Annual rent increases in the regulated segment require an annual update of the WOZ component in the WWS point system

The WOZ value of a property changes every year. As a result, the total WWS points and the maximum reasonable rent also change. Landlords in the regulated segment who do not keep track of this on a property-by-property basis run the risk of implementing rent increases that are not permitted.

Many landlords in the regulated segment assume that the point total calculated at the start of the lease agreement remains the fixed basis for all future rent increases. That is incorrect, and this misconception can lead to errors. In this blog, I’ll explain how the system works and what you, as a landlord, need to do each year.

Two Limits on Rent Increases

When it comes to an annual rent increase, it’s not just the well-known maximum increase percentage based on the CPI index or collective bargaining agreement wage growth that applies. There’s also a second limit: the rent may never exceed the maximum reasonable rent under the WWS.

It is therefore not enough to simply multiply the current rent by the permitted increase percentage. Landlords must also verify that the new rent falls within the maximum reasonable rent for the property as it stands at that time.

The Role of the WOZ Value in the Current WWS Point System

The WWS point system at the time the lease agreement is entered into determines whether a property falls under the regulated or the liberalized segment. However, when determining the maximum rent allowed for a subsequent annual increase, the current WWS point system at the time of the rent increase also plays a major role.

Fortunately, landlords do not have to recalculate the entire WWS point system every year. Most components of the WWS are static. However, there is one component that fluctuates structurally each year: the WOZ value (section 11 of the WWS). This component must be updated annually based on the most recent WOZ assessment.

How does the WOZ component work in the WOZ point system?

The Residential Rent Decree uses a cohort system. The reference date of the WOZ assessment determines which calculation figures are used. The calculation figures are indexed annually and are linked to that reference date. This prevents the total point score from changing solely due to the indexation of the calculation figures.

The calculation factors are adjusted annually so that a residence with an average WOZ value trend remains the same in terms of points. The amounts in Section 11.1 of the Decree are adjusted each year as of January 1 to reflect the average change in owner-occupied home values.

If the rental property in question experiences a value change comparable to the national average, the WOZ point total will hardly change. Only properties with a significantly different value change will actually see a fluctuation in their point total. This makes the annual update, in most cases, a simple check rather than a major administrative project.

The calculation consists of two steps that are added together.

Step 1: Points based on the absolute WOZ value:

• Reference date January 1, 2025: 1 point per €16,954

• Reference date January 1, 2024: 1 point per €15,329 

Step 2: points based on the WOZ value per square meter (rooms, other spaces, and Type I parking spaces);

• Reference date January 1, 2025: 1 point per €268 per m²

• Reference date January 1, 2024: 1 point per €242 per m²

Calculation example: A home with a WOZ value of 398,000 euros and 70 m² of floor area (reference date January 1, 2024) yields approximately 25.96 points in Step 1 and approximately 23.49 points in Step 2. Total: rounded to 49.5 WOZ points.

The WOZ cap: no more than 33 percent

The share of WOZ points in the total point total is capped at 33 percent. Therefore, a rising WOZ value does not result in an unlimited increase in points. This limitation does not apply to homes up to 40 m² built between 2018 and 2022 and located in the Amsterdam or Utrecht COROP area, nor to homes that would already score fewer than 187 points without this limitation.

Protection of Segment Status in the Event of a WOZ Decrease

This is an important consideration for landlords of deregulated housing. A residence that has more than 186 points at the start of the lease will not revert to the regulated segment during the term of that lease if the WOZ value decreases. The segment status therefore does not change due to a decrease in the WOZ value as long as the lease agreement is in effect. This changes when the lease agreement ends and a new one is entered into.

This is particularly relevant for recently concluded lease agreements

In practice, the issue of WOZ fluctuations is most relevant for recently concluded lease agreements in the mid-range segment. There is a simple reason for this.

With the Affordable Rent Act taking effect on July 1, 2024, the WWS will also apply to homes valued at up to 186 points. For leases entered into after that date, the initial rent is set at or close to the maximum reasonable rent. There is virtually no margin between the actual rent and the ceiling.

The situation is different for long-term lease agreements. The actual rent has built up over the years through annual increases, each of which was capped by the maximum increase percentage. As a result, the rent for older contracts is generally well below the maximum reasonable rent. In such cases, the increase percentage is the limiting factor, not the WWS ceiling.

Is a decline in the WOZ value unusual?

Less so than you might think. During the financial crisis from 2009 to 2013, home values in the Netherlands declined. Even after the correction in the housing market in 2022 and 2023 due to sharply rising mortgage rates, many landlords received a lower WOZ assessment in 2024 than in the previous year.

Declines in WOZ values are a real and cyclical phenomenon. The reference date system causes some delay: a market decline in 2022 wasn’t reflected in the 2024 WOZ assessment until 2024.

New-Construction Surcharge: A Separate Story

The maximum rent for a mid-priced rental property may be increased by 10 percent if the property was first occupied after July 1, 2024, and construction began before January 1, 2028. This new-construction surcharge applies for 20 years, even for successive lease agreements within that period.

There are two important things to know here. First, the surcharge does not affect the point system itself. It is an increase on top of the maximum rent resulting from the WWS point system. Second, the absolute amount adjusts automatically because the 10 percent is calculated each time based on the then-current, already-indexed maximum rent.

Steps Landlords Must Take

Step 1: Determine the maximum increase percentage for that year and calculate what the new rent would be.

Step 2: Use the most recent WOZ assessment, determine the reference date, and calculate the current number of WOZ points using the corresponding calculation factors.

Step 3: Verify that the share of WOZ points does not exceed 33 percent. The cap does not apply to dwellings that would score fewer than 187 points even without the cap, nor to dwellings subject to the COROP exception.

Step 4: Using the applicable points-to-price table, determine the maximum rent limit resulting from the WWS points calculation. Are you eligible for the new-construction surcharge? If so, add 10 percent to this amount. For new-construction homes with the surcharge, the result may exceed the maximum rent limit derived from the points calculation alone.

Step 5: Compare the result from Step 1 with the result from Step 4. The lower of the two results is the maximum amount by which the rent may be increased.

Step 6: Draft the rent increase proposal and submit it in a timely manner in accordance with legal requirements.

In conclusion

The annual rent increase in the regulated segment requires annual consideration of the WOZ value. For most properties with average value growth, the impact will be limited. The risk lies primarily with recently leased mid-range rental properties where the rent was already at or near the maximum at the start of the lease, and with properties in regions experiencing significantly divergent WOZ value trends.

Do you have any questions? Feel free to contact us.