A young man having coffee at home. Photo: Lehtikuva
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Annual state spending on housing benefits in Finland has fallen by nearly €400 million following a series of government reductions, forcing many tenants to seek lower-cost living arrangements.
The drop, nearly one-fifth from previous levels, reflects reforms that came into effect from April 2024. Monthly payments under the general housing allowance scheme, administered by Kela, dropped from €150 million in April 2023 to €117 million in April 2024. On an annualised basis, this represents a cut of close to €400 million.
The Ministry of Finance had anticipated an increase in other social supports to offset some of the savings. Expenditure on basic social assistance has already risen by roughly €100 million. Signe Jauhiainen, research director at Kela, noted that while housing benefit cuts may be one factor, other causes are also possible.
The full impact of the reforms will continue into August, when students will be excluded from the general housing benefit scheme. After the change, students will only be eligible for the smaller student housing supplement under the financial aid system.
The shift reverses a 2017 policy that expanded access to housing benefits for students. That reform coincided with a rise in single-person student households, which grew from 40 to 60 percent within a few years. The reversal is now expected to reduce government expenditure by an additional €57 million, according to government estimates.
The rental housing market is already responding. Juho Kostiainen, an economist at Nordea, wrote in a new analysis that the cuts are having visible effects. “Lower maximum rent limits, removal of income protection components, and the exclusion of students from the housing benefit scheme have led many tenants to move to smaller homes, return to live with parents, or form shared households,” he said.
Despite population growth in major cities such as Helsinki, Tampere and Turku, the number of new households has not kept pace. The result is a persistent surplus of rental flats. Kostiainen argued that the oversupply has remained even though new residential construction has nearly stopped.
While the state records substantial savings in housing benefit payments, the broader housing market is adjusting to new pressures. Cheaper rent expectations and stagnant demand are likely to shape both rental pricing and housing sales in the near term.
HT
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Source: www.helsinkitimes.fi
