Finnish Housing Markets and Housing Policy Tommi Laanti Senior Analyst Ministry of the Environtment tommi.laanti@ymparisto.fi
Housing Stock Right of occupancy is a form of co-operative housing, where resident invests 15 % of the construction costs. Over 2,7 million dwellings. About 2/3 of the housing stock is built after 1970. Right of occupancy 1% Apartment building 45% Single family house 41% Interest subsidised rental 3% ARAVA rental 15% Free market rental 15% Owns the house 36% Row house 14% Owner in housing company 30% ARAVA rental is social rental based on state loans. In addition hitas in Helsinki (price controlled owner-occupied housing) and part-ownership (15 % initial ownership with option to buy in full)
Germany (East) Germany (West) Netherlands France Sweden Denmark Austria Finland USA Belgium Great Britain Greece Portugal Norway Ireland Italy Spain Iceland Spain Luxembourg Switzerland USA Portugal Iceland Italy Norway Belgium Ireland Germany Finland France Denmark Great Britain Sweden Austria Netherlands percent percent International Comparison 100 Share of Owner-occupied Dwellings 40 Share of Social Rental Dwellings 90 80 70 60 50 40 30 35 30 25 20 15 10 20 10 0 5 0
Population projection 2003 2030 (%)
1990M1 1991M1 1992M1 1993M1 1994M1 1995M1 1996M1 1997M1 1998M1 1999M1 2000M1 2001M1 2002M1 2003M1 2004M1 2005M1 2006M1 2007M1 2008M1 2009M1 2010M1 2011M1 2012M1 2013M1 2014M1 Household Mortgages and Interest Rate 1990 2014 (feb.) Million % 100000 90000 80000 70000 60000 50000 40000 30000 20000 10000 0 Interest Rates, right ax. Household Mortgages, left ax. 14 12 10 8 6 4 2 0 5
House Prices and Earnings 2000 2013 (2000=100) 190,0 180,0 170,0 160,0 150,0 140,0 130,0 120,0 Earnings Helsinki Metropolitan Area Rest of the Country 110,0 100,0 90,0 I III I III I III I III I III I III I III I III I III I III I III I III I III I III 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013* Esittäjän nimi alatunnisteeseen 6
Helsinki Espoo-Kauniainen Vantaa Porvoo Tampere Kehyskunnat Joensuu Kuopio Turku Jyväskylä Vaasa Hämeenlinna Seinäjoki Lappeenranta Oulu Kokkola Mikkeli Lahti Rauma Rovaniemi Pori Kajaani Kotka Kouvola Prices of Dwellings 2013 (4 th q) ( /m2) 4500 4000 3500 3000 2500 2000 1500 1000 500 0 7
Rents of Dwellings 2013 ( /m2/month) 18 16 14 12 10 8 6 4 2 0 Free Market State Subsidised Esittäjän nimi alatunnisteeseen 8
Commuting to Helsinki Metropolitan area (in 2010 about 120 000 commuters) Commuters of total working population Esittäjän nimi alatunnisteeseen 9
Role of the State in Housing Policy Legislation Strategic planning including different programs Subsidies Both for owner-occupants and renters Both for households and for construction Tax subsidies Sale of own home is tax free (after 2 years) 22,5 % of the interest payments on housing loans are deductible for income tax (limits on maximum) in 2014, deductibility has been reduced during government term Housing benefits (allowances) for low income groups Students, pensioners, generally low income households Provision of information
Programs in Housing Policy Government program Housing policy program (based on Government program) Program for the improvement of the suburbs and to prevent segregation Program to provide housing of the intellectually disabled persons Program to reduce long-term homelessness Program to develop housing for elderly people Program in the Metropolitan area (letter of intent) Agreement between Government and 14 municipalities in the Helsinki metropolitan area (Land use / planning, housing, transport) Aims at provision of an adequate amount of dwellings and plots for the dwellings Includes state subsidies and investments (for infrastructure, social housing and transport) Tries to build on joint responsibility of the region Similar agreements in Turku, Tampere and Oulu regions
EURO MILLION Housing subsidies 1980-2013 2500 2000 1500 1000 500 0 198019851990199519961997199819992000200120022003200420052006200720082009201020112012 Housing allowances Mortgage interest deduction Production subsidies
Support of the Social Housing Production Financing from the Housing Fund of Finland which operates outside state budget (worth about 7 billion ) Interest subsidies for loans from financial institutions Cover certain proportion of interest payments over 1,0 % (3,4 % for special groups) and are paid for 27 years Subsidy is the highest at the beginning and declines in time State guarantees for interest subsidised loans Loan-to-Value is up to 90 95 % in new construction for social housing Compensate the eventual losses of the lending institution after realisation of the securities Grants for special groups 4 categories, maximum grant varies from 10 % to 50 % of the investment Grant is connected to an interest subsidy loan ARAVA-loans (loans granted from the Housing Fund) used to be the main source of finance for social housing Subsidised interests and high Loan-to-Value ratios No longer granted, replaced by interest subsidy loans
