/ COMMISSION EUROPÉENNE
SECRÉTARIAT GÉNÉRAL

C(2009) 9963Bruxelles, le 4 décembre 2009

DOCUMENT INTERNE

OJ 1899

Proposition: MESURES

UTILES/PAS OBJECTIONS

Contrôle de l’application du droit communautaire – Aides d’Etat
réunion preparatoire interservices du lundi 7 decembre 2009

Objet:Aide d’Etat E 2/2005 et N 642/2009 –Pays-Bas

Titre: Existing and special project aid to Dutch housing corporations

PROPOSITION DE :Mme KROES

DECISION PROPOSEE :

  • recommend, pursuant to Article 18 of Regulation No. 659/1999 to the Dutch authorities the adoption of the measures relating to existing aid to housing corporations, in line with the commitments made, referred to in the letter, a draft of which is attached in annex;
  • record the acceptance of those measures by the Dutch authorities pursuant to Article 19 of Regulation No. 659/1999 and inform the Netherlands by means of the letter, a draft of which is attached in annex;
  • raise no objections in respect of thenewly notified measure of special project aid for certain districts, on the ground that it is compatible with the internal market under Article 106 (2) and 107 (3) (c) of the TFEU;

Destinataires:Mme et MM. les Chefs de cabinet

MM. LOWE, DEMARTY, ROMERO REQUENA, RUETE, FOTIADIS

Pour toute information, veuillez contacter Nynke VAN GOOL-TIGCHELAAR, SG/E/2, tél. 57278

Dorthe CHRISTENSEN, SG/E/2, tél. 56767

RECORD OF AGREEMENT

NO. OF AID:E 2/2005 and N642/2009– The Netherlands

TITLE:Existing and special project aid to Dutch housing corporations

SERVICE IN CHARGE:DG COMPETITION

DEADLINE:03/12/2009

Consultation of associated departments launched on 19/11/2009

FOR AGREEMENT: SGFavourable opinion subject to

comments taken into account(most comments taken into account)

DG ECFIN No comments

DG MARKT No comments

DG ENTR Favourable opinion

DG EMPL Favourable opinion

FOR OPINION:LEGAL SERVICE Favourable opinion subject to

comments taken into account(comments being taken into account, but pending verifications with Dutch authorities)

PERSONS IN CHARGE:Henrik SODERMAN, J-705/41 (Tel.: 67712)

Anna WITT, J-70 5/37 (Tel.: 56078)

______

Information concerning the publication of the file on SG-Vista:

The file can be published as such on SG-Vista immediately upon adoption of the decision by the Commission.

/ EUROPEAN COMMISSION
LEGAL SERVICE

Brussels, 4/12/2009

CONS (09) 11444

note to the attention of Mr LOWE

director general - dg comp

RE: Reply from Legal Service

to the interservice consultation launched by DG COMP

Notesigned by:MrLowe Deadline for replies

Dated: 20/11/2009

Reference: D-54875

Title:Joined cases State aid E 2/2005 and N 642/2009 - The Netherlands - Existing and special project aid to Dutch housing corporations

Favourable opinion

XFavourable opinion subject to account being taken of the following comments

Unfavourable opinion (see attached comments)

Contact: D. GRESPAN (98652), E. RIGHINI (96160) and C. URRACA (52131)

Comments:

Favourable opinion subject to these comments:

- III.2 Existence of aid: as the measures concern services of general economic interest, the Commission should demonstrate that the criteria of the Altmark ruling are not respected.

- III.3 Qualification of existing aid: in points 34 and 35 the Commission should take a final position (and not just a preliminary view).

- III.7.1.1: Genuine public service mission: the public service mission should be explained in detail and in particular what is the nature and duration of the public service obligations. Besides, in point 53, in order to better justify the coverage of the 43 % of the population, we should insist in that this target group is a minority and in this respect we could compare the income ceiling with the Dutch average income.

- III.7.1.2: Entrustment: the elements mentioned in point 57 should be explained in detail. In particular, the obligations on the beneficiaries to provide services that are not present in the market should be explained.

