innovative concept or too expensive?

Ralph Mamadeus walks proudly through his building on the Berlinplein in Utrecht, where 600 flats will soon be completed. The flats between 30 and 40 square meters are especially intended for young workers, between 20 and 35 years old. The rent is in the low regions with about 633 euros. That was also the intention, the municipality would like to see affordable housing here. There is only one thing that can be discussed. Heating and service costs are estimated at just under 330 euros. That’s pretty high. But, says Mamadeus, for that money you also get a lot in return. However, his company Change = was previously reprimanded by the judge for cost items. What is the deal?

Much work is still underway to put the finishing touches on the stone floor of the atrium, where residents will soon enter the building through the reception area. Mamadeus is CEO of Change=, a relatively new player in the housing market. The CEO speaks passionately about his company. He comes from business services, but started his new plan about eight years ago. His ambition is to build ten thousand houses to start in the real estate market. People between 20 and 35 years old, who have just finished their studies and want their own apartment. At first it focused mainly on MBO graduates, because there was little to find for them. But now he too sees that HBO and WO graduates are having similarly tough times in the real estate market.

Mamadeus: “I saw that young people experienced a lot of inconvenience due to the lack of good, adequate and affordable housing. Owning a home is so important that the lack of it can also lead to poorer individual and professional development. I thought, I have to do something about it. I wanted to help that group.” That, in a nutshell, is the beginning of the real estate business of Mamadeus. But your company Change= is doing something new. Not only does he build houses, according to Mamadeus, his residential complexes offer a community with a very high level of service.

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cost elements
So what exactly are we talking about? The Leidsche Rijn building looks from the outside like a normal apartment building, like several being built in the city. But Change= emphasizes ‘community life’ within the building. There are relaxation areas, work areas, interior restoration, several landscaped courtyards and a reception. Additionally, caretakers and housing supervisors are present from 7 am to 2 am where residents can ask questions. There is also 24/7 security on site, using cameras.

According to Change=, you’re not just renting a house, it’s about the whole concept. It all sounds good, but the company Change= also has to deal with criticism. Over the past year, there have been regular headlines about miscalculated charges. In view of the high costs of the service, the Utrecht city council recently raised questions about the ‘affordability’ of housing in Utrecht.
First back to touch on the toes of the court. In other Change= locations, in addition to basic rent and service fees, community fees were also charged. And that is not allowed, according to the court.

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Mamadeus: “It was not allowed from a legal point of view, but the judge has also realized that we are not acting in bad faith. The concept as we offer it just didn’t exist yet, so we had to come up with something for it when we started Change=. I myself drew the parallel with nursing homes. Residents there pay rent, but are also required to buy care. Just as we offer services in our buildings. We are not familiar with the scheme of community expenses in the Netherlands. But as said, it was tested in court and it turned out that it was not allowed. The judge came to see us on site and saw and recognized the added value of our concept. Consequently, the judge has decided and confirmed in his sentence that what was not possible before, which was to include the community expenses in the expenses of the service, is now allowed. Consequently, a revision of the costs of the service can be presented retrospectively, resulting in the total costs remaining the same.”

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Therefore, the costs of the service are much higher than usual. A fact on which the Utrecht city council also requested clarification. The politicians asked the municipal authorities through written questions what the situation was. Because with the high costs of the service, these no longer seem to be social rental housing, and that was the agreement. The Municipal Executive pointed out: “Basically, the houses comply with the aspect of social income, after all, the income is at the level of the first cap. Service costs here are higher than is usually the case for normal social housing. However, as stated above, it is difficult to compare the Change= housing concept with the regular social rental offer and therefore it should not be seen as a regular social rental.”

Mamadeus also acknowledges that the costs of the service are high. “However, I think if you factor in all the costs, residents will actually improve their purchasing power compared to a regular housing association.” Mamadeus believes that he should consider the total cost of ownership, a concept used primarily in business. The bottom line is that you really should include all the costs you incur and what you get for it. The residents of Change= receive for the 633 euros of rent and about 330 of service expenses not only the house, the common areas and the employees who are there, all the houses also have fast internet, wooden floors, washing machine with dryer function , built in cabinets appliances in the kitchen, window coverings, a Google Nest and everything is represented. In addition, the building is full of solar panels, so all the necessary energy is generated by the building itself and no gas is used. The promised heating costs, which are part of the service costs, are therefore much lower.

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Mamadeus: “If you include all the products and services we provide in a cost comparison to a normal housing association, then I think we are cheaper on Change=. Plus, we organize everything for residents, so they don’t have to do it themselves. We really offer a very different level of service than what people are used to in the real estate market.”

Mamadeus is annoyed that this comparison is not always made and that the media write suggestively about Change=. We also wrote in previous DUIC posts about the unrest that had arisen at the Change= facility in Amsterdam over the high costs of community and service, and the lawsuit that had been filed over it.

As mentioned above, the Utrecht city council also requested clarification from the city council. In its response, the latter seems to move in line with what Change= said and believes that the current homes also do justice to the competition that the company won in 2017. “The complex with the homes as it is now offered is in line with the plan presented. The houses are an addition to the existing housing stock, because the complex meets the need for specific housing for young people and studio houses for creative professionals. In addition, a number of installations are underway to suit your flexible lifestyle. This type of housing cannot yet be found in Leidsche Rijn.”

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But are the costs of the service too high? Do these homes still fall into the affordable category? That seems to be mostly a matter of opinion at this point. Some residents may completely like this way of life, others are simply in favor of it. Mamadeus: “People don’t have to agree with me either, but they see us mainly as an enrichment of the real estate market and not as a danger.”

The municipality of Utrecht also highlights that, once the first contracts have been signed with the residents, the costs of the service can be assessed with the Rent Assessment Committee. Only then will it be definitively clear whether the actual costs of the service are legally valid. In response to questions from the council, the city executive writes: “A tenant has the right to have the rent assessment committee and/or sub-district court judge assess the costs of service if he or she considers the costs to be too high and /or unreasonable. In principle, the costs of the service should cover what is offered. There shouldn’t be a revenue model in disguise.”

The municipality has announced that it will pay more attention in the future to service cost agreements for social housing, in order to regulate this more strictly. We do this with priority for student accommodation. However, as the municipality also writes: “Honestly, however, it must be said that if residential complexes that are innovative in nature are to be realized, this may be accompanied by higher service costs than with regular social housing.”

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