The Dutch tax system allows the mortgage interest to be offset against income tax. Home owners with high incomes see the major part of their mortgage subsidised for 52% by the government. From time to time politicians dare to discuss this “mortgage allowance” (“hypotheekrenteaftrek”). The use of the “m-word” however always leads to a public outcry.



Recently Dutch employers attacked oppenents of the mortgage allowance frontally. A memorandum of the Confederation of Netherlands Industry and Employers (VNO-NCW) and the small and medium-sized enterprises sector (MKB-Nederland) states that every intervention is bad for the economy. Chairman Bernard Wientjes says abolishment of the mortgage allowance will harm the economy, the construction sector in particular. Up till now, only the left wing parties want to abolish the mortgage allowance.

Labour leader Wouter Bos (PvdA) says he wants restrictions but not abolishment. He repeats that PvdA wants to limit the rate to 42%. The millionaires must hand in, not the average man in the street. Earlier however, a report of the PvdA states this limitation to 42% would be the first step towards abolishment.

The next step would be a compensation for the expenses of living. Like the rental subsidy this would be primarily for the lower incomes. But the employers make out a case for the opposite:

- people with 52% mortgage allowance also pay 52% tax

- the cause of the shortage on the house market is lack of houses and circulation

- many home owners have fixed their interest rate for a long time

- renters are favoured over owners

- abuse of the mortgage allowance is already dealt with

The Dutch government dealt with the allowance in various ways. First of all, home owners can only offset their mortgage interest of the main home. Secondly, there's a maximum of 30 years. Third, when you raise your mortgage, the extra sum can only be offset when it is actually used for home improvement.

Wientjes concludes his plea with a final argument. People with higher incomes will have to buy cheaper homes when the allowance is restricted, which in turn will lead to shortage and price increase in the lower segment.

This will certainly not be the last time the M-word causes exitement in the Dutch public debate.