Economic update of the Netherlands: New legislation as of July 1

The Netherlands implements new laws at the beginning of each year and in July. Below we highlight some of the legal changes that came into effect as of July 1, 2024, specifically those pertaining to economic topics.

The Dutch housing market remains tight. In June, the residential price index continued to increase by 1.3%, compared to May (see figure 1). Compared to the same month one year ago, prices of existing owner-occupied homes have gone up by 9.7%. We expect that prices will continue to increase in the remainder of 2024 and 2025, driven by a lack of supply and rising wages. Though housing construction is recovering from the cooldown that followed the rise in interest rates, the number of issued building permits remains below the long term average (see figure 2).

In order to keep housing affordable, the government capped rents in a large part of the (previously) unregulated rental sector. However, this cap applies only to new contracts. The government also put an end to fixed-term rent contracts. New rent contracts have to be indefinite as of July 1, 2024, with only a few exceptions. Another regulation that came into effect is that housing associations wanting to sell an accommodation have to first offer it to the current tenant before offering it to someone else.[1]

[1] Housing associations in the Netherlands are organizations that rent or sell houses and are responsible for the social housing sector.

The labor market is also tight. Even though the number of bankruptcies is back at pre-Covid levels and a large employment agency in the Netherlands recently reported (Dutch) a turnover decline for the sixth quarter in a row, the unemployment rate remains low (see figure 3). The amount of unfulfilled vacancies also continues to exceed the number of unemployed people and a shortage of labor remains the most reported restriction to businesses (see figure 4).

One of the sectors struggling with labor shortage is the childcare sector. As of July 1, the quality requirements for people working in childcare have been lowered in order to reduce their workload. This means that trainee professionals who have just completed their first year of education can already be employed as permanent staff members, for instance.

Related to the labor market, there is also the raise in minimum wage and some social security benefits, such as the National Old Age Pensions Act, for people past their pension age, and the Social Assistance Benefit, which guarantees a minimum income for Dutch citizens. However, this is not a new regulation, as these are raised twice a year. The minimum wage and social securities are being raised by half of the average contractual wage growth. Contractual wages continued to increase in June by 6.6% year-on-year. The rise in contractual wages positively contributes to the real disposable income of Dutch households. However, consumers were slightly more pessimistic in June compared to May, and consumer confidence has not been positive since January 2019. This probably has to do with Covid-19 and the recent historically high inflation. Dutch inflation (harmonized CPI) increased in June to 3.4% year-on-year, mainly caused by a rise in core inflation.

Besides regulations affecting the housing and the labor market, some new regulations directly impacting businesses also took effect. For instance, supermarkets and the hospitality sector, as restaurants and cafés, are no longer allowed to sell any tobacco related products and e-cigarettes as of July 1. We expect this prohibition will cost supermarkets about EUR 1.5 to 2 billion in turnover in 2024 (see our sector forecasts [Dutch] ).

Finally, there are some new regulations related to the environment. For instance, plastic caps have to remain attached to the bottle, even when these are opened. This ensures that the caps are also getting recycled and do not end up in waste. The regulation was actually set by the EU and also applies in all other EU countries. Another act related to the environment concerns new reporting obligations for firms with a workforce larger than 100 people. They have to report the distance and the vehicle of their employees’ commute, in order to map the CO2-emmissions and to see if and how these can be reduced.