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Sweeping hikes in cost of living planned for 2018

Government plans to raise the property tax next year as well as the cost of heating, water, electricity and waste disposal. House-dwellers, students and pensioners living alone would likely feel the brunt of the hikes, one housing association director says.

Kerrostalon seinää.
Capital region rents will soar in 2018. Image: Paula Koskinen / Yle

The living expenses of Finnish residents will rise next year if the government's plans go through, while no rise in incomes is expected. The income tax will remain unchanged due to the government's nationwide 270-million-euro tax deduction.

Heating, water, electricity and waste disposal costs are all set to increase. Both homeowners and people living on rent would be affected by the change.

The biggest increase, euro for euro, would be seen in oil-heated single-family detached houses in Helsinki and Espoo (numbering some 220,000 households), as both the heating and property tax hikes will affect them.

"Another group who will be especially affected by these increases is low-income pensioners living alone," says Kaija Savolainen of the Finnish Home Owners' Association. "They are the biggest losers in this situation."

The lower limit for property taxes on dwellings may rise, affecting owners of houses, apartments and cottages alike.

The Association of Finnish Local and Regional Authorities calculates that an owner of a 130-square-metre house on a plot of some 1,000 square metres in the capital region would pay about 110 euros more in property tax next year. That is compared with just 20 or so euros extra for dwellers elsewhere in the country. About a million detached dwelling households would be affected.

Rents rise, benefits don't

Because the maximum living expenses defined in pension institution Kela's housing benefit scheme are being suspended at the 2017 level, residents will be solely responsible for capitulating to possible rent increases.

The housing benefit will further be diminished when the rent index turns into a "living cost index" – in other words, benefits will not increase with soaring rents (up two percent year-on-year in the capital region).

In Helsinki a one-person household's acceptable living costs are estimated at 508 euros per month, while a four-person family's are pegged at 1,095 euros. Compare that with the figures in Kuopio: 390 euros and 856 euros respectively.

Students strapped

For people renting a room in a large shared apartment or living in a rented apartment smaller than 20 square metres – that is, mostly students – the proposed slash in housing benefits is severe. The support is currently available in proportion to 80 percent of a one-person household's value, or 406.40 euros a month in Helsinki. That sum would shrink to 328.80 euros per month in 2018.

Kela says that some 270,000 households received general housing assistance, and 150,000 students received housing allowance as part of their student welfare. Students became subject mainly to the general housing assistance in August.

The National Union of University Students in Finland (SYL) estimates that the level of benefits will in fact remain the same for some 120,000 students. Support for 50,000 students will fall by about 25 euros per month, and 42,000 students will lose the housing benefit altogether.

Jani Sillanpää of the SYL says that students will have to make up the difference in rising rents themselves, primarily using their student benefits. If and when that is not enough, students may be forced to seek more employment or go deeper into debt.

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