Regulating Kuwait Rental Market: Lessons from the Netherlands
The Kuwaiti public sphere has recently witnessed a growing controversy following the Cabinet’s decision regarding the regulations governing usage allowances and service fees on state-owned properties, including chalets. These decisions have sparked widespread objections, as many view them as ignoring economic realities, dampening investment incentives, and directly passing the cost of these increases onto citizens.
At a time when developed countries are moving toward enacting strict legislation to protect citizens from excessive volatility in the rental market, the Dutch experience stands out as a model worthy of consideration and implementation, especially in Kuwait, which suffers from unjustified inflation in rental prices. One example is the rental laws in the Netherlands, where the government employs a rental assessment system based on points awarded to a property according to its quality, location, size, and available amenities. This system is used to determine the maximum permissible rent, with strict oversight to ensure a balanced relationship between landlord and tenant. Even rents in the free market are subject to regulatory controls that limit annual increases and protect tenants from exploitation.
In contrast, Kuwaiti citizens face a different reality. Although there are some laws regulating rents, oversight and enforcement mechanisms are virtually nonexistent, allowing some investors and landlords to impose unjustified increases, the cost of which is borne by citizens, particularly those with limited incomes.
The question that arises is: Who bears the burden of these increases? It is certain that the investor will not bear it; rather, they pass it on entirely to the tenant through periodic increases, turning citizens and residents into victims, while some merchants monopolize the market, raising prices of goods and services to offset costs, and forcing small merchants to close, thus perpetuating the vicious cycle of exploitation.
Surprisingly, the phenomenon of rising rents has not been limited to commercial or residential properties but has extended to state-owned land leased at nominal rates, with the aim of stimulating the economy and services. Nevertheless, this land is being subleased at double the price without any real oversight, particularly in areas such as Shuwaikh, Al-Rai, Al-Fahaheel, Al-Jahra, and Sharq, leading to massive profits without providing any real services, while the tenant bears the full burden without clear legal protection.
There are investors reaping huge profits from leasing industrial or “commercial” plots without committing to developing them or improving services. With the absence of taxes and requirements, this amounts to outright exploitation of state property. The state must impose clear requirements, such as the creation of safe pedestrian paths, the provision of parking spaces, facilities for people with special needs, tree planting, and the maintenance of public cleanliness.
To illustrate the vast gap between the nominal rent paid to the state and what is charged to the tenant, consider the following example: Rent for non-industrial commercial plots starts at 8,250 dinars per square meter annually, equivalent to 690 fils per square meter per month. In one of the plots in Al-Rai, a merchant operated a 46-square-meter shop and paid a monthly rent of 200 dinars in 2011, amounting to 4.3 dinars per square meter. The rent rose to 250 dinars in 2015 for the shop, equivalent to 5.430 dinars per square meter, but after the property was sold to a new investor in 2021, the monthly rent jumped to 850 dinars (or about 18.47 dinars per square meter), with a lease term not exceeding one year. In 2023, the previous contracts were terminated, and new rents ranging from 1,100 to 1,500 dinars per month were imposed—equivalent to 28 to 32 dinars per square meter per month—while the original value set by the Industry Authority remains unchanged!
What can be done? This glaring disparity highlights the gap between the Dutch and Kuwaiti models. In the former, citizen protection takes center stage in real estate legislation, while Kuwaiti citizens are left at the mercy of the market, without sufficient legal support or deterrents against exploiters. Therefore, we recommend studying the possibility of implementing a system similar to the Dutch “WWS” in Kuwait, as it is based on evaluating properties according to a fair points system that sets a maximum rent, with periodic oversight to ensure compliance, and the imposition of penalties on those who violate the laws or impose additional expenses without just cause.