When Rent Caps Miss the Mark

Executive Summary

Across Europe, governments are tightening rent regulation to address affordability — but design details matter. The Netherlands’ Affordable Rent Act (2025) expands regulation deep into the private market via the Woningwaarderingsstelsel (WWS), a points-based cap. Using data from hundreds of thousands of dwellings, this study compares WWS caps to market rents and to how tenants and landlords value homes, informing debates beyond the Dutch case.

Tenants value location and quality differently from the regulatory model. Controlling for dwelling traits, tenants assign much higher value to location (e.g., Amsterdam, Utrecht) than the points-based system; conversely, small/older/less energy-efficient units are rated more positively than the model implies. The inputs to the points-based system explain only ~35% of market rent variation; location/characteristics models explain >70%, indicating the formula misses core value drivers.

Returns fall most for lower-quality and centrally located homes. The points-based system compresses returns most sharply for small/older stock and for attractive locations; because these segments start from different yield profiles, the link between capping and profitability is weak and uneven.

Regulation risks deepening shortages in key segments. Large, uneven adjustments push dwellings out of the rental market. This increases the supply of buildings for those who want to buy, but at the expense of renters who often have lower incomes. In addition, this exacerbates the housing crisis, because on the rental market the same housing stock is used to house more people.

The Dutch case highlights limits of point-based systems. For countries eyeing stronger controls, rules must reflect location value and investor incentives to stay effective over time.

Policy recommendations

1. Recalibrate the WWS to real value drivers. Increase the weight of location (via scarcity and amenity indices) and adjust quality weights to match observed tenant preferences.
2. Safeguard rental supply. Ensure that rent control helps rather than hurst low-income households, which crucially depends on whether dwellings remain in the rental market after regulation is introduced.

3. Target regulation at excess returns. Focus on curbing speculative yields rather than applying uniform caps across all market segments.

4. Complement regulation with supply policy. Expand social and mid-range construction to reduce pressure on regulated segments and maintain mobility within the housing market.