End of Rent Indexation Restrictions for Energy-Inefficient Properties in Brussels, Flanders and Wallonia: Everything Belgian Property Owners Need to Know

Introduction

If you own property in Belgium and rent out (or are planning to rent out) one or more of your properties, it is essential to stay informed about the current rules governing rent indexation. 

As a reminder, since autumn 2022, rents were indexed based on the energy performance of buildings in the three regions (Brussels, Wallonia and Flanders). Energy-intensive properties with a poor energy rating could not be (fully) indexed.  The aim was to limit the impact of inflation on tenants and encourage landlords to modernise and renovate their rental properties. These measures were introduced last year (2022) for a period of one year. 

These regulations have undergone significant changes. All three regions are now ending this restriction. 

In this article, we explain in detail what you need to know about rent indexation for energy-intensive homes in Flanders, Wallonia and Brussels, as well as the steps to follow to (re)calculate your rent correctly.

Rent Indexation in Flanders from 1 October

Energy-Intensive Homes and Indexation 

In Flanders, until 30 September 2023, restrictions applied to rent indexation for energy-intensive homes with a D, E or F rating. From 1 October 2023, indexation is once again permitted, but subject to an adjustment/correction formula. This measure is intended to prevent drastic rent increases for tenants.

Who Does This Adjustment Formula Apply To?

This formula applies if your home meets the following criteria:

• You rent or let a property on the private market, excluding social housing and student tenancy agreements.
• If you let your home through a housing company (formerly known as a social rental agency), this measure also applies to your main tenancy agreement.
• The tenancy agreement was signed before 1 October 2022 in accordance with the Residential Tenancies Act or the Flemish Residential Tenancies Decree.
• The property’s energy rating is D, E or F, or the property does not have an EPC.

How Do You Calculate Rent Indexation Using the Adjustment Factor? 

To calculate rent indexation, you use the standard indexation formula (basic rent x new index/base index). This formula is then multiplied by a specific correction factor (see tables below).

There are different correction factors depending on the energy rating and the anniversary date of the tenancy agreement. You can choose between the statutory correction factor and a simplified correction factor, both of which produce the same result. 

The correction factors to be applied are as follows: 

Correction factor for agreements expiring in the month of:	EPC = D	EPC = E – F – or no EPC
October	0,949447646	0,898895293
November	0,945356473	0,890712946
December	0,951977401	0,903954802
January	0,951950895	0,903901791
February	0,961757813	0,923515625
March	0,967996216	0,935992433
April	0,965766823	0,931533646
May	0,971941594	0,943883189
June	0,972124068	0,944248135
July	0,976119286	0,952238571
August	0,977109655	0,954219311
September	0,980049682	0,960099363

Here is an example illustrating how rent indexation is calculated in Flanders*:

Suppose you signed a residential tenancy agreement on 15 February 2019, with a start date of 1 March 2019 and a base rent of €750.00. In this example, we refer to the Flemish Housing Rental Decree. The “initial value” of the index is that of the month preceding the start of the agreement, namely February 2019, with a health index of 108.78. The health index for February 2022 is 118.74. The health index for February 2023 is 126.86. The tenancy agreement commenced on 1 March 2019, and you are permitted to adjust the rent each year from March onwards. The last time you were able to adjust the rent was in March 2022, when the indexed rent was €818.67. In March 2023, you may only adjust half of the rent, bringing it to €846.67. From 1 October 2023, you may apply indexation again, but you will need to apply a correction factor. Here is how to calculate the rent indexation: base rent x (February 2023 index / February 2019 index) x correction factor Step 1: First, let us calculate the indexed rent: base rent x (February 2023 index / February 2019 index) x correction factor 750 x (126.86/108.78) x correction factor 750 x 1.16621 x correction factor 874.66 x correction factor Step 2: The indexed rent is now multiplied by a correction factor: 874.66 x correction factor 874.66 x (February 2022 index / February 2023 index) x [1 + 50% x (February 2023 index / February 2022 index – 1)] 874.66 x (118.74/126.86) x [1 + 50% x (126.86/118.74 – 1)] 874.66 x 0.93599 x [1 + 50% x 0.06838] 874.66 x 0.93599 x [1 + 0.03419] 874,66 x 0,93599 x 1,03419 874,66 x 0,96799 846,67 You can also calculate the index-linked rent using a simplified correction factor: 874,66 x simplified correction factor 874,66 x 50% x ((2022 index + 2023 index) / 2023 index) 874,66 x 50% x ((February 2022 index + February 2023 index) / February 2023 index) 874,66 x 50% x ((118,74 + 126,86) / 126,86) 874,66 x 50% x 1,93599 874,66 x 0,96799 846,67 From 1 October 2023, the rent due will be 846,67 euros. This amount is identical to the index-linked rent for March 2023. The correction factor therefore allows the rent to remain unchanged. Indexation on 1 October 2023 is therefore of no practical benefit. You will be able to adjust the rent from the next anniversary date, namely in March 2024. Source: https://www.vlaanderen.be/huurprijs-en-huurwaarborg/huurprijsindexatie-vanaf-1-oktober-2023-met-correctiefactoren  For other examples (EPC rating E or F), please refer to the link above

Rent Indexation in Wallonia from 1 November 2023

Energy-Inefficient Housing and Indexation

In Wallonia, the restriction on rent indexation applies to properties with energy ratings D, E, F or G until the end of October 2023. The Walloon Government has decided not to extend this restriction.

How to Calculate Rent Indexation in Wallonia? 

