Table of Contents

COVID-19 and WFH means the end of the city as we know it.....................................................................1
The institutional real estate market is a global market................................................................................2
The housing market is about to collapse.....................................................................................................5
The securitization of mortgages is a great innovation for real estate markets............................................7
REITs provide a useful investment alternative to private real estate investments for institutional
investors....................................................................................................................................................11
In 2023, market barriers for adopting energy efficiency still prevent the large-scale transformation of the
housing market..........................................................................................................................................16
The shift to online retail means the end of the brick-and-mortar retail real estate sector.......................19
Real Estate is a good inflation hedge.........................................................................................................22
Rent control is an effective means to increase affordability......................................................................28
Real estate developers should be required to allocate a percentage of their projects to affordable
housing........................................................
THE FOUR QUADRANTS MODEL:

Quadrant I: Demand (Quantity and Rent): This quadrant focuses on the demand side of the real estate
market. It considers the quantity of space demanded and the rental prices associated with that demand.
It analyzes factors such as population growth, employment levels, and consumer preferences that
influence the demand for real estate.

Quadrant II: Asset Market (Rent and Prices): The second quadrant examines the asset market for real
estate. It looks at the relationship between rental prices and property prices. This quadrant considers
factors such as interest rates, investor sentiment, and market expectations that impact the valuation
and pricing of real estate assets.

Quadrant III: Supply (Prices and Space): In this quadrant, the focus is on the supply side of the real
estate market. It considers the prices of construction materials, labor costs, and land prices that
influence the supply of real estate space. It examines how changes in supply affect property prices and
rental rates.

Quadrant IV: Stock (Quantity and Space): The fourth quadrant relates to the stock of existing real estate
properties. It looks at the quantity of available space in the market and how it relates to the overall
supply. This quadrant considers factors such as property inventory levels, vacancy rates, and the aging of
the existing stock.
COVID-19 and WFH means the end of the city as we know it.
Arguments For the Statement:

 Redistribution of Population: The work-from-home model eliminates the need to live near the
workplace. This allows people to move away from cities, opting for suburban or rural areas with
lower cost of living, more space, and potentially higher quality of life. This could result in the
depopulation of cities.
 Decline in Commercial Real Estate: As more businesses adopt remote working, demand for office
spaces in cities might drastically decrease. This could lead to a drop in value for commercial real
estate, affecting the city landscape and economy. Because less taxes for that city. However, working
remote is decreasing due to the concern that employees’ at-home productivity is falling to
unaffordable levels.
 Economic Shift: Businesses that rely on office workers such as restaurants, cafes, and various
services might face economic hardships with the drop in city-center footfall. This could affect the
economic balance within cities and potentially lead to closures and job losses. The hospitality and
retail industry is still struggling with an increasing amount of bankruptcies.
 Reduced Public Transit Use: With fewer people commuting to work, the demand for public transit
could decrease, leading to cutbacks in service and a decrease in revenue for these systems. This
could lead to lesser connectivity and a possible decline in infrastructure development.

Arguments Against the Statement:

 City Attractions: Cities are more than just workplaces. They are cultural and entertainment hubs
that offer experiences and amenities that are hard to find elsewhere. Museums, theaters,
restaurants, shops, and social events will continue to draw people to live in or visit cities.
 Innovation and Collaboration: While remote work has its advantages, physical proximity can foster
innovation and collaboration. Many businesses might still prefer having a central city location where
employees can meet and exchange ideas.
 business are trying to attract workers back to the office in fancy buildings with amazing
amenities, views
 Economic Adaptation: Cities have proven resilient in the face of past changes and crises. Businesses
could adapt to the new normal, converting office spaces to residential or mixed-use properties. The
decline in certain businesses could be offset by the rise of others that cater to the needs of remote
workers.
 Inequities in Remote Work: Not all jobs can be performed remotely and not all employees have the
resources to work from home effectively. Cities still provide a concentration of opportunities for
those who can't or don't want to work remotely.
 Environmental Considerations: Cities, due to their density, are often more energy efficient than
suburban or rural living. Climate concerns might push more people to live in cities for their smaller
environmental footprint.
 Socialization and Networking: Humans are social creatures, and cities offer unparalleled
opportunities for socialization, networking, and community engagement. This aspect of city life
could keep cities relevant despite the shift towards remote work.
The institutional real estate market is a global market.

Arguments For the Statement:

 Cross-Border Investments: It is the nature of institutional investors to invest beyond

the national borders of one’s home country. This is especially important if we consider
which motives institutions such as pension funds, wealth funds or insurance companies
aim to achieve with their investments. Diversification, attractive returns, access to
different markets; all of these can be achieved by investing not only in different types of
assets but also by investing in different regions around the world. Diversification: making
use of different economic cycles, different political impacts… you can reduce the risks of
investing in only one country and being dependent on its political and economic climate.
Also diversify the risk of currency exchange rate changes. (9 out of top ten inst. RE
investors have portfolios with RE on more than 3 continents)
 Globalisation and Advance of Technology: The globalization combined with the
increased ease to access information also impacted the investment behavior and
possibilities of institutional RE investors. In the context of globalization, many countries
dropped important parts of economic regulations that hinder international investments.
This new era in the economic - and most importantly financial - world allows for cross-
border investments and therefore fosters the presence of a global institutional RE
market.
 Global Investment Managers: Institutional investors usually work with global
investment management firms to acquire access to global real estate prospects. These
investment managers have dedicated teams with localized expertise in many markets,
allowing them to identify and implement global investment ideas. This collaboration
demonstrates the transnational nature of the institutional real estate industry. The
participation of these global investment managers demonstrates that institutional
investors actively seek opportunities outside of their home markets and are willing to
explore global real estate investments. Furthermore, institutional investors use asset
allocation techniques that stress diversification across numerous asset classes and
countries. Real estate, being a physical and income-generating asset, plays an
important role in these strategies. Recognizing the benefits of diversification, institutional
investors are motivated to seek opportunities in a variety of global sectors, including real
estate. This underlines the global aspect of the institutional real estate market, as
investors actively seek real estate investments across various countries to balance their
portfolios and limit risk exposure. As a result, the presence of global investment
management firms partnering with institutional investors, as well as the inclusion of real
estate as an important factor in institutional investors' asset allocation strategies,
provides a strong argument that the institutional real estate market is indeed a global
market.
 REITs: The rise of Real Estate Investment Trusts (REITs) has been key to making the
institutional real estate market more global. REITs are publicly listed companies that
hold and manage income-producing real estate. Their rise has changed the face of real
estate investing by creating a vehicle that enables easier and larger institutional
participation in the market. This, for example, enabled smaller institutional investors who
 could not afford in-house specialists to invest in real estate. Institutional investors can
acquire exposure to a diverse portfolio of real estate properties by investing in REITs,
eliminating the requirement for direct ownership or management. This accessibility has
broadened institutional investors' reach, allowing them to participate in global real estate
markets. Second, the rise of REITs has played a critical role in lowering the barriers to
entry for institutional investors in the real estate sector. Investing directly in real estate
properties can be capital-intensive, time-consuming, and involve major operational
duties. REITs provide a more liquid and easily transferable investment vehicle, allowing
institutional investors to allocate capital more efficiently and alter their real estate assets
in response to market conditions. This liquidity and flexibility have attracted a wider
range of institutional investors, including those with insufficient resources or skills to
engage in direct real estate transactions

Arguments Against the Statement:

