Survey: earthquake risk undermines Groningen housing market and quality of life

News - 21 February 2016 - Webredactie Communication

Researchers from Delft University of Technology and CMO/Stamm have been investigating the housing market in earthquake-prone areas of the Dutch province of Groningen. On 21 January, they presented their conclusions and recommendations to the National Coordinator for Groningen (NCG). Based upon their findings, they advise the NCG to continue the existing property-value enhancement scheme , offer greater certainty to people wanting to sell their homes and introduce a broader guaranteed purchase scheme for blighted properties.

Reduced quality of life

The survey shows that members of almost one in three households – more than 15,000 people – in the affected local authority areas* feel unsafe due to the earthquakes induced by natural-gas extraction. And almost 4,000 households face psychological problems as a result of earthquake-related issues. 

Since the strong Huizinge tremor of August 2012, the perceived quality of life in earthquake-prone areas has worsened considerably. In that year, it was comparable with the rest of the Netherlands, but by 2015 had fallen to one of the lowest levels in the country. 

Little confidence in the Government

Many people living in the affected areas have lost more or less all confidence in the Dutch Government. They do not believe that it and gas production company NAM are doing enough to tackle the negative effects of the earthquakes. There is a widespread feeling that the government has sided with NAM and is avoiding full responsibility for the problem. The way in which claims are handled, and the procedures surrounding them, are a cause of great concern and frustration for local residents. 

Housing market under pressure

Due to a combination of population decline and the earthquake risk, the housing market in the affected areas is no longer functioning normally. Taken together, these two factors represent a toxic cocktail for the future. 

The post-crisis recovery of the housing market in the earthquake-prone areas is lagging behind the rest of the province (not including the municipality of Groningen) and the Netherlands as a whole. This is evident from the number of homes for sale, the number sold, the prices, the length of time on the market and the difference between asking and selling prices.  

Broader guaranteed purchase scheme

The NCG’s current plans include a limited guaranteed purchase scheme for blighted homes. This would be confined to properties which cannot be strengthened quickly enough to ensure the safety of their occupants or would cost more than their market value to repair and/or strengthen. There are also provisions for purchasing other blighted homes in “cases of distress”.  

However, the researchers recommend that this arrangement be extended to cover all homes which cannot be sold at a reasonable price within a reasonable period. The best model to follow would be the so-called “Moerdijk scheme”, under which the nominal current value of a home is calculated by indexation of its historical Property Tax (WOZ) valuation to the present day. 

Property-value compensation scheme

One major negative effect of the earthquake problem is uncertainty surrounding the current value of residential properties. At present, any compensation for loss of value is only calculated following a sale. But the researchers believe that a good compensation scheme should be straightforward and transparent so that homeowners can calculate in advance how much they will be entitled to. The current scheme should therefore be revised and possible alternatives developed. 

Monitoring

Finally, the researchers recommend that an independent body be established to monitor quality of life and the housing market in the earthquake-prone areas, and to propose any necessary follow-up research. This would ensure that we maintain a complete and up-to-date picture of the situation in the long-term, building upon the “snapshot” provided by the present survey. 

* Appingedam, Bedum, De Marne, Delfzijl, Eemsmond, Loppersum, Slochteren, Ten Boer and Winsum.  

More information   
Download the full Groningen earthquake areas: Housing market and quality of life survey (in Dutch).   

For more information about the survey, please contact Prof. Peter Boelhouwer of Delft University of Technology on +31 (0)6 4887 5642.

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