People at the Puhos shopping centre in Helsinki. LEHTIKUVA
- Next Article Nuclear plant operator suspected of illegal archive transfer to Russia
East Helsinki has recorded the highest level of benefit-based housing tactics following recent cuts to Finland’s general housing allowance.
Data from the Finnish Social Insurance Institution (Kela) shows a sharp drop in rental contract terminations in key districts. The trend has emerged after changes were introduced in April. Households receiving support now face lower allowances if they move. Many have chosen to stay put until current benefits expire.
These tactics are visible across major urban areas, but most common in East Helsinki. Patterns also appear in Vantaa, Espoo, Tampere and suburbs in Turku.
The government removed Helsinki’s special status within the housing allowance system. Previously, the city formed its own group, allowing higher maximum rent support than neighbouring municipalities. Now Helsinki is grouped with Espoo, Vantaa and Kauniainen. This results in dual cuts: one from general nationwide changes, and another from the loss of Helsinki-specific benefits.
More than 400,000 households receive general housing allowance in Finland. Kela checks benefits annually if household conditions stay unchanged. This means the timing of benefit reductions depends on the individual review month, giving recipients time to remain in place to maximise support.
Kela’s rent benefit calculator has seen widespread use. It shows how a change of address triggers new, lower rates under the revised rules. This may explain the behaviour, as users learn that a move before reassessment would reduce their support.
The number of rental contract terminations dropped significantly in spring and summer in the areas affected. In some locations, terminations halved compared to previous years. Housing allowance-related relocations slowed dramatically in April. According to Kela, about 90 percent of recipients would lose support or see it decrease if they changed residence after April.
The Finnish parliament passed the allowance changes in early 2024. These included a rise in the basic deductible share of income, from 42 percent to 50 percent. The reimbursement percentage of accepted housing costs was cut from 80 percent to 70 percent. In addition, the €300 earnings disregard was removed.
As a result, all working households receiving support now get less. These changes affect all recipients but hit Helsinki residents harder due to the separate elimination of the city’s higher rate.
Further shifts are expected in 2025, when student renters will lose access to general housing allowance. From August next year, they will fall under the student housing supplement. This allowance will range from €216 to €296, depending on location. It will only be paid for study months, excluding summer for most students.
The government expects these changes to coincide with a spike in demand for low-cost rental housing. Both students and other recipients seeking cheaper accommodation will compete for the same supply. The supplement covers up to 80 percent of rent but excludes any portion above specific thresholds. These are €370 in the capital region, €310 in other large cities, and €270 elsewhere.
This is likely to push up rents for the cheapest flats. At the same time, larger or newer flats, especially in less central locations, may see falling rents. Residents leaving such homes will need to be replaced. In some buildings, landlords have already started lowering rents. Tenants remaining in those properties are also asking for rent reductions.
The rental value of private market flats continues to be based on demand, supply, and tenant purchasing power. Smaller, basic flats or those in remote areas are becoming more attractive as tenants now pay a higher share of their rent from their own income.
Earlier, such flats had low demand, keeping rents stable. But rising interest in affordable housing is expected to increase rents in this segment.
The government plans three more housing allowance cuts. It will reintroduce wealth limits. A household with one adult will face a €10,000 limit, while two or more adults will face a €20,000 limit. Households with €50,000 or more in net assets will no longer qualify for support. For those above the lower thresholds, 20 percent of the excess will be added to annual income in benefit calculations.
By the end of this year, the housing allowance for owner-occupiers will end. This applies to those living in properties they own.
The government also plans to freeze indexation for pensioner housing support between 2024 and 2027.
As a smaller measure, cities including Kouvola, Mikkeli, Pori, Kajaani, Lappeenranta and Vaasa will shift from group 2 to group 3 under the housing allowance area classification. This reclassification will reduce the maximum recognised housing costs in these municipalities.
According to Kela, over 400,000 households received general housing allowance at the end of 2023. The new rules are now in effect. East Helsinki has emerged as the centre of behavioural change, as recipients seek to delay the impact of reductions by avoiding moves.
HT
- Next Article Nuclear plant operator suspected of illegal archive transfer to Russia
Source: www.helsinkitimes.fi