 Local Market Dynamics: The real estate market reveals a unique mix of local and
global dynamics, putting into question the assumption of a completely global market.
Local factors such as government laws, legislation, cultural preferences, and economic
situations have a huge impact on real estate markets around the world, resulting in
significant differences. As a result, institutional investors frequently emphasize home
markets or specific regions where they have a greater understanding of and control over
these local dynamics, indicating a more focused strategy rather than a truly global
market. Furthermore, local economic factors such as GDP growth, employment rates,
and demographic trends have a substantial impact on real estate markets, which vary
significantly from country to country. This hinders institutional investors' capacity to treat
the market as a unified global entity. Furthermore, cultural and behavioral differences
between countries have a significant impact on real estate investing techniques and
preferences. Understanding local market dynamics and cultural distinctions becomes
critical for successfully navigating the real estate market. The lack of such understanding
impedes the creation of a truly global institutional real estate market. As a result, the real
estate market includes both regional influences and global interactions, which underlines
that the real estate market is not global.
 Local Knowledge And Expertise: As real estate markets differ significantly across
different regions investors are required to possess the relevant local knowledge and
expertise to make attractive investments. Investors need to know factors such as local
demographics, supply and demand dynamics, market trends and cultural motives. This
poses different hindrances of global investments.
1. Costly
2. Low relative attractiveness compared to local markets, where the investor has
knowledge, a network with important partners, and knowledge about the local
landscape.
 Legal and Regulatory: Regulation creates barriers and prevents the real estate market
from achieving full globalization due to several reasons. To start, regulations vary widely
among countries and regions, complicating cross-border real estate transactions.
Different legislative frameworks, such as property ownership rules, zoning regulations,
tax policies, and foreign investment restrictions, can make it difficult for institutional
investors to operate in international markets. Secondly, legal differences might have an
impact on real estate market transparency and standardization. The lack of consistent
 and reliable data in some jurisdictions, makes it difficult for institutional investors to
properly evaluate investment opportunities and risks. Also, laws and regulations
intended to preserve local interests or achieve social objectives can limit foreign
investors from participating in real estate investments. Governments may prioritize
community welfare, housing affordability, or environmental sustainability by putting
restrictions on property development, rent control, or land-use laws. To summarize,
legislation differences and complexities between countries and regions could hinder real
estate market globalization. Different legal frameworks, compliance requirements, and
limits can stymie cross-border transactions, reduce market transparency, and increase
risks and uncertainties.
 Currency and Exchange Rate Risk: By entering different regional markets, institutional
investors put themselves at the risk of exchange rates and the volatility of different
currencies. For institutional investors, these risks are unbearable for several reasons:
1. Currency exchange rate risks undermine the positive effect of diversification,
significantly lowering the effectiveness of global investments. → Numerical
example +- 5ct → ≈150.000€ difference in return at 1.000.000€ initial investment
2. Even though hedging for these risks might be an attractive strategy on the first
glance, it becomes more and more costly, the more risks the investor can take on.
The problem: cross-border investments bring up a variety of risks at once, making
it impossible to gradate them
The housing market is about to collapse

Arguments for the statement

Now that the housing boom is threatened by soaring mortgage rates and a potential recession,
buyers and homeowners are asking a familiar question: Is the housing market about to crash?
Signs of a housing market crash are: softening real estate prices, a downturn in the economy
and rising interest rates.
Therefore we conclude that YESS the housing market IS going to COLLAPSE
In the following minutes we will explain why that is the case

 Every collapse starts with the creation of a bubble, it can be seen that this is the case in the
current economy due to overvaluation and speculative behavior, this leads to at least a
heavy overheating of the market. History has shown that such unsustainable growth
patterns ultimately will lead to market corrections and even crashes. → Data from Dutch real
estate agencies show that in 2021 the average price paid for housing was 11% higher than
the asking price, this shows the overvaluation of the housing market.
 The overvaluation and unsustainable growth patterns will lead to unsustainable debt levels,
eventually this increases the risk of underwater mortgages leading to financial problems and
decreasing housing affordability.
 Subsequently, what we have seen in the past year is that we cope with an economic
downturn as a consequence of the COVID-19 crisis and the Ukrainian war. Due to the high
energy prices, high inflation ultimately leading to what we have seen: rising interest rates
and subsequently rising mortgage rates. Which ultimately will lead to reduced affordability
and reduced purchasing power. Referring to the purchasing power, we do not only see this
occurring for the individual homeowners, but also for institutional investors. A source of
Yieldstreet showed that institutional homebuyers reduced their homebuying levels by 90%.
This is an exceptional amount, indicating that the reduced affordability and reduced
purchasing powers does not only impact the private markets, but also the capital markets,
having a double negative effect on housing prices.
 So, based on all the mentioned and explained signs and consequences it cannot be ignored
that a housing market collapse is going to occur.
 Arguments against the statement

Now that the housing boom is threatened by soaring mortgage rates and a potential recession,
buyers and homeowners are asking a familiar question: Is the housing market about to crash?
No it is NOT:
A very important sign of a housing market collapse (or maybe even a requirement) is: excess
housing inventory, it can be stated that in the current market this is definitely not the case.
Furthermore, the excessive lending with low creditworthiness what we have seen during the
crisis in 2008 is not present this time as well. This will be explained later on.
We believe that the housing market is NOT going to collapse!
In the following minutes we are going to explain why the housing market is NOT going to
COLLAPSE

 First of all, it can be stated that the overall housing market has become relatively resilient
due to the crises it already experienced, which led to increased knowledge and historical
experience. This knowledge led to for example an increase in stabilizing government
interventions and stricter mortgage regulations by banks, which reduce the risk of
widespread defaults.
 Secondly, it can be stated that many households have fixed rate mortgages which means
that households are less influenced by the rising interest rates that result from the current
economic environment.
 Next to that, it should be acknowledged that despite the overvaluation there is still a very
strong demand for housing which is a logical consequence of demographic factors. This
strong demand prevents a complete collapse from happening.
 Rob Dietz, the chief economist at the National Association of Home Builders explained that
the correction that is going to occur in the housing market will lead to a moderate downturn
and not to a complete crash. He stated that a housing market correction can also occur
without a complete crash since a correction is basically a natural part of the market cycle
and will in addition lead to new opportunities for buyers.
 However when coming back to the excess housing inventory/supply we mentioned at the
start, we wonder whether someone in the audience has experienced that this is definitely
not present in the current housing market. Because for example if you are looking for
housing in the Randstad for a future job we experienced that this can be extremely difficult.
Indicating that one of the strongest reasons for a housing crash occurring is simply not
there.

So yes, we recognize that home prices are still pushing the bounds of affordability. But no, this
boom shouldn’t end in a bust. The somewhat decreasing prices we now see are nothing more
then just a logic result of monetary policies of increasing interest rates and is a cycle we see
many times happening.
The securitization of mortgages is a great innovation for real estate
markets

Pros:

- Increased liquidity & Access to capital

First and foremost, securitization significantly increases liquidity in the mortgage
market. By converting illiquid mortgage assets into marketable securities, banks and
lenders gain access to immediate cash flow selling these securities on the secondary
market, providing a new source of liquidity. This infusion of liquidity allows financial
institutions to offload mortgage assets from their balance sheets, reducing their risk
exposure and enabling them to meet regulatory capital requirements more effectively.
This can enhance the overall stability of the banking system. Ultimately, this increased
access to capital furthermore stimulates economic growth and facilitates
homeownership by ensuring a steady flow of available funds for new mortgages.

