A housing association historically linked to the Centre Party has had state-backed loans called in after several corruption scandals.
The decision to cancel the loans was made following allegations of questionable financial activities by the Centre-Party affiliated Finnish Youth Foundation's (Nuorisosäätiö) previous management.
Former Youth Foundation directors Aki Haaro and Perttu Nousiainen are suspected of bribery and aggravated fraud, among other financial crimes, along with dozens of other suspects.
There is an ongoing police investigation into the allegations.
"The decision we have made is unusual, but I would like to remind everyone that the actions against public interest have been particularly serious, and the damage caused is extensive," the Housing Finance and Development Centre of Finland's (ARA’s) chief director, Hannu Rossilahti, wrote in the organisation’s press release.
ARA’s decision will stand unless the Youth Foundation is able to repay 20 million euros of state-guaranteed loans within 6 months.
Future of foundation in doubt
The Youth Foundation provides rental housing and housing support for young adults across the country, and houses over 4,000 residents.
Many of them are funded by ARA, a state-owned finance body that offers loans to housing companies and associations. ARA's decision to cancel loans to the Finnish Youth Foundation puts the foundation’s future further into question.
The Youth Foundation currently has interest subsidy loans backed by ARA worth 132 million euros. This is only the second time that ARA has decided to cancel the non-profit entity loans.
The first time such a decision was made was related to the financial discrepancies of the Riihi Foundation in Oulu, when the former foundation chair was jailed for several cases of serious fraud.
Jari Laine, chair of the Youth Foundation board, called ARA's decision "unfortunate and incorrect".
"It is exceptional for ARA to take such drastic action, especially as our appeal to the Administrative Court has not been processed yet," Laine said.
ARA had previously cancelled the non-profit status of the Youth Foundation's subsidiaries, and the latest loan cancellations are part of these measures. The Youth Foundation has appealed the decision to the Administrative Court and asked ARA to reinstate the status of its subsidiaries as non-profit organisations.
The Youth Foundation now has several options: bankruptcy, corporate restructuring, or letting go of some of its apartments.
"We still have time until next summer to explore options," Laine says.
The majority of the Youth Foundation's apartments are so-called public utilities and are subject to ARA restrictions. This means they will continue to be rented to young people, regardless of whether the apartments’ owner changes.
Therefore, the decision made by ARA on Monday will not have a direct impact on the Youth Foundation’s residents.