The house bonus ("woonbonus" in Dutch) was introduced in 2005. Under the system, house buyers enjoy a major tax benefit, as part of the monthly mortgage is tax-deductible. The amount gained via the annual tax return can equal 2 or 3 monthly mortgage payments.
The original purpose was to make housing more affordable. However, in practice it meant that people took out bigger loans to buy the house or apartment of their dreams, as they know they would enjoy a bigger tax return. This resulted in a price hike: more money was being paid for houses, house owners asked a higher price and got it.
The mechanism had the wrong effect. Experts highlighted this negative trend in the past, and it is now confirmed by the KU Leuven study. The biggest price hike took place between 2005 and 2008, immediately after the "woonbonus" was introduced.
Researchers conclude that the system has completely missed its goal. "The tax benefit is simply used to buy a more expensive house", says researcher Frank Vastmans. He adds that's it's mainly the rich that benefitted from the system. 72 percent of the budget ended up with the 40 percent highest incomes, researchers calculated, while only 8 percent ended up with the 40 percent lowest incomes. The "woonbonus" widened the gap between rich and poor.
"Single people paid the bill"
Single people were the biggest victim of the house bonus, researchers conclude. They can only win back half of what couples can receive through tax benefits, but are being confronted with higher property prices, caused by couples that can take out bigger loans and have more cash available. Buying a decent house on your own account in big cities like Ghent, Antwerp or Leuven has become almost unaffordable for single people.
The house bonus is costing the government an arm and a leg. Where it used to be a federal responsibility, it will now become a regional power. The issue will be in the hands of the Flemish government. Experts are advising the government to reduce the tax benefit very slowly but surely. It would be wrong to abolish it altogether, as this could the housing market to crash.