Furthermore, the availability of a liquid secondary market for mortgage-backed

securities attracts a wide range of investors. The heightened competition among these
investors can drive down borrowing costs for consumers. Lenders, in their quest to
attract buyers, strive to offer more favorable terms and conditions. As a result,
securitization fosters a competitive environment that benefits borrowers through
lower interest rates and more favorable mortgage terms.

- Risk distribution
Another crucial aspect of securitization is risk distribution. By spreading the risk of
mortgage default across a broader range of investors, securitization enhances financial
stability. This risk diversification reduces the exposure of individual institutions to
localized or concentrated default risks. Moreover, securitization attracts new investors
who may not have been willing to undertake the entire risk of individual mortgages. The
expansion of the investor pool promotes market efficiency and provides additional
capital for lending.

- Diversification
Additionally, securitization offers diversification opportunities for investors. Mortgage-
backed securities have different risk profiles compared to traditional asset classes like
stocks or bonds. Institutional investors, such as pension funds or insurance companies,
find these securities attractive due to their potential for stable returns and
diversification benefits. This diversification of investment portfolios strengthens overall
financial stability and resilience.
 - Globalization
Lastly, the securitization of mortgages plays a vital role in the globalization of financial
markets and interconnectivity which various benefits. Globalization allows for the flow
of capital across borders, enabling access to international investors and expanding
funding sources for mortgages. This cross-border investment can lead to increased
efficiency and broader market participation.

- Enhanced regulatory oversight

regulation has increased significantly: Basel III; Dodd-Frank Act in the United States,
financial institutions are required to retain a portion of the risk when securitizing
assets); Credit rating agencies and Due diligence and underwriting standards; more
sophisticated models and analytical tools for evaluating the underlying risks;
Transparency and disclosure requirements have been strengthened to provide investors
with more comprehensive information about securitized assets; duty to evaluate not
only hard but also soft criteria of the lender

- Securitization leads to increased liquidity in the market

Financial institutions eg. Banks pool together different existing mortgages and create
mortgage- backed securities. So therefore the bank can mitigate the default risk,
compared to selling a single mortgage, and combine different assets into one income
stream. So enabling investors to buy and sell shares of these securities, will lead to
a more efficient allocation of capital within the real estate market. So for example, a
bank use securitization to convert a portfolio of mortgages into cash. So when a bank
underwrites a mortgage, it owns the rights to the future stream of income provided by
the borrower repaying the loan. Effectively it creates an asset on its balance sheet.
This process improves the liquidity of a bank by reducing its position in illiquid assets
and increasing its position in a more liquid asset.
- Securitization leads to better diversification of risk
So when the bank securitizes its mortgages, the risk associated with individual loans is spread
across a larger pool of investors. Therefore it reduces the impact of default or foreclosure on
any single investor and it allows investors to choose securities with risk profiles that align with
their investment objectives. This is important for lenders and investors because, through
securitization mortgages, the risk is shared among investors, compared to individual mortgages
where the risk is rely on only one investor. The securitization of mortgages happens in special
purpose vehicles, named SPVs. So in a nutshell, pooling mortgages together leads to better
diversification of risk for investors and lenders which is important for investors and it happens
in SPV.
Con:

- complexity and opacity of the process.

The multiple layers of financial transactions and complex structures involved make it
challenging to assess the underlying risks of mortgage-backed securities. This lack of
transparency can undermine investor confidence and contribute to market volatility. As
we witnessed during the 2008 financial crisis, the complexity of securitized mortgage
assets made it difficult to accurately value these securities, leading to significant losses
for investors and contributing to the destabilization of financial markets.

- securitization can create moral hazard. & lax screening (Fico Score Loopholes)
The knowledge that mortgages can be securitized and transferred to investors can lead
to a relaxation of lending standards. Originating lenders may become less cautious, as
they believe they can shift the risk to investors. This can result in lax lending practices
and an increase in risky loans. Such behavior can potentially destabilize the market and
create a situation where a higher number of defaulting mortgages can have severe
consequences for the financial system.

- loss of control for originating lenders.

Once mortgages are securitized and sold to investors, lenders lose direct control over
the loans. This limits their ability to modify terms or offer personalized assistance to
borrowers facing financial difficulties. The loss of control can negatively impact
homeowners, as they may have fewer options for loan modifications or refinancing,
potentially exacerbating financial hardships.

- securitization poses systemic risks to the financial system.

During periods of economic stress or a housing market downturn, a significant number
of defaults on mortgage-backed securities can have a cascading effect, leading to
broader financial instability. The widespread securitization of mortgages increases the
interconnectedness of financial institutions. If one institution fails due to its exposure to
securitized assets, it can trigger a chain reaction, impacting other institutions. This
contagion effect, as seen in the 2008 financial crisis, highlights the systemic risks
associated with securitization.

- Securitization leads to a lack of transparency for investors

Since securitized mortgages can be bundled and sold multiple times, it makes it challenging for
investors and regulators to trace the underlying assets. This lack of transparency can create
information asymmetry and hinder effective risk assessment. There is an information
asymmetry because the investors do not always have a clear which mortgages are included in
the bundle of mortgages and this can hinder effective risk assessment. Also, it can lead to
 mispricing and market efficiencies because it is difficult to make accurately price mortgage-
backed securities. So it is important for investors they know what they invest to be able to
predict the risk associated with the investment and regulations need to have sufficient
information in order to regulate markets efficiently eg. Through policies. But securitization
makes this impossible due to the bundles of mortgages which leads to information asymmetry
and hinder effective risk assessment.

- Securitization leads to adverse selection

Lenders may encourage to engage in riskier lending practices through securitization. This is
because when mortgage loans are securitized and transferred to investors, lenders may have
less incentive to thoroughly evaluate borrower creditworthiness. This adverse selection can lead
to an increase in subprime lending or loans with inadequate underwriting standards, which
leads to increases in the likelihood of defaults and creates instability in the real estate market.
So in your view, banks are using the money of investors to make more money by giving out
loans. Since this is not their money, the banks will take more risk which leads to a higher default
risk. And this could lead to a crash which causes unstable markets and then you have a financial
crisis. While the banks have to do sufficient due diligence policies. So this leads to adverse
selection.
REITs provide a useful investment alternative to private real estate
investments for institutional investors.
Team pro
1. Another way to deriving investment in a passive income compared to PERE
2. Listed on stock market : increase transparency of information due to having
meaningful regulatory oversight and analyst coverage-> Need less skills to
select investments

Additionally, since choosing a PERE (Private Equity Real Estate) requires more skills
for selection. In fact, PERE are not publicly traded, which means investors are unable
to perform research on their investment.

As a result, it's difficult to determine the PERE’s value often; So institutional investors
often rely on an external manager to choose the right PERE, which adds an extra layer
of fees and increases the chances of agency conflict. -> Avoid external chains of
financial intermediaries

agency conflicts: REITS are Listed on stock exchange; increase transparency; reduces agency
conflicts through mandatory dividend distribution by law REITs are required to pay out at least
90% of their income and profits in form of dividends. They can provide steady income : the
prospect of consistent, higher-than-average income from the rental and lease income
generated by the underlying property portfolio.

→ REIT investments are part of strategic asset allocation designed to match fund-specific
liabilities

3. Allows managing real estate instead of an external manager or an internal

manager, thus externalizing risks.

No problem with internalizing the choice and management of investment: hiring a

manager, attracting human capital, costly, difficult, and requires a significant investment
to make it profitable.

External passive income asset: by not buying property itself REITs eliminate the need for
investors to manage the properties, hire property management firms and deal with contractors,
tenants and leases specialized department is not needed

4. Outperformance relative to PRE ;

REITS outperform direct real estate investments for internal and external investment approach: 10.9% vs
7.12%

REIT returns have consistently outperformed private real estate by around 2% per year and,
because of the timing differences between public and private real estate, provide “temporal”
diversification.

