Modernization of cost recovery: the current situation

From Minister Keijzer's letter to the coalition agreement "Getting started"

Shortly after the fall of the Schoof Cabinet last year, outgoing Minister Keijzer (BBB) of the Ministry of Housing and Spatial Planning sent a letter to the House of Representatives about cost recovery. This letter builds on earlier letters from the minister and her predecessor, Minister De Jonge (CDA), on the modernization of land policy in a more general sense.

The reason for the desired modernization is that the cost recovery usually does not cover all public costs. This has to do with the following. In the current legal system of public law cost recovery under the Environment Act (as under the previous law, the Spatial Planning Act), it is assumed that the municipality acquires all land, makes it suitable for construction and habitation, and then sells it. The acquisition costs of the land – the contribution value – are therefore an expense item. The current system also includes the concept of macro capping: costs cannot be recovered in excess of the proceeds from the area development. In the case of high contribution values – for example, existing inner-city real estate – not all costs can therefore be recovered, so that the municipality is usually left with a public deficit.

With this letter, the minister aims to implement the (outgoing) cabinet's policy program. The objective stated in the program is to finance public investments that are necessary for accessibility and the realization of affordable housing as much as possible from the increase in land value. In the letter, the minister proposes to the House of Representatives how this can be achieved: firstly, by intensifying and expanding the existing cost recovery instruments, and secondly, by initiating a legislative process to adjust the valuation basis of the contribution value for cost recovery to the value in use.

The coalition agreement of January 30, 2026 also addresses the modernization of cost recovery, as mentioned above. It refers to an instrument "whereby private profits of landowners can be used more publicly for, for example, facilities and infrastructure where expanding cost recovery is the fastest and most suitable option."In doing so, the coalition appears to be building on Minister Keijzer's letter, which for that reason still seems relevant. With the words "the fastest and most suitable," the coalition agreement seems to be moving away from the alternative instrument of the planning gains levy, which I will discuss in more detail below.

Intensification and expansion of cost recovery

The (outgoing) minister is therefore fully committed to intensifying and expanding cost recovery. What does the minister have in mind? First of all, the minister wants to increase the accountability of costs. Under the current public law system—the cost recovery rules in the environmental plan—costs can only be recovered if they meet the criteria of benefit, proportionality, and accountability (the so-called PPT criteria). These criteria do not apply directly to prior agreements involving cost recovery, but they do have a shadow effect. It is not the intention that a municipality should recover substantially more through an anterior agreement than through the public law system. Attributable means that there must be a causal link between the costs incurred or to be incurred and the cost recovery area (think of a ring road that is being built specifically for a new residential area and would not have been built without the realization of the residential area).

In order to make these costs more attributable, the minister is considering relaxing or broadening the criteria for attributing a number of specific types of costs. This would enable a municipality, for example, to attribute a larger proportion of the costs of a ring road to a new residential area. The minister is also considering predetermined fixed contributions. However, working with fixed, lump-sum contributions has its disadvantages. Such a lump-sum system leaves less room for customization and flexibility. It does not take actual costs and revenues into account. Furthermore, the question arises as to how a flat-rate system relates to macro capping (not recovering more costs than revenues). If you apply macro capping in a flat-rate system, the revenues from the cost recovery area still need to be mapped out. Suppose that the flat-rate contribution exceeds the revenues, then the municipality would have to repay the difference. If you do not apply macro capping in a flat-rate system, this can lead to cost recovery that exceeds the revenues. That sounds like profit-making. All in all, it does not seem to be a recommendable system, except perhaps for components such as the so-called "financial contributions for developments in an area" pursuant to Articles 13.22 and 13.23 of the Environment Act, which will be discussed in more detail below under the heading "Alternatives."

Furthermore, the minister wishesto "expandthe cost recovery frameworkin the context of accessibility." According to the minister, cost types for accessibility should be added to the cost recovery framework. Without further explanation, it is unclear what the minister is referring to. After all, infrastructure costs can already be recovered to a large extent under the current system.

