The origins of ground lease in Amsterdam
The introduction of ground lease in 1896 marked a turning point in Amsterdam’s land policy. The municipality decided to stop selling municipal land and instead issue it on a long lease. This policy was meant to combat speculation with building land and give the city a grip on spatial development. Proceeds from the canon were used to finance communal facilities, such as infrastructure.
In the first decades, these were temporary ground leases, with a set end date. However, this proved unsustainable. When a leasehold contract expired, uncertainty arose for residents and financiers because the right was not automatically renewed. Banks were reluctant to provide mortgages for houses on temporary long leases. Therefore, Amsterdam switched to perpetual ground lease in 1915, whereby rights were automatically renewed in fixed periods of 50 or 75 years.
The move to perpetual ground rent
In 2017, Amsterdam implemented a major reform: the introduction of perpetual ground lease. This system, where conditions and canon payments are fixed forever, offers more predictability and stability. Residents and financiers know exactly where they stand. It avoids the big financial shocks that previously arose when reviewing a period.
Yet there were also challenges. The switch to perpetual ground rent was especially tough financially. The municipality worked with neighbourhood street ratios, in which the land value was calculated as a percentage of the house value. In some areas, such as the south part of Amsterdam, these percentages could be as high as 50 per cent. For many homeowners, it was difficult or even impossible to raise this amount at once. Although the municipality offered favourable conditions, switching remained a financial barrier for many people.
Advantages and criticisms
Perpetual ground rent has important advantages. The system provides legal certainty and eliminates the unpredictable increases in canon that previously caused problems. It is also closer to full ownership, which makes houses more attractive to buyers. In addition, the stable income allows the municipality to invest in urban development.
At the same time, there is criticism. For some residents, the switch remains too expensive. Older residents see little benefit in the switch and often decide to wait and see. Moreover, the new system does not yet apply to all types of property. Business and social real estate, for instance, are excluded from the current scheme, creating a fragmented system.
A future with leasehold
The leasehold system has proved to be a dynamic instrument over the years. Whereas it was introduced in 1896 to combat land speculation, it is now primarily a means of making property more accessible and stable. Nevertheless, it remains important to further simplify and modernise the system.
Some experts advocate the possibility of converting leasehold to full ownership in certain parts of the city. This would reduce the administrative burden for the municipality and give residents more freedom. At the same time, ground rent could remain a valuable tool in other situations, such as business sites or housing associations.
In short, Amsterdam has taken a big step towards a more stable and fair system with the switch to perpetual ground lease. Although challenges remain, such as financial accessibility and extending the scheme to other property categories, the system offers significant advantages. For residents and financiers, there is more security, and for the municipality, the revenues remain available for the development of the city.
Leasehold remains a live topic of discussion and adaptation. With the right steps, the system can contribute to an inclusive and resilient city, where the balance between ownership, development and common interests is central.
Curious about the other blogs in this Amsterdam Commercial Spirit blog series, click here, or listen to the podcast series here.