5. Allows lowering costs:

REITS have significantly lower investment costs 43% on average while direct real estate costs on
average have 86% costs

6. liquidity compared to PERE: PERE have a time-tested favorable risk/return

profile with less volatility compared with other assets. However, closing real
estate deals typically takes weeks or months, making the asset class extremely
illiquid.

REITs solve this problem by having their securities traded on major stock exchanges,
allowing investors to buy and sell easily with a much more affordable price of single
share

PRE: creates a risk for institutional investors when they are unable to sell the assets but need
to meet their liabilities → REITs eliminate this problem

7. Positive correlation between REITs and interest rates

o During periods of economic growth, REIT prices tend to rise along with interest rates. The
reason is that a growing economy increases the value of REITs because the value of their
underlying real estate assets increases. In a growing economy, the demand for financing
also increases, resulting in increased interest rates. Conversely, in a slowing economy, when
the Fed is tightening money, the relationship turns negative.
- REITs are forecast of underlying assets → PRE valuation is done infrequently whereas
REITs are valued simultaneously → for PRE you cannot take advantage immediately
from capital appreciation; you need to undergo the selling process whereas REITs offer
liquidity and you can benefit immediately from capital gains → PRE you don’t see the
impact of economic growth right away

 Rising interest rates are generally a negative factor for REITs; their outflows increase due to
higher interest payments, which reduces the cash they have available to make dividend
payments to investor

8. dynamic investment strategy:

a. Very usefull for smaller pension funds which can implement passive
reit strategy bcs it will lower their costs ( no external manager needed) and
give a better return than go through fund of fund or external manager
b. bigger pension funds: they can add REITs investments besides their PRE
investment strategy to benefit from diversification; REITs correlate with the
 market and benefit from immediate capital gains because REITs provide
liquidity

9. Inflation hedge: Real estate moves with inflation: key to its effectiveness lies in
landlords’ ability to raise rents in markets with low vacancy rates, thus outpacing
rising inflation and potentially increasing income to investors

Team con
1. REITs do not grow too much in value. This is because they are mostly
structured as pass-through entities. About 90% of the rental income that the
REITs earn from these properties is paid out to the investors as a dividend. A
mere 10% is retained and that too, for emergency purposes and administrative
expenses.

→ Mandatory dividend distributions from REITS: It forces REITs (Real Estate

Investment Trusts) to distribute a yield even if their situation does not allow it, or
reduces their investment from the beginning.

As a result, REITs are generally unable to increase the number of properties which
they manage. Any growth is merely the result of price appreciation.

They have to raise cash by issuing new stock shares and bonds. Sometimes, investors
are not always willing to buy them, such as during a financial crisis or recession. So
REITs may not be able to buy real estate exactly when they want to. When investors
are again willing to buy stocks and bonds in the REIT, the REIT can continue to grow.

in terms of disadvantage of investing in REITs: it only provides a passive consistent

income stream but you cannot benefit from capital growth from the underlying assets

2. REITs are time bound. This means that at the end of a specific time period (let’s
say ten years), the REIT management is supposed to sell off the property and
distribute the returns to the owners. Since many REITs mature at the same
time, they can exert downward pressure on the prices. REITs may also be
forced to sell at a time when prices are depressed. → is PRE always time bound? if so
then this point is an advantage for REITs relative to PRE (because REITs vary from
infinite to finite REITs)

3. Publicly traded REITs have the risk of losing more value as interest rates
rise, which typically sends investment capital into bonds whereas in PERE, the funds are
stuck for a period of time, meaning that the value will not take the loss of value → same
as point 8 from advantages → it is an advantage and disadvantage at the same time
depending whether there is an economic recession or economic growth
⇒ include our economic outlook of interest rates; will they go up or down → interest rates affect
the value of the underlying assets whereas inflation affects the value of rents (inflation and rents
have positive correlation)

4. Limited diversification Listed REITs suffer from the movement of market

Diversification:
- Correlation with market REITs have a beta slightly lower than 1
- correlation between common stocks and listed real estate which is twice as large as that
between common stocks and direct real estate this is correlation analysis; estimating the
beta for systematic risk but volatility is here not included with

5. Too Much Debt: REITs pay out 90% of their taxable income to their
shareholders. That doesn't leave much funding for business expansion. They
commonly use debt to solve that problem. New borrowings can fund property
acquisitions, which increases profits, cash flow and dividends. It's not unusual for
REITs to be highly leveraged.

But debt can become unmanageable very quickly—particularly under changing

economic conditions. A REIT shouldn’t be so leveraged that it can’t absorb temporary
periods of lower occupancy, higher interest rates or lower property values.

REITs use more debt to fund new real estate investments relative to PRE because they are
mandate to pay 90% of their income in dividends → hence; when there is a recession REITs can
be more risky in terms of meeting their debt liabilities

6. Volatility: yield too high

Duration And Range of Share Price Declines

Share price declines mathematically push dividend yield higher. That's why the highest-
yield REITs often show a downward price trend.

Dive into that trend. How long has the share price been declining, what does leadership
have to say about it and what are the root causes? If the underlying issues are external,
is the REIT managing better or worse than its peers?

Liquidity:
- Seems as an advantage but is a disadvantage; higher volatility
o Due to liquidity: sold on the market: REITs fluctuate in price and are influenced by market
trends movement of macroeconomic movement is reflected directly in prices
In 2023, market barriers for adopting energy efficiency still prevent
the large-scale transformation of the housing market.

FOR:

 higher marginal costs for more efficient, green construction and refurbishment projects (6,5%).
 significant premium in design costs and preliminaries, as well as in finishes and fitting costs for green
buildings, which is robust to different model specifications (31%). These costs have to be paid
upfront and it is paid out of the pocket of developers in a stage that is very risky (the beginning of a
project).
 project duration: buildings certified as green take on average almost 11 percent longer to complete
(take more time to recoup their investment). But, this market barrier will reduce over time if
developers and construction companies make advances in green building practices and innovation
through the adoption of digital technology for improved cooperation.
 The grim conditions of the sector: high interest rates, remote work and increased vacancy rates
(commercial property: bloomberg article, a lot of developers chose to give back the keys before the
maturity of their loans because of the grim conditions).
 Shortage on technical workers who can install sustainable alternatives like solar panels and heath
pumps
 Supply chain issues and material / mineral shortages

Counter arguments:

 development of green loans → mostly banks who provide this to companies

 marginal costs < green premium → suggest market failure
 The Dutch government is already giving incentives and in 2023 VAT on solar panels is removed

AGAINST

 Lack of awareness: lots of people do not know their energy label rating. People are not aware of the
profitability of green houses (less expensive energy bills)
 Great improvements in technologies like solar panels and reduction in prices (Moore’s law)
 Outdated building policy: ban of double glazing windows in Amsterdam’s listed buildings. For
example in London (Bloomberg article), there’s a “race to avoid obsolescence” among developers
who fear their properties will become stranded assets because of increased regulation dictating that
office buildings must meet minimum efficiency standards.
 The costs of retrofitting a non-energy efficient building go beyond monetary costs: nuisance, dirt,
uncomfortable, you would maybe have to move out for a time.
 The high demand for housing for example in Amsterdam → every building is gonna get rented out or
sold even if they are not efficient buildings. So the demand for green buildings is not high
(Bloomberg article on London: Demand for first-rate green premises is outstripping supply after
years of anemic construction, aided by a push from large corporations seeking to meet
environmental targets and lure staff back.)
 Inadequate infrastructure (emergent countries): smart meters, advanced insulation systems, and
renewable energy sources
 New technologies like smart thermostats are low cost are becoming more and more available
 Governments have to facilitate more electrification, companies and households want to electrify but
right now companies like Tennet are worked against by nitrogen rules

To do:

 definition of market barriers: A barrier to market entry is an obstacle (usually high costs) which
prevents a product from gaining traction in a new market.
 definition of an energy efficient building

Opening Statement: according to the European Commission, buildings in the EU are responsible for 40%
of energy consumption and 36% of greenhouse gas emissions. Which is why sustainability in the real
estate sector has been championed for years now. However, today, around 75% of the EU building stock
is energy inefficient. Understanding why the transition to green buildings has been so slow is of prime
interest for each stakeholder in order to tackle the issues and foster sustainability. For this matter, we
will adopt the position in favor of the following proposition: “In 2023, market barriers for adopting
energy efficiency still prevent the large-scale transformation of the housing market”.