Use value as the basis for the contribution value

Then there is the exploration of the utility value as the basis for the contribution value. Background: Article 8.17 of the Environmental Decree stipulates that the estimate of the contribution value in connection with determining the cost recovery contribution is made with the corresponding application of the expropriation rules included in Articles 15.22 to 15.24 Ow (the actual value of the land with any buildings or full compensation) or by applying the WOZ values. The actual value is the higher of the utility value (based on continuation of the current use) and the market value (based on future use, often the complex value). In many cases, the market value is higher than the utility value, such as agricultural land on which housing is planned in the near future. In that case, the owner will not sell his land for its agricultural value (utility value) alone, but only for its market value based on its future, more lucrative function. The (political) debate on value in use versus market value is certainly not new: in 1977, it led to the fall of the Den Uyl cabinet; the latter was in favor of value in use in the case of expropriation, while Van Agt disagreed.

The idea behind the exploration of the minister's letter is that using the utility value as the input value for cost recovery reduces the acquisition costs, thereby leaving more room for cost recovery. That may be true, but it leads to a difference that is difficult to justify between owners whose land is acquired (or expropriated) on the basis of market value (because they do not proceed with self-realization) and owners who do proceed with self-realization and who bear the positive difference between the market value and the utility value. The only way to eliminate this difference is to equalize the valuation for the contribution value with that for expropriation (and the right of first refusal). However, this leads to a heated debate about land policy, which the D66, CDA, and VVD coalition is unlikely to want to get involved in (compare the Den Uyl/Van Agt debate).

Furthermore, the question arises as to how the fiction of utility value as contribution value relates to the actual acquisition at market value. In other words, what about the financial feasibility of an area development if, in order to prevent expropriation, the land must ultimately be acquired at market value, while the cost recovery (and thus the determination of the public deficit) is based on the use value? These higher costs are then not covered by the cost recovery.

Incidentally, there is currently no majority in the House of Representatives in favor of applying the value in use when recovering costs. The motion by MP Zalinyan (GroenLinks-PvdA) to that effect was very recently (on January 20, 2026) rejected by a large majority.

Alternatives

Residual method

Are there other options that could reduce the public deficit in cost recovery? One possibility is to use the residual method instead of the comparative method. See also the report by the STOER advisory group (Final report by the STOER advisory group, Volkshuisvesting Nederland, pp. 84-85). The disadvantage of the latter method, also known as the comparison method, is that transactions in which the 'top price' has been paid for comparable land are also relevant for the valuation. And in those (speculative) transactions, the housing program, the infrastructure to be constructed, the municipality's requirements in terms of future-proofing, etc. are not always taken into account. The residual method does take these elements into account, so it regularly produces a lower result than the comparative method.

The constant criticism of the residual method is that it is highly sensitive: the outcome is heavily dependent on 'what you put in'. For this reason, the residual method is less appropriate at a very early stage of area development. However, at a later stage, for example after the environmental plan amendment has been adopted or the BOPA has been granted, this is of course different. The housing program, the infrastructure to be constructed, the municipality's requirements in terms of future-proofing, etc., will then be known. The use of the residual method is also in line with the practice of area development, in which developers often determine the land price on the basis of costs and revenues.

A side note to the above is that, by analogy with expropriation law, the municipality is free to choose the method for determining the contribution value (i.e., comparative or residual). One possible solution would be to supplement Article 8.17(1) of the Environment Decree with a text stating that the contribution value is also estimated on the basis of the estimate of the recoverable types of costs (as referred to in Article 8.15 of the Environment Decree) and the revenues (as referred to in Article 8.16 of the Environmental Decree) associated with the cost recovery area, unless there are insufficient points of reference available for this. This is, of course, unless the contribution value based on the continuation of the current, permitted use is higher, in which case the contribution value is the latter value. Thus, when determining the contribution value for cost recovery, the residual method would be the starting point. This is defensible because at that point (adoption of the environmental plan or granting of the BOPA) there will be a sufficiently concrete picture of the program, infrastructure facilities, etc. Although this then formally only applies to cost recovery under public law, it will have a knock-on effect on prior agreements.

