affordable housing possible for all Flemish families by 2034. One of their conclusions is that the supply of homes for vulnerable households needs to be expanded considerably. With this, Embuild Vlaanderen is responding to Minister Diependaele’s plans to give investors a subsidy if they realize high-quality, energy-efficient rental homes that are affordable for vulnerable families.
In addition, new instruments such as a subordinated loan with deferral of payment should enable the increasingly difficult middle class to cope with a lack of sufficient own resources. After all, repaying a mortgage loan is often the most difficult in the first few years. Young families in particular could thus realize their project more quickly and thus immediately benefit from an energy-efficient home and therefore low energy consumption.
Fewer owners means additional pressure on the rental markets. Vulnerable households are particularly affected by this.
Smoother permit procedures
“It is very important to maintain the ownership percentage in our country,” says Marc Dillen of Embuild Vlaanderen. “Because fewer owners means additional pressure on the rental markets. Vulnerable households are particularly affected by this. After all, the owner-occupied and rental markets are communicating vessels.”
Embuild Vlaanderen also advocates smoother permit procedures, sufficient supply and space for housing and a dynamic densification policy that takes the social costs into account. An observing, multidisciplinary committee with stakeholders and experts should monitor the various parameters for affordable housing and adjust – now often contradictory – interventions in a timely manner.
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*The most recent tax incomes date from 2020, newer figures are not yet known.
prof. Albrecht divided the total number of taxable incomes into ten groups of 375,000 taxable incomes each, of which he divided the average annual income by 12. He then examined the average net taxable monthly income to see how heavily the pressure of average housing costs weighs on it.
He did not take the first decile into account because it includes almost all student workers and people who earned very little in 2020 for various reasons, for example young people who graduated in September to start their first job in November. Very specific profiles, therefore, who probably do not want to rent or buy right away.
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