First

For an average resident, installing solar panels costs around 10,000 euros, this is a price which an
average family will struggle to afford. These people don’t have electric cars and are already trying to
minimize their electricity bill so they will struggle to see the benefit of solar panels.

Second, in the case of construction, it is on average 6,5% more expensive to build an energy efficient
home than a non efficient home. This is mostly caused by high design and preliminary fees that have to
be paid upfront by the developer himself at a high risk stage of development which is the preliminary
stage. This of course deters developers from constructing these types of buildings.

The current high interest rates are another market barrier since it is less attractive to take a loan out to
make a house more sustainable → high prices of buildings, hard to sell

Furthermore increasing supply lines, scrambles for mineral rich grounds and countries looking to be
more strategically independent in these turbulent times cause materials that are used in solar panels
like polysilicon to be scarcer and higher in price.

Lastly, it is incredibly hard these days for companies installing solar panels and heat pumps to find
people in the labor market who are willing and capable to install solar panels and heat pumps.

Therefore, we argue that there are significant market barriers that increase the market barriers for large
scale transformation

Closing Statement FOR: Buildings, whether commercial or residential, represent a considerable and
tangible investment that will exist for years, making it a crucial decision to build it or not. Therefore, the
costs of a project are carefully studied by developers and individuals at the very outset of the project. As
we mentioned, the costs of constructing an energy efficient building or retrofitting a building are high
and deter either developers or homeowners from contributing to sustainability matters in real estate.
The current high interest rates makes potential solutions such as loans unappealing. The scarcity of
materials and qualified labor contribute to hamper the transition to sustainable houses. For all these
reasons, market barriers for adopting energy efficiency are today hampering the transformation of the
overall sector.

Narrative AGAINST:

Legislation: Reeducation of workers, incentives, legislation, awareness

We argue that the market barriers that our opponent points out are nowhere near as bad as they seem.
and that the problems in making our housing stock more sustainable is not originating from market
barriers but from government policies

Firstly there are a lot of cheap and smart tools on the market that can be used to make your house more
sustainable in the most simple ways just like with smart thermostats, led lights you can even stick a
piece of aluminum foil to lower your natural gas bill or swap your gas cooking stove with an induction
stove. People have to become more aware themselves that making your house more sustainable can be
easy and does not always have to be expensive and done with products that are scarce in the market
right now.

Furthermore, the Dutch government has even removed VAT on solar panels which make them even
more attractive for people who want to make their house more sustainable.

We can also see that the free market is also efficient and innovative in terms of new sustainable
solutions. The price of solar energy has dropped down 105 dollars per watt in 1975 to 5 dollars per watt
in 2000 and to only 0.20 cents per watt in 2020. This will only continue to drop down over the years
making solar panels affordable to every layer of society. Also in terms of scarce minerals, Europe is
working hard to open mines across the whole of Europe, especially in Scandinavia to open mines for
minerals to make solar panels

Also the problem does not lie in the fact that too few people have solar panels on their roofs. Tennet,
one of the companies that builds the electricity grid in the Netherlands and Germany cannot even take
the electricity that households generate back on the grid because there is too much in some places.
Therefore the core of the problem does not lie in the market, it lies in the public sector where
governments limit the building of new sustainable homes and limit the building of our energy grid
because of nitrogen regulations.
The shift to online retail means the end of the brick-and-mortar
retail real estate sector

FOR

Increasing online sales: The rise of e-commerce has been dramatic and continuous. According to data
from Statista, retail e-commerce sales worldwide amounted to 3.53 trillion US dollars in 2019, and e-
retail revenues are projected to grow to 6.54 trillion US dollars in 2022. This rapid growth in online sales
poses a significant challenge to physical retail spaces. Share taken from physical retail

Decreasing physical sales: according to eMarketer, spending at brick-and-mortar retail stores is

expected to drop 14% year-over-year (S&P Global | Market Intelligence: Amazon, online retail to take
share from brick-and-mortar stores post-pandemic).

Consumer Behavior Shift: The COVID-19 pandemic accelerated a shift in consumer behaviors. More
people started shopping online due to lockdowns and social distancing measures.

 E-commerce as % of total retail sales 15%-> over 25% from 2015-2026

 Approximately 50,000 (5.7%) stores in the U.S. are forecast to close by 2026, while online sales
are expected to grow by 50%.

Convenience and Variety: Online retail offers customers convenience and a wider variety of products
than physical stores, reducing the need for physical retail spaces. With online shopping, customers can
shop anytime, anywhere, and have access to a global marketplace.

The Rise of Direct-to-Consumer Brands: More brands are selling directly to consumers online, bypassing
traditional retail outlets. This trend is reducing the need for physical retail spaces.

Operational Costs: Operating an online store is generally cheaper than maintaining a physical retail
space. Rent, utilities, and other overhead costs can be significantly reduced or eliminated. According to a
report by BigCommerce, these savings allow online retailers to invest more in marketing and product
development, posing a further threat to bricks-and-mortar stores.

Empty Retail Spaces: There has been an increase in the number of empty retail spaces in recent years.
According to a report by the Wall Street Journal, U.S. retail vacancies hit a seven-year high in 2019. Q4
2022, over 8.7% vacancy in US malls,

New digital technologies such as AR and VR, as well as platforms that use information technology to
match consumer demand to production directly, significantly lower the need for physical stores.
AGAINST

Consumer Preference for Physical Shopping Experience: Despite the rise of online retail, many
consumers still prefer shopping in physical stores. According to a survey by First Insight in 2020, 73% of
all consumers (and 81% of baby boomers) prefer shopping in-store to shopping online. Physical stores
offer sensory experiences, immediate gratification, and personalized service that online shopping
cannot provide.

Immediate gratification: vs waiting for shipment + better for climate physical returns vs shipment

Returns and exchanges: a lot easier in physical stores. Lower carbon footprint

Omnichannel Retailing: Many successful retailers use an omnichannel approach, combining the
advantages of online and offline shopping. Customers may browse products online and then go to a
store to make a purchase, or vice versa. As of 2021, >70% of customers used multiple channels during
their shopping journey, according to the Harvard Business Review.

Online Retailers Opening Physical Stores: Some predominantly online retailers, like Amazon, have
recognized the value of physical stores and have opened their own. For example, Amazon opened
Amazon Go, Amazon 4-star, and Amazon Books physical stores. This trend suggests that the bricks-and-
mortar retail real estate sector continues to have value.

Showrooming: Even as e-commerce grows, physical stores are still valuable for "showrooming." This is
where customers come to stores to try out products before buying them online. This practice allows
customers to physically interact with a product before purchasing, reducing the uncertainty that often
comes with online shopping.