To calculate rent indexation in Wallonia from 1 November 2023 for a property with a PEB certificate rated D – E – F or G, follow these simple steps:

• Step 1: Base Rent: First, determine the “base rent”. This is the rent adjusted between 1 November 2022 and 31 October 2023. For example, if your rent is 600 euros during this period, this will be your starting point.
• Step 2: Starting Index: Find the “starting index”. This is the health index for the month preceding the anniversary date of your tenancy agreement, falling between 1 November 2022 and 31 October 2023. This index is essential for the calculation.
• Step 3: Calculating the Indexation: Use the following formula to calculate the indexation of your rent: (Base Rent x October 2022 Health Index) / August 2019 Health Index

For example, with a base rent of 600 euros, an October 2022 health index of 127,92 and an August 2019 health index of 109,07, the calculation would be:

(600 euros x 127,92) / 109,07 = 703,69 euros

• Step 4: Calculating the Difference: Now find the difference between the rent indexed on the anniversary date of the tenancy agreement as at 1 November 2022 and the rent indexed as at 1 November 2021.

703,69 euros (2022) – 626,79 euros (2021) = 76,90 euros

• Step 5: Apply the Reduction: Next, apply a 50% reduction to the result obtained.

50% of 76,90 euros = 38,45 euros

• Step 6: Rent Indexed as at 1 November 2022: Add the reduction to the rent indexed as at 1 November 2022 to obtain the rent indexed as at 1 November 2022.

626,79 euros + 38,45 euros = 665,24 euros

• Step 7: Rent Indexed as at 1 November 2023: To calculate the rent indexed as at 1 November 2023:

665,24 X October 2023 health index/ October 2022 health index, i.e. 127,92

This process will allow you to calculate the indexation of your rent in Wallonia accurately from 1 November 2023 if you have a PEB certificate rated D – E – F or G. In this example, the rent indexed as at 1 November 2023 would be calculated on the basis of the October 2023 and October 2022 health indices.

Source: https://logement.wallonie.be/fr/faq/calcul-indexation-nov-2023-peb-defg 

Rent Indexation in Brussels from 14 October 2023

From 14 October, all Brussels landlords will once again be able to adjust their rents. However, an ordinance will prevent the application of double catch-up indexation.

Following Flanders and Wallonia, the Brussels government made its decision on Thursday 28 September 2023. It will not extend the measure introduced in response to the energy crisis, which was intended to protect tenants of energy-inefficient homes from rent increases due to indexation.

As a reminder, since 13 October 2022 in Brussels, homes with an EPC rating of G or F had been subject to a ban on indexation. Those with an EPC rating of E could be indexed, but only up to 50%. For all other energy ratings, 100% indexation was permitted. From 14 October 2023, all homes may therefore be subject to indexation, bringing the period of a (partial) freeze or absence of indexation to an end.

How to Calculate Rent Indexation in Brussels?

In Brussels, the calculation of rent indexation depends primarily on the home's Energy Performance Certificate (EPC) and the anniversary date of the tenancy agreement. The EPC, which classifies homes into different energy-efficiency categories, plays a key role in calculating rent indexation. Here is how you can calculate this indexation according to the energy rating of the rented property:

For homes with an EPC rating of E:

• Step 1: Determining the correction factor

If the anniversary date of the tenancy agreement falls between 1 January 2023 and 13 October 2023, the correction factor is calculated as follows: 50% x [(2022 index + 2023 index) / 2023 index]. However, if the anniversary date of the tenancy agreement falls between 14 October 2022 and 31 December 2023, the correction factor is calculated by taking 50% of [(2021 index + 2022 index) / 2022 index].

• Step 2: Calculating the new rent

The new rent is calculated using the following formula: [(basic rent x new health index) / basic health index] x CORRECTION FACTOR, as calculated in step 1.

For homes with an EPC rating of F or G (or without an EPC):

• Step 1: Determining the correction factor

As with rating E, the calculation of the correction factor depends on the anniversary date of the tenancy agreement in Brussels. If this date falls between 1 January 2023 and 13 October 2023, the correction factor is calculated by dividing the 2022 index by the 2023 index. However, if the anniversary date of the tenancy agreement falls between 14 October 2022 and 31 December 2023, the correction factor is obtained by dividing the 2021 index by the 2022 index.

• Step 2: Calculating the new rent

The new rent is calculated using the following formula: [(basic rent x new health index) / basic health index] x CORRECTION FACTOR, as calculated in step 1.

It is important to remember that rent indexation may only be applied on the anniversary date of the tenancy agreement, i.e. once a year.

Source: https://logement.brussels/louer/bail/indexation-des-loyers/indexation-des-loyers-a-partir-du-14-octobre-2023-avec-facteurs-de-correction/ 

Key Points

If you are a landlord in Flanders, Wallonia and/or Brussels and you rent out an energy-inefficient home, here is what you need to know about its indexation, subject to certain restrictions (see correction factor): 

• In Flanders, indexation has once again been permitted since 1 October 2023.
• In Wallonia, the restriction on indexation for energy-inefficient homes ended in October 2023. 
• In Brussels, the restriction on indexation for energy-inefficient homes will end on 14 October 2023.
• To date, the Brussels Region has not yet taken a position on this matter. 
• Make sure that you calculate your rent correctly and comply with the applicable rules to avoid any disputes with your tenants.

Remember that laws and regulations governing residential lettings may change, so it is advisable to consult a lawyer or property professional for legal advice specific to your circumstances.

Conclusion 

In summary, rent indexation in Belgium is an important matter for tenants and landlords to understand. Its purpose is to ensure that rent remains fair over time by taking inflation into account. However, the details of how it is applied vary by region, so it is crucial to familiarise yourself with local legislation and maintain open communication to avoid any disagreements.