Homeowner vulnerable: ensure responsible financing of foundation repair
Half a million private homeowners have a vulnerable foundation. For more than 120,000 of them, repair is needed – a task totaling €11 billion. Most cannot pay their own repair costs immediately. And for more than 25,000 homeowners, taking out a loan appears not to be responsible, as shown by our research. Foundation repair must be financed in a responsible manner, according to the AFM. This is to make and keep the financial risks for private homeowners manageable. We provide four concrete action points for addressing the foundation problem.In short
- Postponing foundation repair can lead to rising repair costs, declining property values and increased residual debt risks
- €11 billion repair task – at the expense of 120,000 homeowners with the highest foundation risks
- 25,000 owners appear unable to borrow responsibly to cover the costs of foundation repair
- 4 actions for the financial sector and stakeholders for timely identification of foundation risks and responsible financing
- We will actively engage with stakeholders to arrive at solutions
Postponing foundation repair can lead to rising repair costs, declining property values and increased residual debt risks
Foundation problems entail substantial financial risks for private homeowners. Damage is not insurable and owners must, in principle, pay the costs of foundation repair themselves. Postponing repairs can worsen the problems and lead to higher repair costs, with a possible risk of residual debt upon sale of the home. Foundation problems therefore need to be identified and addressed in a timely manner, according to the AFM. Private homeowners must also be able to bear the costs of foundation repair in a responsible way.
€11 billion repair task – at the expense of 120,000 homeowners with the highest foundation risks
More than 120,000 homeowners suffer from such foundation problems that repair is necessary. The total foundation repair task for this group is estimated at €11 billion, according to our study ‘Foundation repair: financeable for homeowners?’. A study that for the first time zooms in on the foundation problem at the level of the private homeowner. The study therefore provides insight into both the total and the individual financing task associated with foundation problems.
25,000 homeowners appear unable to borrow responsibly to cover the costs of foundation repair
For the ‘typical owner’, repair costs are €54,000, but €92,000 on average. More than 75,000 homeowners lack sufficient liquid assets – including bank balances, savings and investments – to finance full foundation repair directly. This means that a total of €6 billion in repair costs cannot be paid out-of-pocket. Taking out a loan is then an option, but for more than 25,000 homeowners this does not appear to be responsible. This suggests that €3 billion of the total €11 billion task cannot be financed responsibly.
4 actions for the financial sector and stakeholders to identify foundation risks in a timely manner and to finance foundation repair responsibly
Beyond the financing issue, the complexity of the foundation issue makes it unrealistic to place full responsibility for remediation solely on individual homeowners. Collective action is therefore required. The AFM urges the sector and stakeholders to collaborate on the basis of their respective roles and responsibilities in addressing both the foundation issue and the associated financing challenge. We see four action points:- Provide easily accessible, property specific and reliable information on foundation risks for homeowners. The Ministry of the Interior and Kingdom Relations (BZK), municipalities, estate agents and housing platforms play a key role here.
- Ensure the availability of standardised foundation risk information during orientation, purchase, valuation and financing processes, for example by incorporating mandatory foundation risk components into property valuations or through a standardised foundation risk indicator. Relevant stakeholders include the Ministry of the Interior and Kingdom Relations, the Netherlands Register of Real Estate Valuers (NRVT), estate agents and housing platforms.
- Examine how financing opportunities can be utilised more effectively or strengthened in a responsible manner. Here, mortgage lenders, the Dutch Banking Association (NVB), National Mortgage Guarantee (NHG) and policymakers play a central role.
- Explore potential additional measures to reduce the financing gap. We see a role for mortgage lenders, the Sustainable Foundation Repair Fund and policymakers.
We will actively engage with stakeholders to arrive at solutions
With this report, we explicitly place the financing of foundation repair on the public policy agenda, and in our capacity as supervisor we will actively engage with involved parties to seek effective solutions. Furthermore, it is important to continue paying attention to foundation risks that may arise in the longer term. With preventive measures, such as groundwater management, (further) foundation problems in the future can in fact be prevented.
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