- III.7.1.3: Absence of overcompensation: in point 49, the effective mechanisms of ex post control should be explained in detail. It is argued in point 60 that the wocos have a legal obligation to not have profits as primary objective. However this does not seem to exclude that they have profits as a (secondary) objective, nor that they could actually have profits. Besides, even if the amount of aid in the form of direct grant will be no more than the shortfall between the expected rent revenues from the project and the costs thereof, no condition seems to be imposed as regards the other types of financial support. For these reasons, it does not seem possible to conclude at this stage that there are mechanisms that exclude overcompensation. Besides, a mechanism that ensures that financial support will not spill-over to commercial activities should be imposed.

- III.7.2: Construction and renting out of public purpose buildings: It is not clear that this type of aid can be declared compatible directly under Article 107.3.c), and in particular that it is proportional, given that the measure is not open to private developers. In this regard, it would seem easier to approve the measure under the SGEI Decision (it is already recognised in point 66 that the activities are of genuine public interest). More in detail, the analysis of proportionality in point 69 seems to cover only direct grants and not other types of financial support. Finally, the risk of overlapping between these measures and the previous ones (III.7.1: construction and renting out of dwellings to individuals with ancillary infrastructure included) should be assessed.

- III.9: Concerns raised by the complainants: Paragraphs 79 and 80 should be substantially modified. At most, what the Commission could say is that the Commission approves the conditions of the functioning of the system and that a particular infringement of these conditions by a particular woco would be a matter of national law.

- IV.2.2. Compatibiliy of the new aid. The same observations made above apply mutatis mutandis to this measure. Besides, the risk of overlapping and thus of overcompensation with the existing aid measures should be assessed.

Copies: H. Soderman and A. Witt (DG COMP), Consulted DGs

MEMORANDUM FROM MS KROES TO THE COMMISSION

Subject:E 2/2005 and N 642/2009– The Netherlands

Existing and special project aid to housing corporations

I.PROCEDURE

The decision concerns two closely related cases, all of which involves State aid to housing corporations in the Netherlands:

- Case E 2/2005. Following a notification by the Dutch authorities of the general system of State aid to wocos and a letter pursuant to article 17 of the Procedural Regulation sent to the Netherlands on 14 July 2005.

- Case N 642/2009.By e-mail dated 18 November 2009, registered on the same day, the Dutch authorities notified a new aid scheme for the revival of declining urban regions.

In addition to that, the Commission has received complaints from the Netherlands concerning the aid granted to the wocos (CP 126/2007, CP 203/07, CP 117/08, 220/08).

II.DESCRIPTION OF THE AID MEASURE

The measures under the current financing system target at wocos that are not-for-profit organisations, providing social housing and related activities. For their activities, wocos benefit from the following measures:

a)State guarantees for their borrowings from the Social Housing Guarantee Fund (Waarborgfonds Sociale Woningbouw, hereinafter "WSW").

b)Support from the Central Housing Fund (Centraal Fonds Volkshuisvesting, hereinafter "CFV").

c)Sale of public land by the municipalities at price below market value.

d)Right to borrow from the Dutch Municipality Bank (Bank Nederlandse Gemeenten hereinafter "BNG").

Furthermore, an additional new measure is foreseen for the revival of declining urban areas.

III.ASSESSMENT OF THE AID MEASURE

For the reasons explained in the attached draft letter to the Member State, it is considered that the current financing system of the social housing is an existing state aid which is not compatible with Articles 106 (2) and 107 (3) (c) TFEU. However the commitments submitted by the Netherlands to amend the current regime dispel these concerns.

The Measure newly notified by the Netherlands concerning declining urban districts is compatible with the common market under Articles106 (2) and 107 (3) (c) of the TFEU.