Last-Mile Delivery Challenges: One of the main challenges for e-commerce is the "last mile" delivery -
getting the product from a hub to the customer's door. Physical stores don't have this issue and can
often provide faster access to products.

Retail as Entertainment: Shopping is not just about purchasing products for many people. It's also a
form of entertainment. Shopping centers and districts often offer dining, events, and other experiences
that draw in customers.

Resilience of Certain Retail Sectors: Certain retail sectors, such as grocery stores, hardware stores, and
pharmacies, have proven to be resilient to e-commerce competition due to the immediate nature of the
needs they meet or the desire of customers to see and select these products in person.
Links:

https://www.lloydsbankinggroup.com/insights/green-homes-premium.html

https://www.europarl.europa.eu/doceo/document/TA-9-2023-0068_EN.html

https://www.dutchnews.nl/2022/03/calls-to-modernise-outdated-building-policy-for-greener-city/

Nitrogen: https://www.dutchnews.nl/2022/11/setback-for-government-as-council-of-state-throws-out-
new-nitrogen-rules/

Bloomberg article on green projects in London: https://www.bloomberg.com/news/articles/2023-05-

22/london-developers-kick-off-record-revamps-to-turn-offices-green#xj4y7vzkg

Incentives in the US (tax deductions) https://www.marcumllp.com/insights/inflation-reduction-act-

sparks-green-revolution-in-real-estate-development-with-billions-in-tax-breaks
Real Estate is a good inflation hedge.

What do we consider real estate? The market? People’s houses? As an

investment?
PRO
Argument 1: Real estate value tends to increase with inflation.
Explanation:
We have history on our side! There is a statistical correlation between real estate and
inflation. As inflation rises, the prices of goods and services rise too. This means that
the construction costs and land prices follow that increase. That is why the value
increases with inflation. So, yes, real estate is a good inflation hedge!
Not convinced yet? Let me provide you an example.
Example:
As I said, History is on our side. In the 1970s, the real estate market was moving up and
down. According to researches, the property prices in the USA increased to match with
the inflation. This happened in several places around the world, of course. Therefore, in
the 70s, the housing market was, more than a good, but an efficient inflation hedge. We
can also notice that the prices dropped when inflation decreased.

Counter-Argument:
Real Estate IS NOT an inflation-ETF. There are various factors accounting for the prices
of the properties, such as local economic conditions, interest rates and demand.
Real estate values can be influenced by various factors, including local economic
conditions, interest rates, and market demand. While inflation can positively impact real
estate values in some cases, it is not the sole determinant. Economic downturns,
changes in demographics, and oversupply in specific regions can result in depreciation,
even in the presence of inflation. In 1990, the US housing markets bottomed… While
inflation rose.

Argument 2: Rental income increases with inflation.

Explanation: Real estate investments, particularly rental properties, can provide a
steady stream of income through rental payments. When inflation occurs, rental rates
tend to rise as the costs of living increase. This allows real estate investors to adjust
rents to keep pace with inflation, thereby preserving the purchasing power of their rental
income.
Example: Suppose an investor owns a residential property and charges $1,000 per
month in rent. If inflation is 3% per year, the investor can adjust the rent to $1,030 the
following year to account for the increased cost of living. This adjustment helps to
maintain the real value of the rental income over time.
Counter-Argument: While rental income can be adjusted to counteract inflation, it is
important to consider the overall rental market dynamics and the ability of tenants to
afford higher rents. In certain situations, market conditions or regulations may limit the
ability to raise rents in line with inflation, which can impact the effectiveness of real
estate as an inflation hedge.
LAWS? NOT POSSIBLE IN BELGIUM.
Vacancy rates increase? vacancy rates increased dramatically causing returns to
decline, thus reducing the inflation hedging effectiveness of the investment

Argument 3: Leverage amplifies the benefits of real estate as an inflation hedge.

Explanation: Real estate investments often involve borrowing funds to finance the
purchase. When inflation occurs, the value of the property and rental income may
increase, while the debt used to acquire the property remains fixed. This creates a
scenario where the investor's equity grows, effectively magnifying the returns and
hedging against inflation.
Example: Suppose an investor purchases a property worth $500,000 with a $400,000
mortgage and $100,000 of their own equity. If inflation pushes the property value to
$600,000, the investor's equity increases to $200,000, representing a 100% gain. This
leverage amplifies the investor's returns and acts as a hedge against inflation.
Counter-Argument: While leverage can enhance returns in an inflationary
environment, it also introduces financial risks. If property values decline or rental income
decreases due to economic factors, the leverage can work against the investor,
exacerbating potential losses. Careful risk management and analysis of market
conditions are crucial to mitigate these risks.

Argument 4: Real estate provides tangible value and protection against currency
devaluation.
Explanation: Real estate is a physical asset with intrinsic value that is not easily eroded
by inflation of currency devaluation. In times of high inflation, when paper currency loses
value, it’s been observed that historically real estate retains its inherent worth. Investors
can rely on the tangible nature of real estate as a store of value, protecting their wealth
from the effects of inflation.
Example: In countries experiencing hyperinflation, such as Zimbabwe in the late 2000s,
the local currency rapidly lost value. However, real estate properties.

maintained their value and often became the preferred store of wealth for individuals
looking to preserve their purchasing power.15,99MILLIONS inhabitants
In Japan, the real return is higher during inflationary regimes than at other times
Counter-Argument: While real estate can provide a hedge against currency
devaluation, it is important to consider the liquidity and transaction costs associated with
buying and selling properties. In times of high inflation or economic uncertainty, it may
be challenging to convert real estate holdings into cash quickly, limiting its effectiveness
as a short-term inflation hedge.

Argument 5: Real estate investment options provide diversification against inflation

risks.
Explanation: Investing in real estate allows individuals to diversify their portfolios and
hedge against inflation risks. By including real estate alongside other asset classes
such as stocks and bonds, investors can achieve a balance that cushions against the
impact of inflation on their overall investment portfolio.
Example: During periods of high inflation, stocks and bonds may experience diminished
value due to rising interest rates and declining corporate profits. However, real estate
values tend to appreciate or remain stable, offering a counterbalance to inflation-related
losses in other asset classes.
Counter-Argument: Diversification does not guarantee protection against all forms of
risk. Real estate investments themselves are subject to market fluctuations, and the
overall performance of the portfolio will depend on the specific assets chosen.
Additionally, real estate investments require careful consideration of property selection,
location, and management, which can introduce risks that need to be carefully
evaluated.

Con's:
Argument 1: Real estate maintenance costs can rise with inflation.
Explanation: Inflation affects the cost of materials, labor, and other inputs required for
property maintenance and repairs. As inflation increases, these costs can escalate,
putting pressure on property owners to allocate more funds for maintenance. This can
reduce the net returns from real estate investments and potentially erode the perceived
inflation hedging benefits.
Example: If inflation pushes up the cost of construction materials, property owners may
face higher expenses when renovating or repairing their properties. The increased costs
can reduce the profitability of real estate investments and erode the anticipated hedge
against inflation.
Counter-Argument: While maintenance costs can increase with inflation, rental income
and property values often have the potential to rise in tandem. The ability to adjust
rental rates and realize capital appreciation can help offset the higher maintenance
costs, allowing real estate investments to remain relatively resilient as an inflation
hedge.

