Is affordable still feasible?
These days, we all know someone looking in vain for an affordable home. We can no longer ignore the fact that real-estate prices will keep rising on the private housing and rental markets year after year. This particularly affects young people and the financially less well off, and they are rightly concerned about the future. Is this going to change, or will it become the new normal? So, what causes these increases and what are the solutions, if any?
Aspiration to homeownership is a thing of the past
One reason is that demand far exceeds supply. Belgium’s population keeps rising, and family compositions are entirely different from 20 to 30 years ago. There are now many more single-parent families and two-person households. And it is precisely those families that are looking for more compact homes. Also, the aging population is increasing the demand for smaller homes that are closer to stores and amenities.
Moreover, young people are less likely to invest heavily in their homes. “Aspiration to homeownership” is a thing of the past. They are more inclined to spend money on travel and experiences. Much like lifetime jobs, lifetime residences will likely disappear as well. People find it less necessary to own a house, which means that the number of tenants is rising sharply. We have seen this trend for some time in our neighbouring countries.
Increasing construction costs
The sustainability transition also has a role to play. Property developers are making significant investments in sustainability, but that comes at a cost. Construction costs are increasing due to the need for more and more expensive materials. These include additional insulation, ventilation techniques, solar panels, and heat pumps. In the long run, these will benefit us financially, but installing them doesn’t come cheap.
How are our northern neighbors faring?
In the Netherlands, this has been a problem for much longer. Developers there are pushing hard for affordable housing. They do this by increasing the supply and selecting large-scale area developments, allowing them to build more efficiently, which makes everything more affordable. They also like to work with housing corporations. In this way, they help to increase the supply of social housing. The largest property developer in the Netherlands, BPD, has also set up its own housing fund. This allows them to help people who earn too much to rent social housing but not enough to buy or take out a mortgage.
We also intend to implement the initiatives that have been undertaken in the Netherlands. At ION, we are in the process of creating supply and are also planning largescale projects. An excellent example of that is Burenberg in Leuven, where we have combined a residential care center, assisted living apartments, student dorms, modest apartments, luxury apartments, and single-family homes. The City of Leuven insisted that social housing should be included in this project. Needless to say, ION took this requirement into account. Ten percent of the project comes under social housing. It gives people experiencing financial hardship the opportunity to live affordably in quality homes.
Investment platform for affordable homes
In early 2021, we also set up the IRP: ION Residential Platform. In collaboration with international institutional asset managers Bouwinvest Real Estate Investors and CBRE Global Investment Partners, we invested 280 million euros in new-build homes and apartments exclusively for the rental market. The purpose of this joint venture is to provide more homes at affordable prices. This brings financial benefits and will improve the housing quality by taking its management to a higher level.
We are still facing a long and challenging road ahead, but have noticed a growing interest in this trend. Even our governments have come to realize the seriousness of the situation. We all need to and will work together to achieve something we all want, which is quality and affordable homes in the Belgian real estate market.