IV.PROPOSAL TO THE COMMISSION

It is proposed to:

1. recommend, pursuant to Article 18 of Regulation No. 659/1999 to the Dutch authorities the adoption of themeasures relating to existing aid to housing corporations, in line with the commitments made, referred to in the letter, a draft of which is attached in annex;

2. record the acceptance of those measures by the Dutch authorities pursuant to Article 19 of Regulation No. 659/1999 and inform the Netherlands by means of the letter, a draft of which is attached in annex;

3. raise no objections in respect of thenewlynotified measure of special project aid for certain districts, on the ground that it is compatible with the internal market under Article 106 (2) and 107(3) (c) of the TFEU;

4. inform the DutchGovernment by means of the letter, a draft of which is attached in annex;

5. inform interested parties by means of the attached factsheet to be published in the Official Journal of the European Union and the publication of the full text of the letter in the authentic language on the Internet site:

6. inform the EFTA Surveillance Authority by means of a copy of the letter referred to above;

7. communicate to the EFTA Surveillance Authority the references of publication of the above-mentioned fact sheet in the Official Journal of the European Union

1

/ EUROPEAN COMMISSION

Brussels,

C (…) …

Subject:State aid No E 2/2005 and N 642/2009– The Netherlands

Existing and special project aid to housing corporations

Sir,

I.PROCEDURE

I.1. Existing measures and new notification

  1. The present decision concerns two closely related casesconcerning State aid to housing corporations ("woningcorporaties", hereinafter:"wocos") in the Netherlands. These are as follows:

Case E 2/2005Following a notification by the Dutch authorities of the general system of State aid to the wocos, on 14 July 2005 the Commission services sent a letter pursuant to article 17 of the Procedural Regulation[1] to the Netherlands qualifying the aid as existing and expressing doubts as regards the compatibility of the system with State aid rules ('Article 17 letter'). Since the Article 17 letter there have been ongoing consultations between the Commission and the Dutch authorities on the possible ways of reforming the system for it to comply with State aid rules. Equally, as the case is strongly linked to social policy it was subject to a national debate within the Netherlands. Following this, the Dutch authorities have by letterdated 3December2009presented to the Commission the commitments for amending the existing aid scheme to bring it into line with EC law.

Case N642/2009 By e-mail dated 18 November 2009, registered on the same day, the Dutch authorities notified a new aid scheme for the revival of declining urban regions. Named 'special project aid', the scheme consists of direct grants to wocos.

I.2. Complaints

  1. The Commission has received complaints from the Netherlands concerning the aid granted to the wocos. The complaint that most comprehensively addresses the distortions in the Dutch housing market was submitted on 16 April 2007 by the Association of Institutional Investors in the Netherlands('Vereniging van Institutionele Beleggers in Vastgoed, Nederland, hereinafter"IVBN"'(CP 126/2007). IVBN has complemented its submission in 2007, 2008 and 2009. Vesteda, a private housing investor, has joined the complaint in June 2009.

According to IVBN, the wocos are expanding their activities beyond the sector of social housing and are increasingly active in the market of expensive dwellings. Lack of clear definition of their scope of activities has allowed them to compete for high-income customers and expensive rented housing. Due to State aid they receive, private competitors suffer from unfair competition from the wocos.They are also constructing owner-occupied houses thereby competing beyond rental markers.

According to the complainant, a refocusing of the activities of the wocos is necessary to establish fair competition in the Dutch rental market. Any activities of the wocos targeted to higher income groups or higher-rent dwellings should be operated on the same conditions as those of the private competitors. State aid should be restricted only to the provision of social housing to disadvantaged citizens and should be strictly separated from commercial activities.

According the complainant, the target population of the wocos should be defined strictly so that it does not include categories of population that cannot be considered disadvantaged citizens.

According to the complainant, wocos artificially classify dwellings as social housing by setting their rent below the rent ceiling defined in the Dutch legislation as the maximum rent allowed in social housing, while in fact their market conform rent would be higher.

In the field of provision of social housing, only the wocos are allowed to receive aid. According to the complainant, all operators should be allowed to participate in the provision of social housing with same level of State support.

  1. Other complaints concernthe behaviour of specific local wocos in providing services of painting of buildings (CP 203/07); advantages in the form of lower leasehold prices and longer leasehold periods for wocos provided by the city ofAmsterdam(CP 117/08); sale of land to a housing corporation by the municipality of Nordwijk (CP 220/08). According to the complainants, the advantages received by individual wocos distort competition in the housing market to the detriment of private competitors, while the original purpose of the aid should be to provide affordable housing for disadvantaged citizens, not to compete in commercial markets with private companies.

