In Finland, affordable social housing is mainly provided by municipality-owned companies and a few nationwide non-profit organisations. The production is financed through interest subsidy loans granted by a commercial bank or other financial institution like MuniFin.
The loans are guaranteed by the Finnish state. The process is overseen and subsidies granted by the Centre for State-Subsidised Housing Construction (Varke), which operates within the Finnish Ministry of the Environment.
The purpose of affordable social housing in Finland is to provide affordable living for those who need it most and have difficulties finding it on the free market. This includes people with low income or certain special groups defined by Varke, e.g. students, people with special needs, elderly people in poor health, and people recovering from mental health problems.
Affordable housing is all about hope, equality and opportunity
According to the Finnish Affordable Housing Companies’ Federation (KOVA), in 2023 approximately 11% of all Finnish homes were in state-subsidised housing: this means around 404,000 homes. (KOVA’s overview of the sector available on their website, only in Finnish.) Of these, close to 60% were regular rental apartments and 26% homes for special groups. The rest were right-of-occupancy homes, a Finnish concept that could be described as a hybrid between renting and owning.
The Finnish system has strong roots in the country’s post-war history, explains Teija Ojankoski, CEO of the Y-Säätiö, one of the nationwide providers of affordable social housing. Finland needed homes for a great number of citizens who were forced to evacuate from regions lost in the Second World War. At the same time, urbanisation grew stronger, and more Finns moved to live in the cities.
While many countries eventually discontinued state-subsidised housing production or privatised it, Finland has continued it over the decades. Ojankoski sees this as a decision that has created many benefits to Finnish society, including the economy.
“In many cases, people working in low-paying industries would have difficulties finding a home that matches their budget on the free market. With affordable housing, people can live with manageable costs within a reasonable distance from job opportunities. You need organisations like Y-Säätiö that rent homes based on need, not on ability to pay.”
Another important aspect is the human one, Ojankoski emphasises. Providing quality housing for special groups supports equality, while affordable rental homes help prevent social segregation and make participation in society possible for everyone.
“When people can afford a home, it makes their life more secure and allows them to be more involved with the society around them. People feel more hopeful, which in turn supports social stability.”
Ending homelessness is possible
Affordable social housing answers a demand that will always exist on the housing market. As Ojankoski says, sometimes life just happens.
“The free market tends to be responsive, but sometimes an individual’s or a family’s situation changes very rapidly. Sudden unemployment, divorce, or some other circumstance can upend a person’s life quickly. If they cannot find a new place to live within their means, it creates further challenges. 11% of state-subsidised housing is a share of the total stock that doesn’t interfere with the free market – but it helps prevent structural homelessness.”
Finland has been a leading country in eliminating homelessness; experts from around the world have considered Finnish housing a success story to learn from. Ojankoski sees this as a result of three core pillars: government-subsidised housing production, the Finnish social security network, and the Housing First -principle.
“The only way a person’s problems can truly be solved is if they have a secure home first. Many European countries have seen housing issues spike; at the same time, Finland has managed to eliminate poverty-related homelessness. This is a major achievement even on a global scale”, Ojankoski says.
Building for the future – both environmentally and socially
Many affordable housing providers are also committed to sustainable construction. MuniFin encourages climate-conscious choices through its green finance products: green finance offers the client better terms if certain targets, such as complying with the limit values of global warming potential, are met. Construction and use of buildings create around a third of Finland’s all CO2 emissions: lowering the carbon footprint of buildings can have significant impacts.
“State-subsidised housing production in Finland has long involved different ways of working that encourage green building. MuniFin’s financing has also set a path in a positive direction”, Ojankoski describes.
She emphasises how important long-term thinking is to the Y-Foundation and other affordable housing providers.
“When we plan any new building, we want it to be a good home for our occupants – and we demand quality that lasts for decades, not just a few years. This means we always think of our choices from the perspective of sustainability, both in social and environmental terms, when constructing and managing new houses.”
Ojankoski hopes that government-subsidised housing can serve as a green forerunner in Finland also going forward. She gives an example of a past project where there was an ambition to grow the share of waste recycled in the construction phase. Those days, around 30% of construction waste was generally recycled.
“We discussed that one day it could rise to 70%. The environmental ministry, Varke, the construction company, all were involved and shared this development goal. Well, now 70% is obligatory by the law. We need shared platforms for this kind of evolution to happen, now and in the future. Both green building and affordable social housing are long-term endeavours; that’s why we need a system that consistently supports these targets and supports the work needed to reach them.”
Hard times in the economy are challenging public spending, including government-subsidised housing. Ojankoski hopes that the system’s long-term benefits would be understood, and affordable housing considered a priority also in the future.
“Over time, the math is simple: it is cheaper to support people in need of housing than to allow homelessness to grow and problems to form.”
MuniFin is one of the major financiers of affordable social housing and special groups housing in Finland. MuniFin’s CEO and President Esa Kallio highlighted the Finnish system’s unique merits as well as its capability to speed private construction in his opinion piece, published this June.
“The Finnish system has even been described as the Rolls Royce of affordable housing; this is how highly it is regarded in other European countries”, Kallio pointed out.
“The praise is well-founded. With this committed, long-term approach to housing policy, Finland has managed to significantly reduce homelessness and prevent social segregation. State-subsidized housing also creates anchor projects in new residential areas that encourage private construction projects to move ahead.”