Creating affordable cities: the urban investment challenge

The creation of affordable, inclusive cities is a key concern globally. The Holland Metropole alliance, a network of 30 developers, investors and local authorities, has put creating value through urban investment at the heart of its approach. Robin Pascoe reports.

The Netherlands has the biggest shortage of residential property in Europe and, the founders of the Holland Metropole alliance say, this makes the country an attractive option for long-term, stable investment in affordable housing.

Within the alliance, the public and private sectors are working together to help meet official targets to build 900,000 new homes in the coming years. Of those, some 300,000 will require capital from institutional investors.

The shortage of housing requires a significant investment, says Mark Siezen, chief executive of Bouwinvest, which manages real estate portfolios for institutional investors. “It’s a situation that offers interesting opportunities in the Holland Metropole for both international and Dutch investors.”

The Holland Metropole is one of the most important economies in the world and, according to 2023 research by urban intelligence firm The Business of Cities, the region has rebounded from the pandemic faster than its global competitors.

Fast and reliable digital connections are driving confidence and demand, while the region has been able to develop a much deeper pool of well-educated people, through both its own universities and new arrivals. According to global data platform Dealroom, the region is now the number two innovation ecosystem in Europe by value and number of start-ups.

The Dutch real estate market is mature, liquid and transparent, offering excellent opportunities for investors and developers and strong residential returns. In particular, the region offers high growth potential for institutional investors that provide affordable housing for its growing population.

“The range of companies and institutions now moving to the Holland Metropole is a big vote of confidence in its combined scale and complementary value propositions of the five cities,” states The Business of Cities’ report. “The region remains firmly near the top of the foreign investment charts.”

Climate change targets

Across the Dutch real estate sector, climate change targets are becoming increasingly important. To that end, the themes of circular construction, carbon emission reduction and water management are at the forefront of the Holland Metropole’s approach, whether it is from local authorities, developers or investors.

Construction group Dura Vermeer has developed a net zero strategy which the company hopes will impact on its partners and clients as well. “We are here for society, not the other way round,” says real estate divisional director Marieke Mentink. “We have an obligation to do everything we can to have a positive impact.”

Above: The Dommel project involves redeveloping the area around Eindhoven’s main railway station
Below: Little C is part of a major upgrade of the Rotterdam Coolhaven waterfront

Anjelica Cicilia, acquisition and development director at Achmea Real Estate, points out the importance of ESG in attracting investors in today’s market. “ESG is not only important to our investors. but is a key part of our strategy to meet UN development goals,” she says. “Our investments not only have to be sustainable but also focus on the social impact. And affordability is very important because we are looking for long-term, stable investors and meeting the needs of home hunters.”

Real estate investor Vesteda also sees improving its sustainability performance as a key way to safeguard the attractiveness of its funds and its long-term risk/return ratio, says head of acquisitions René Tim. “We also aim to use circular materials, increase biodiversity around our complexes and improve the climate adaptivity of our portfolio.”

Circular construction

Developer VORM focuses on using timber, on top of circular construction techniques and biobased materials. “It is all about making the maximum impact for the minimum footprint,” says chief executive Hans Meurs.

Bouwinvest’s Siezen sees public-private partnerships, such as Holland Metropole, as the cornerstone for advancing sustainability in real estate, particularly in the face of escalating climate change. “As our planet grapples with the consequences of environmental shifts, the real estate sector can play a pivotal role in mitigating these impacts,” he says.

Developer AM also highlights the importance of working together to bring about change. “It is both important and necessary to work together with different local authorities to make sure the owner-occupier market is accessible to everyone, through social purchasing, socially-linked ownership and other forms of financing,” says AM chief executive Ronald Huikeshoven.

AM and the city of Amsterdam, for example, are working together on the GEINS project in the Zuid-Oost district, which falls under a special scheme for first-time buyers. Of the 90 apartments, 60% are affordable ownership with a price cap of €250,000 per unit. If sold within five to 10 years, any profit will be split between owner and developer.

ESG, sustainability and affordability are also at the centre of developer Heijmans’ strategy. “These are important themes, not just because of laws and regulations, but because our clients are increasingly asking about them,” says the company’s sustainable development director Robert Koolen.

Energy-neutral homes

Nevertheless, practical steps to boost sustainability and make sure the theories actually work is key. Eindhoven city council and developer Amvest are among the main backers of the Living Lab 040 project. This is a development of 119 experimental housing units to test and try out technical and other innovations in real living situations, with residents, companies, local officials and scientists.

In Amsterdam, thousands of new homes and residential districts are being created on artificial islands. The city is aiming for energy-neutral homes with neighbourhood mobility hubs where people can park their cars and pick up a shared car, scooter or bike. The same theme of car-free, energy-neutral, sustainable development is reflected across the housing strategies in Rotterdam, The Hague and Eindhoven.

Another first is the Cartesius development, inspired by the Blue Zones, which aims to be a sustainable, inclusive, and healthy neighbourhood of some 3,000 homes in the centre of Utrecht. The project is also included in the World Health Organisation’s Healthy Cities programme and residents’ wellbeing will be monitored by scientists to see how area developments can contribute to better health.

The Holland Metropole approach is helping stimulate a different way of thinking about real estate development and its impact on the lives of people who will live there. Investors are also interested in this kind of project.

“We no longer just look at a building to see how sustainable it is,” says Achmea Real Estate’s Anjelica Cicilia. “Our strategy is focusing more on things like the social value and the environmental impact.”

For more on foreign direct investment see the October edition of RealFDI