II.HOUSING CORPORATIONS

  1. Wocos are not-for-profit organisations. Their basic mission is to acquire, build and let out dwellings mainly for disadvantaged citizens and socially less advantaged groups. They are engaged in other activities such as construction and renting out apartments of higher value, construction ofapartments for sale, construct and let outof public purpose buildings such as cultural and health centres, construct and let out commercial premises, construct and maintain parks and other local infrastructure. They are also involvedin supporting social services such as family coaching, financial advice to households and integration of immigrants.
  2. There are 7.1 million dwellings in the Netherlands, of which 2.4 million (33%) are owned by wocos. In the rental market wocos are the biggest player with a 77% share of all rental dwellings. Of this stock 98% are under regulated rent regime.Wocosvirtually alone rent out public purpose buildings such as community centres, youth centres, sports facilities etc. In addition, wocos are also active in the market of construction of owner-occupied homes where they had a 14 % share of new constructions in 2007.
  3. Wocos usually act as developers i.e. they are responsible for the whole project from inception until the conclusion. Depending on the project this might involve then market research, feasibility study, due diligence, property acquisition, arranging for financing, construction, maintenance and subsequent lease. For the construction part they usually employ subcontractors, they do little in-house construction work themselves (mainly minor maintenance works). Their role in that regard is the supervision, coordination and management of the construction.
  4. Most wocos operate in the legal form of a foundation, i.e. the State (including municipalities) does not control them. Their own supervisory board appoints the members of the governing board, while the vacancies in the former are filled by the decision of the existing members. The other possible legal form for a woco is that of a civil law society ("vereniging"). The State (including municipalities) does not control them. The governing board is appointed by the members of the civil law society. Their own supervisory board is co-opted by the existing members of the supervisory board. To ensure that they operate in the interest of public policy they are subjected to regulationsinstead of direct State ownership. The Minister for housing is exercising supervisory powers over wocos. These powers provide for gradual sanctions in the case of non-compliance with the applicable rules ranging from notice through fines until the revocation of the licence as a woco.

III.ASSESSMENT OF EXISTING SUPPORT MEASURES(E 2/2005)

III.1. Measures benefiting wocos

  1. For their general activities, wocos benefit from the following measures:

a)State guarantees for their borrowings from the Social Housing Guarantee Fund (Waarborgfonds Sociale Woningbouw, hereinafter"WSW"). The wocos' borrowings are guaranteed by the WSW which pools the resources and power of all wocos, while ultimately the WSW's obligations are guaranteed by the State. Wocos are estimated to benefit from EUR 300 million on a yearly basis in the form of lower financing costs.

b)Support from the Central Housing Fund (Centraal Fonds Volkshuisvesting, hereinafter"CFV"). This form of support is on the one hand 'regular project aid' and on the other hand so-called 'rationalisation aid'. Regular project aid is available to those wocos who experience difficulties in financing aparticular projectand takes the form of a direct grant. 'Rationalisation aid'is effect support to wocos experiencing financial difficulties in general and can be either a soft loan or a direct grant. The aid from the CFV is financed from a general levy on all the wocos and not from general taxation. In other words, the CFV basically redistributes funds from financially healthier wocos towards weaker ones if and to the extent the need arises on the side of the latter.

c)Sale of public land by the municipalities at price below market value. This form of support is available to wocos for certain specific projects.

d)Right to borrow from the Dutch Municipality Bank (Bank Nederlandse Gemeenten hereinafter "BNG"), a special purpose public bank with an exceptionally good credit rating. Only public bodies, mainly municipalities, and the wocos can borrow from the BNG.

III.2. Existence of aid within the meaning of Article 107TFEU

  1. Article 107TFEU provides that “Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, insofar as it affects trade between Member States, be incompatible with the common market.”
  2. Thus for a measure to constitute State aid it has to:

provide the undertakings with an advantage

be adopted by the State or be imputable to the State

be selective in nature

involve a transfer of State resources

distort or threaten to distort competition

affect intra-Community trade

  1. As Article 107 TFEU applies only to undertakings, it should be first assessed whether the wocos can be considered as such for the purposes of competition law.