One third of the current Dutch housing shortage of over 400 thousand homes occurred because fewer homes were built than usual after the 2008 financial crisis. Martijn Mak of the Economic Bureau Amsterdam reveals this information in a publication at ESB.

Unfortunately, due to bottlenecks in licensing and the labor market, among other factors, it is difficult to catch up with the construction backlog. This underscores the continued relevance of the lessons learned from the financial crisis to prevent a housing bubble in the future.

The figure shows that fewer homes were built when house prices were low following the credit crisis. Prices fell after 2008 and did not recover until 2020 when adjusted for inflation. This affected housing construction; a total of 133,000 fewer homes were built than usual from 2009 through 2019. By 2019, housing prices had nearly recovered, and the average number of homes built per year returned to normal.

Housing construction has not caught up since the crisis. Due to bottlenecks, such as permitting restrictions and tight labor markets, the number of homes that can be built per year is capped.

The far-reaching impact of the credit crisis highlights the importance of preventing future financial crises. For example, in 2013, the House of Representatives’ Temporary Committee on Housing Prices recommended increasing the housing supply and preventing a new housing market bubble. Such a bubble could trigger a new crisis. The committee recommended curbing price-driving mechanisms through the demand side and increasing dynamics between renting and buying — advice that is still relevant today.

This article was published in ESB (Economisch Statistische Berichten), a leading, influential, Dutch-language journal focusing on economics and socioeconomic policy.