(Bloomberg) -- The Dutch government is set to impose rents caps on more than 300,000 homes to provide more affordable housing for middle-income tenants amid a crippling shortage.

Under the plan, the rental price of those homes will be cut on average by €190 ($202) a month when the new measures come into force in January 2024.

Housing Minister Hugo de Jonge wants to expand rent controls currently in place for social housing to apply to all homes valued at up to 187 points under the Dutch housing valuation system. Pricing will be indexed annually with inflation and when the law comes into effect from January 2024, those properties will carry a maximum monthly rent of around €1,100. 

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Middle-income earners such as teachers, nurses and police officers are struggling to meet rising rent demands due to the “enormous scarcity” of homes, said the minister. The valuation system will also become mandatory, which means that landlords who fail to comply with the maximum rents risk fines.

Corporations and institutional investors want to build 100,000 homes for middle-income earners by 2030, the government said in a statement. With increased regulation, tenants will gain more protections and landlords will be more willing to invest in the sector, it added. 

Not everyone agrees with that rationale. Peter Boelhouwer, professor of housing systems at TU Delft University, warned there may be less building activity and landlords may be tempted to sell the properties. The measures coupled with rising interest rates risk exacerbating the country’s housing shortage, he said.

“If we’re looking at our building permits, in the last five quarters it’s already going down,” Boelhouwer told Bloomberg. “If investors and institutions build less houses and also because of the high interest rates, then it becomes more difficult to build homes. Then the whole housing production can become jeopardized.”

The Netherlands is already the European country with the highest number of social rental properties, according to a study by the OECD. The government expects that by 2024 more than 90% of social and medium rental properties in the Netherlands will eventually be rented out for less than €1,000 when a new lease is signed. 

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