Argument 2: Real estate investments may be illiquid, limiting flexibility during

inflationary periods.
Explanation: Real estate investments are typically illiquid, meaning they cannot be
easily converted into cash or sold quickly. During periods of high inflation, individuals
may require immediate access to liquidity to cope with rising costs or take advantage of
other investment opportunities. The illiquidity of real estate can restrict the flexibility and
effectiveness of using it as an inflation hedge.
Example: Suppose an investor owns multiple properties but faces sudden financial
needs due to inflationary pressures. If they are unable to sell their properties quickly, it
can limit their ability to access funds promptly, potentially causing financial strain and
reducing the perceived advantages of real estate as an inflation hedge.
Counter-Argument: While real estate investments may be illiquid in the short term,
investors can explore alternative options such as refinancing, leveraging the equity in
their properties, or seeking rental income to cover immediate financial needs.
Additionally, careful planning and maintaining an emergency fund can help mitigate the
potential liquidity constraints associated with real estate investments.
Argument 3: Real estate returns may not outpace inflation in all market conditions.
Explanation: Although real estate has generally demonstrated a positive correlation
with inflation, there can be periods when real estate returns fail to outpace inflation.
Factors such as economic downturns, oversupply in specific regions, or changes in
market dynamics can lead to stagnant or declining real estate values. In such scenarios,
real estate may not provide an effective hedge against inflation.
Example: During the 2008 global financial crisis, real estate markets in many countries
experienced significant declines, and property values plummeted. Inflation during that
period did not prevent the decline in real estate prices, illustrating that real estate
returns are not guaranteed to outpace inflation in all market conditions.
Counter-Argument: While real estate returns may not always outpace inflation, the
long-term historical trend suggests that, on average, real estate values tend to
appreciate over time. Investors with a long-term horizon can benefit from the potential
for real estate values to recover and outperform inflation, provided they carefully select
properties and manage their investments.

Argument 4: Real estate investments carry inherent risks and costs.

Explanation: Real estate investments involve various risks and costs that can diminish
the effectiveness of using it as an inflation hedge. These risks include property market
fluctuations, economic conditions, interest rate changes, and potential legal or
regulatory challenges. Additionally, owning and managing real estate incurs expenses
such as property taxes, insurance, and maintenance costs, which can reduce the net
returns and erode the perceived inflation hedging benefits.
Example: Suppose an investor purchases a commercial property but faces challenges
in finding suitable tenants due to changes in market demand. The property remains
vacant for an extended period, resulting in a loss of rental income and incurring ongoing
expenses without generating sufficient returns. In this case, the investor faces risks and
costs that can limit the effectiveness of real estate as an inflation hedge.
Counter-Argument: While real estate investments carry risks and costs, diligent
research, proper due diligence, and risk management strategies can help mitigate these
factors. Thoroughly analyzing market conditions, diversifying property holdings, and
implementing sound property management practices can enhance the potential returns
and minimize the impact of risks and costs on the inflation hedging benefits of real
estate.

Argument 5: Real estate markets can be influenced by factors unrelated to inflation.

Explanation: Real estate values can be influenced by a range of factors, including local
economic conditions, demographic changes, interest rates, and government policies.
While inflation is an important consideration, it is not the sole determinant of real estate
market performance. Therefore, relying solely on real estate as an inflation hedge may
overlook other factors that can impact the value and returns of real estate investments.
Example: Changes in zoning regulations or the development of new infrastructure
projects can significantly affect property values, irrespective of the inflationary
environment. For instance, the construction of a new highway near a property may
increase its value, while changes in local employment prospects may have the opposite
effect. These non-inflation-related factors highlight the need to consider a broader range
of influences on real estate values.

Counter-Argument: While real estate markets can be influenced by factors unrelated

to inflation, the long-term correlation between real estate and inflation

Argument 6: the hedging capacity of housing returns against actual inflation may have
declined in recent decades.
Explanation: estimate of gamma is smaller in the second sub-period,
Example: our analysis does not reveal any positive correlation between total returns of
office property and actual inflation
autocorrelation, however when taking the differences of our data the results became
insignificant

Rent control is an effective means to increase affordability

What do we mean by “affordability” → percentage of income put on rent → very difficult
to evaluate because it does not account for commuting costs, preferences, and income
distribution.

Pros:

7. More affordable housing for student specifically

8. More rent security: higher contract renewal rate → less vacancy rate and more on time
payments
9. Creating a community of renters
10. More money to spend in consumer market
 11. Rent control will indeed lead to less profitability for landlords and thus more properties
sold, however, this supply decrease in the rent market also comes with a supply
increase in the buyable housing market. This will allow more people to buy a house
after their studies (starters).
12. while there is less incentive to implement “comfort” upgrades, sustainability upgrades
are still incentivised to lower utility costs (we see that most properties they want to
control have increased values due to luxury bathroom fittings and guest bedrooms)
→ if utilities are paid by the landlord

cons:

1) reduced quality (less maintenance because rents too low) → instead of increased
affordability → reduced quality of the property
2) less rent tax earnings, which in turn would lead to worse quality of area/city
3) reduced options (CONSTRUCTION)(landlords preferring to directly sell rather than renting
because rent prices will be too low) → less supply, higher prices in the long-term.
4) Health (lack of renovation has an impact on health outcomes) → As Juan and Nils stated in
their paper “Housing condition on health”, “the likelihood of home renovation of poorly
maintained rental homes is less than 5%, prolonging tenants’ exposure to unhealthy housing
conditions”. There is already a lack of renovations on rental housing, rent controls would worsen
this problem, leading to even more health problems on low income population.

13. As rent control is fixed, high earners will benefit more than low earners as they have a
higher willingness to pay for better apartments.
14. (Implement at once? you’d have to as these are legal legislations) A sudden big sale of
properties could be alarming for the real estate market, and even cause a recession.
15. Think about the landlords; mid-market properties are often held by private landlords
who rent out 2-3 apartments as their pension, who are reliant on providing this extra
luxury for extra rent. Big multinationals will create a business model which fit the rent
control (more quantity can be bought due to small landlords having to sell, and renting
out with less quality for less rent).

General Arguments Pro

- Home access for lower income tenants
- Would increase lease renewal rate and thus less vacancy (against: also higher renewal rate
for bad tenants)
- More rent security through on time payments as tenants know what to expect
- Better communities due to less renter turn-over
- Enables low-income population to work in cities (much more opportunity)
- More money to spend which is good for the consumer market
- Spillover effect which makes the whole city united/equal
- Increases supply of houses
- More incentive to sell properties rather than rent out = Average people can buy rather than
big corporations buying and renting out
- While rent control doesn’t incentive “comfort” upgrades, it does still incentive sustainability
improvements (to lower utility costs)
General Arguments Con
- No incentive to upgrade maintain when the max rent is already asked
- Same property tax (large share), less income: less profit
- Lower rent tax for the local municipality
- Less demand (less profitable)
- Real estate market might fall behind as less people want to invest in real estate: people
selling a lot of assets would be alarming
- Because it is a fixed limit, high earners benefit more than low earners
- Landowners will opt to sell rather than rent out = less opportunities for students with debts
(as they can have trouble buying)
- mid-market properties are often held by private landlords who rent out 2-3 apartments as
their pension, who are reliant on providing this extra luxury for extra rent. Big multinationals
will create a business model which fit the rent control (more quantity can be bought due to
small landlords having to sell and renting out with less quality for less rent).

