The government says it’s determined to intervene in the housing market to curb the rapid increase in rental costs. The administration notes that even rents in homes managed by the state-owned housing policy agency ARA have become unsustainably high.
As a result, the state wants to place limits on tenants’ compulsory contributions to the cost of building repairs. A cap will also be placed on property owners’ interest charges included in rents.
Apart from ARA-managed housing stock a draft bill introducing the reforms will also affect state-supported right-of-residency housing and their related occupancy costs. The bill was introduced to lawmakers during Thursday’s parliamentary sitting.
In addition to reducing high rents in ARA-controlled homes, the government is aiming to cut back on the cost of providing housing support and income assistance benefits, which have been rising in pace with rents.
Housing subsidy costs on the rise
Last year housing subsidies paid out by the Finnish Social Insurance Institute Kela increased by nearly eight percent to over 1.5 billion euros. Rents in ARA-controlled units generally remain lower than open market rental costs. Last year rents rose across the board by 3.2 percent, with rental costs in ARA stock increasing almost as much as units on the open market.
If passed, the new legislation would affect rents in almost half of the 800,000 rental homes in Finland. The legislation would have no impact on open market rental accommodation.
ARA housing stock has been built with direct state subsidies or interest subsidies and their use and rental terms can be subject to restrictions. The aim of ARA housing policy is to ensure decades of rental use and to provide affordable housing. The government’s housing policy is implemented by the Housing Finance and Development Centre of Finland, ARA.
Rental companies: Legislation won’t control rising rents
The country’s largest housing rental companies VVO and SATO have already fielded dissenting views on the legislation during the bill’s public commenting rounds. The companies said that the legislation won’t reduce rents over the long term, but could erode interest in new ARA construction projects. However neither of the two companies has been involved in ARA state-backed construction projects in recent years.
VVO, the largest private rental housing provider, has been responsible for putting up some 14,000 ARA units – roughly one-third of the company’s 41,000 rental homes. Meanwhile SATO’s total housing stock totals 24,000 units, of which just 5,000 - or about one-fifth - are ARA homes.
The private housing providers say they disagree with the government’s intention to impose limits on the amount of money they can collect from tenants for building renovations as well as on the direct income that they can collect from their customers for repairs.
The companies said that the limitations will lead to even higher rents, as property owners resort to borrowing to cover the cost of repairs.