The new WWS/WWSO: Hidden opportunities and risks in the definition of (non-)self-contained housing

As of July 1, 2024, the definition of self-contained housing for points valuation has changed. Properties rented to more than two people who do not form a sustainable communal household now fall under the Valuation System for Non-Self-Contained Housing (WWSO). This change could have significant implications for investors. In this article, we discuss the new definition, hidden opportunities and risks, and how investors can prepare for these changes.

What has changed?

Until July 1, 2024, a self-contained home was assessed based on the valuation system for self-contained housing. Now, if more than two people live in a property without forming a sustainable household, the property falls under the valuation system for non-self-contained housing, which could result in lower rental income.

What is a sustainable communal household?

A sustainable household typically consists of a couple or a family. Other arrangements, such as communal living groups, are only considered sustainable in exceptional cases. Previously, municipalities used their own definitions, but these are no longer relevant for valuation purposes.

Does a transition regulation apply for existing contracts?

Until November 2024, it appeared that there would be no transition regulation. This would mean that existing rental agreements would also fall under the new rules. Former Minister De Jonge had stated that the change was merely a clarification of the existing law, which would make a transition regulation unnecessary.

However, a ruling by the Rental Committee on November 20, 2024, shows that it applies the new definition of self-contained housing units only to rental agreements concluded on or after July 1, 2024. This indicates that the Rental Committee does not apply the new definition to agreements made before July 1, 2024.

One unclear aspect remains substitutions, where a new tenant takes over the place of a departing tenant under an existing contract. It is currently unclear how the Rental Committee assesses such continued agreements: do these fall under the new definition or not? Further guidelines or rulings will need to provide more clarity on this matter.

Opportunities for investors

Although the new rules bring some risks, they also offer opportunities:

• Higher valuation for non-self-contained housing: Due to the updated points system for non-self-contained housing, renting out rooms has become significantly more attractive.
• More return on non-self-contained housing: A property in the mid-segment can generate more income when rented by the room. For example, a 55 m² property in Kralingen from our portfolio yields €1,300 when rented by the room, compared to €1,050 when rented as a whole.
• No actual room rental required: When renting to three or more people, a single lease agreement is sufficient for a valuation as non-self-contained housing. You can benefit from the valuation of non-self-contained housing without the drawbacks of actual room rentals. When renting to two people, valuation under the non-self-contained system is only possible with two separate lease agreements.

Risks to consider

There are also risks to keep in mind:

• Change in household composition: If you, as a landlord, agree to add a third tenant, the property may immediately fall into the regulated segment with lower rental income. Conversely, if you rent to three people but agree to one tenant leaving, the property will be reclassified as self-contained, often resulting in a lower rental price.
• Large properties may yield less: Renting large properties to three or more tenants may not always be advantageous. It’s essential to weigh the rental price under the valuation system for self-contained and non-self-contained housing against the current market rent.
• Rental commission: Tenants in the regulated segment can call upon the Rental Commission, for example, in the case of defects.

Tips for investors

• Be aware of changes in the number of occupants during the rental contract: If the tenant wishes to adjust the number of occupants, for example, from two to three or vice versa, be aware that this could affect the rent. It's advisable to start by preparing a new points system for both self-contained and non-self-contained housing to check if the rent needs to be adjusted accordingly.
• Pay attention to agreements in the lease: Renting in the free sector? Then ensure that occupancy by more than two people is only allowed in the case of a sustainable communal household. Renting under the non-self-contained system? Ensure the lease states that the number of tenants cannot be reduced to two. This prevents the property from unintentionally falling into a lower rental category during an ongoing lease.
• Consider renting to sharers: This can be more profitable, especially if your property falls in the lower or mid-segment.
• Make all tenants the main tenant: This prevents a tenant from leaving without permission, causing the property to revert to the mid or low segment.
• Rent to a couple and an individual: Does your property lack enough bedrooms, or does the municipality not grant a permit for three shared tenants? And do you want to avoid the disadvantages of multiple room rental contracts? Consider renting to a couple plus an individual. Often, no room rental permit is required for this, while you still meet the conditions for the non-self-contained housing valuation.

Conclusion

The new rules bring both opportunities and risks. By clearly outlining the terms in the lease agreement and carefully managing tenant composition, you can maximize the benefits of the new regulations.