Member of Parliament Grinwis (Christian Union) recently submitted a motion requesting the government to base the determination of the contribution value on the residual method. That motion was upheld in the vote in the House of Representatives (on January 20, 2026). To be continued, then.

Expansion of scope of “financial contribution for developments in an area”

Secondly, the scope of the financial contribution under Article 13.23 of the Environment Act could be broadened to include the BOPA. In short, this article allows for a mandatory financial contribution to be required from the initiator of a construction project, provided that the contribution relates to one of the six exhaustively listed categories of developments (this financial contribution differs from the 'voluntary' financial contribution to be included in a prior agreement under Article 13.22 of the Environment Act). Examples include contributions to a balanced housing stock (i.e., a compensation fund for social housing) or to infrastructure. There must be a functional link between the activity and the intended development, the funding for which is not otherwise secured by the municipality's 'normal' cost recovery. A substantiation of the functional link can also be laid down in an environmental vision or program.

The scope of this contribution is currently limited to the environmental plan; only there can the financial contribution be included. However, there is no good argument why this contribution could not also be imposed when granting a BOPA. After all, the point is to demonstrate functional coherence—not attributable, but beneficial—between the initiator's construction activity and the development. For example: the construction of homes and the construction of a ring road outside the built-up area, whereby the housing project benefits from the ring road. If this functional coherence can be demonstrated in the case of a partial amendment to the environmental plan, there is no reason why this should not be possible in the case of a BOPA. Amending the law on this point is simple: the current text only needs to be supplemented to state that Article 13.23 (and Article 13.24) of the Environment Act"apply mutatis mutandis to the environmental permit for an activity outside the environmental plan, insofar as it concerns an activity that conflicts with a function assigned to a location in the environmental plan."

Plan profit levy

In her aforementioned letter, Minister Keijzer has temporarily shelved the planbatenheffing (plan benefit levy). This is a levy that targets the increase in value resulting from a change of function. The basis for this is the difference between the redevelopment value and the utility value. The minister cites the main disadvantage of the planning gains levy as being that it is a new instrument, which will lead to an accumulation of regulations and an increase in administrative burdens. The minister also rightly notes that this instrument will only be effective at development sites. This in turn has to do with the macro cap: if costs exceed revenues, there is no room for the planning gains levy. The same restriction applies to the financial contribution under Article 13.23 of the Environment Act, which has been discussed above.

This raises the question of where the planning gain levy would fit into the current system of cost recovery and, in particular, the financial contributions for area development (see also the aforementioned report by the STOER advisory group, p. 85). The latter essentially serve to finance the same developments as those intended by the planning gains levy (such as accessibility of the neighborhood and the construction of affordable rental and owner-occupied homes). It seems illogical to introduce a land value tax at this point in time without waiting to see whether the financial contributions fulfill their intended function in practice. On a positive note, the land value tax would apply uniformly to all land (owners) in the area to be developed. This distinguishes this levy positively from the idea of determining the input value on the basis of utility value in the case of cost recovery, whereby a distinction is made between landowners who sell to the municipality on the basis of market value and self-developers who settle on the basis of utility value for cost recovery. A full discussion of the advantages and disadvantages of the planning gains levy is beyond the scope of this article. If the planning gains levy is taken out of the freezer in The Hague, this will of course be a reason to review this instrument.

Finally: it's up to the new Minister of VRO

Just before completing this article, it was announced that Elanor Boekholt-O'Sullivan (D66) has been nominated as the new Minister of Housing and Spatial Planning. It will be up to her (ministry) to continue the modernization of the cost recovery system. Hopefully, there will soon be clarity about the direction this will take. Given the minister's background as a senior military officer, we can expect her to take decisive action. In my opinion, the most logical course of action would be to build on the Grinwis motion (residual method). As low-hanging fruit, the scope of the financial contribution under Article 13.23 of the Environment Act could be extended to the BOPA in the short term. Limiting this contribution to the environmental plan amendment appears to be an omission in the Environment Act that can easily be remedied.