Background literature

In the Netherlands, current rent is only controlled for social housing with a maximum price of
763 euros. They are, however, planning to also control rent for 150,000 mid-market rents which
will be at a price of between 1,000 and 1,250 euros (in 2024).
https://www.dutchnews.nl/2022/05/dutch-to-expand-regulated-housing-sector-limit-for-
rent-controls-to-rise/

There is already evidence that private landlords are starting to sell their properties once the
tenants have moved out, in anticipation of the rent control. These mid-market properties are
often held by private landlords who rent out 2-3 apartments as their pension.
https://www.dutchnews.nl/2023/03/new-rent-control-plan-bites-more-apartments-are-being-sold-
off/

Four quadrant model

If rent prices are capped → Property prices will go down → construction will go down → supply
will go down
Not interfering with rent control would result in an open market, where an equilibrium will be
reached.

Literature Mixed results

Examining the efficacy of rent control: an empirical analysis for consideration of rent
control in Seattle (washington.edu)

Literature cons

Out of control: What can we learn from the end of Massachusetts rent control? - ScienceDirect
The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from
San Francisco - American Economic Association (aeaweb.org)

Real estate developers must be required to allocate a certain

percentage of their projects to affordable housing.
Arguments For the Statement:
Ensuring government meets their targets (https://www.dutchnews.nl/2023/03/the-dutch-
housing-market-what-exactly-is-the-government-doing/)
· Housing shortage is predicted to increase
· The government wants to ensure two thirds of all new housing developments are affordable.
However, they too failed to meet commitments last year (2022), producing 25% fewer new
homes than planned
· Moreover, the high price of raw materials and increased borrowing costs that make it so
developers are less likely to pursue new development projects, meaning they need a push to
reach the target and improve the housing shortage currently happening in the Netherlands

Social Inequality
· Opportunity to rent a house to low income groups
(https://www.theguardian.com/world/2023/mar/15/netherlands-housing-crisis-dutch-
elections)
o Years of government have left building to the market, creating a situation where many
are priced out and cannot find an affordable house to buy, or to rent
o The average home costs €424,681, more than 10 times the modal income.
o According to a book written by Dr Cody Hochstenbach, an urban geographer at the
University of Amsterdam: “The number of homeless people has doubled, a quarter of
renters struggle to pay their bills, class differences have become much more acute and
young people are having a tough time, findings a home
o Insufficient housebuilding in the past decade is the obvious cause
o By requiring developers to allocate a certain % to affordable housing, we would be
giving people of lower incomes, and younger people, the opportunity to rent a home.
 · Improve health benefits (https://www.tn.gov/content/dam/tn/health/documents/healthy-
places/healthy-homes/CHP_Positive_Health_Affordable_Housing_2007.pdf)
o Housing is often cited as an important social determinant of health, recognising the
range of ways in which a lack of housing, or poor quality housing, can negatively affect
health and wellbeing (Rolfe, S., Garnham, L., Godwin, J. et al. Housing as a social
determinant of health and wellbeing: developing an empirically-informed realist
theoretical framework)
o Affordable housing may improve health outcomes by freeing up family resources for
nutritious food and health care expenditures.
 Families paying excessive amounts of their income for housing often have
insufficient funds remaining to meet other essential needs, including food,
medical insurance and health care. These tradeoffs threaten the health of their
children. Several studies have found that children in low-income families that do
not receive housing subsidies are more likely to suffer from iron deficiencies,
malnutrition and underdevelopment than children in similar families receiving
housing assistance
o By providing families with greater residential stability, affordable housing can reduce
stress and related adverse health outcomes
 At the extreme, there is little question that residential instability has adverse
health impacts. An emerging body of evidence also suggests that less-severe
manifestations of instability related to housing affordability, such as difficulty
keeping up with mortgage payments or home repairs, may be linked to lower
levels of psychological well-being and a greater likelihood of seeing a doctor.
o Well-constructed and managed affordable housing developments can reduce health
problems associated with poor quality housing by limiting exposure to allergens,
neurotoxins and other dangers
 When families have few affordable housing options, they may be forced to live
in substandard housing that puts residents at risk of lead poisoning, asthma and
accidental injury. Despite a major public health effort, many low-income families
still live in homes that have lead-based paint hazards. Poor quality or poorly
maintained housing may also be overrun with mold, dust mites, cockroaches
and rodents — all of which are sources of allergens that cause asthma and other
respiratory illnesses.
· Less crime
o a study from Rebecca Diamond and Timothy McQuade of Stanford Business School,
finds that in low-income neighborhoods, the introduction of affordable housing
decreases crime and decreases segregation
(https://www.vox.com/2016/5/2/11568262/low-income-housing-impact)

Increase the size of market (supply)

· Increase liquidity
o More supply
 o Houses are not being sold ( In total, only 5,766 new-build owner-occupied homes were
sold to consumers: https://woningbouwersnl.nl/persbericht-verdere-daling-
nieuwbouwverkoop-is-zorgelijk-voor-woningbouwdoelen/) this means developers will
also stop buildings. By making sure developers allocate a % to affordable housing, in
ensures supply increases
o Easier to get permits, so we fix two problems at the same time
· Developers have a project they wouldn’t otherwise have
· By building subsidies for social housing the real estate market is accelerated (or easier permits)
o Including social housing units in a development can potentially improve developers'
access to financing options. Some financing programs or government incentives are
specifically designed to support the inclusion of social housing, like subsidies
 The Dutch government has announced a 253 million-euro investment into the
construction of 44.277 new homes in the Netherlands. 64% of these properties
will be classified as affordable housing.

Improve economy
· By buildings affordable housing, you can keep price of housing stable and avoid a bubble
· Generate jobs in construction industry
(https://www.opportunityhome.org/wp-content/uploads/2018/02/Housing-and-Economic-
Development-Report-2011.pdf)
o The Initial Development of Affordable Housing Creates Both Immediate and Long-Term
Employment Opportunities and Spending in the Local Economy
o According to a report by the Center for Housing Policy, research consistently shows that
developing affordable housing creates jobs — both during construction and through
new consumer spending after the homes have been occupied. The impacts of building
certain kinds of affordable rental housing are on par with the impacts of comparable
market-rate units.
· By not just focusing on paying rent, people can follow some other projects that benefit the
economy
o One argument supporting the requirement for developers to allocate a certain
percentage of their projects to social housing is that it allows individuals to move
beyond the sole focus of paying rent and enables them to engage in other projects that
benefit the economy. By providing affordable housing options, individuals and families
have the opportunity to allocate their financial resources towards other essential needs,
such as education, healthcare, and entrepreneurship. This broader financial flexibility
not only improves the overall quality of life for residents but also empowers them to
actively contribute to the economy through increased consumption, savings, and
investment. By alleviating the burden of high housing costs, social housing enables
individuals to participate more fully in the workforce, pursue education or training, start
businesses, and engage in activities that promote economic growth and social mobility.
Consequently, the requirement for developers to include social housing not only
 addresses housing affordability but also fosters a more inclusive and prosperous
economy for all

Arguments Against the Statement:

Supply and Demand should cover it:
· If you affect the market you get inefficiencies
· Deadweight loss from top price regulations
· Regulations are usually lagging so letting the market act is faster and less artificial/ forced

Decrease the value of homeowner value

· People that bought a house for a lot of money would be losing a lot of value -> poticial backlash
· People use them as value keepers and this would go completely against this idea, even
conditioning future household (normal people) investors to not trust houses as investments any
more.
· Ruin real estate market and prices

Not profitable for developers

· Investments related to real estate would be negatively affecter, sometimes to the point of
making developments projects not worth anymore. Stop production. For example in 2022:
50,000 homes per year instead of the intended 100,000 in the near future. And we shouldn’t
repeat it
· It would force some developers to move out of the market as it become less convenient. Maybe
to office real estate