Actors in Social Housing Production Authorities The Housing Finance and Development Centre of Finland (ARA) Governmental agency operating under the supervision of the Ministry of the Environment Grants financial support to social housing Long-term use/need Focus on growth centers Reasonable building cost and housing cost Quality control Municipalities recommend housing projects Developers Municipality companies Limited-profit (non-profit) companies (SGEI)
Restrictions on Social Housing Production Limited profit to owners (limited-profit companies) Special legislation Yield of 8 % to original investment in company only Building unit based restrictions 40 years Building is for rental use only Cannot be sold to open markets Tenant selection based on housing need Cost recovery rent Subsidies of construction are directed to tenants Rents are adjustable between housing units
Dwellings The Importance of State Subsidised production 1950 2010 80000 70000 60000 50000 40000 Free market State subsidized 30000 20000 10000 0 1950 1960 1970 1980 1990 2000 2010
Need of New Housing Production 2030 (VTT, Technical Research Centre of Finland)
Growth centers in year 2030 Municipalities where population prediction is increasing between 2010 2030. Symbol mirrors growth rate. Lähde: Tilastokeskus MML 2011 Aluerajat: Tilastokeskus 20.11.2010 Kuntaliitto/JAH Hämeenlinna Hämeenlinna Hämeenlinna Hämeenlinna Hämeenlinna Hämeenlinna Hämeenlinna Hämeenlinna Hämeenlinna Helsinki Helsinki Helsinki Helsinki Helsinki Helsinki Helsinki Helsinki Helsinki Rovaniemi Rovaniemi Rovaniemi Rovaniemi Rovaniemi Rovaniemi Rovaniemi Rovaniemi Rovaniemi Oulu Oulu Oulu Oulu Oulu Oulu Oulu Oulu Oulu Kajaani Kajaani Kajaani Kajaani Kajaani Kajaani Kajaani Kajaani Kajaani Joensuu Joensuu Joensuu Joensuu Joensuu Joensuu Joensuu Joensuu Joensuu Kuopio Kuopio Kuopio Kuopio Kuopio Kuopio Kuopio Kuopio Kuopio Kokkola Kokkola Kokkola Kokkola Kokkola Kokkola Kokkola Kokkola Kokkola Vaasa Vaasa Vaasa Vaasa Vaasa Vaasa Vaasa Vaasa Vaasa Seinäjoki Seinäjoki Seinäjoki Seinäjoki Seinäjoki Seinäjoki Seinäjoki Seinäjoki Seinäjoki Jyväskylä Jyväskylä Jyväskylä Jyväskylä Jyväskylä Jyväskylä Jyväskylä Jyväskylä Jyväskylä Mikkeli Mikkeli Mikkeli Mikkeli Mikkeli Mikkeli Mikkeli Mikkeli Mikkeli Lappeenranta Lappeenranta Lappeenranta Lappeenranta Lappeenranta Lappeenranta Lappeenranta Lappeenranta Lappeenranta Lahti Lahti Lahti Lahti Lahti Lahti Lahti Lahti Lahti Tampere Tampere Tampere Tampere Tampere Tampere Tampere Tampere Tampere Pori Pori Pori Pori Pori Pori Pori Pori Pori Turku Turku Turku Turku Turku Turku Turku Turku Turku Kotka Kotka Kotka Kotka Kotka Kotka Kotka Kotka Kotka Maarianhamina Maarianhamina Maarianhamina Maarianhamina Maarianhamina Maarianhamina Maarianhamina Maarianhamina Maarianhamina Muutos 2010-2030 henkilöitä 65 000 32 500 6 500
Lessons from (Owner-occupied) Housing Markets Competitive and good quality housing construction sector is the key Only way to keep costs down both in short term and long term (life span) Planning for housing, traffic and services must be coordinated within a region Any measure which increases demand will increase prices if supply is not responsive Eg. Improvements in housing finance 100 % owner occupancy rate is not possible nor desirable Rental housing is a flexible alternative (also job market) Owner occupancy is not risk free and needs financial resources
Competition of the Housing Construction Sector Housing markets are strongly regional Land is the key (adequate amount of plots) Municipalities has the monopoly of land use and planning (partial-optimization in regions) Agreements (letters of intent) between state and municipalities in biggest growth centers (especially Helsinki region) Joint responsibility of regional development More operators in the housing construction sector Need of middle and small size construction firms 20
Successes and Failures of Social Housing Production in Finland Made possible migration to cities in the 1970 s Kept housing construction business alive in the 1990 s and in 2009 2010 Has produced over 400 000 affordable rental dwellings (more than 15 % of total housing stock) Only source of special group housing production Since about year 2000, concentrated on special groups Limited-profit companies have started to look for higher profits Inner migration has led to empty dwellings and financial problems in certain areas
Current Issues Need to increase housing production in growth centers (especially Helsinki metropolitan region) Need of state subsidised (normal) rental housing in Helsinki region (affordable housing) New interest subsidized model Limited profit legislation and unit based restrictions of social housing New players / investors in rental markets Neutrality between owner-occupied and rental housing Limiting the LTV of housing loans Taxation of (owner-occupied) housing