Finnish affordable social housing organisations forerunners in sustainable construction – majority of loans are green or social finance

The Finnish affordable social housing sector plays a significant role in the development of a sustainable welfare state. In 2023, a vast majority of MuniFin’s housing loans were granted to either green or social finance projects.

An increasing amount of housing in Finland is being constructed and financed with consideration for social and environmental factors. Our customers, including affordable social housing organizations and municipal rental housing projects, play a significant role in this trend. Last year, the share of green and social finance in our housing loans reached a record high of 63 percent.

“An increasing number of our customers have made it their mission to carry out their projects more sustainably, taking into account environmental, climate or social benefits. Affordable social housing production is at the absolute forefront of sustainable construction in Finland”, says Päivi Petäjäniemi, Customer Relations Manager at MuniFin.

MuniFin was the first in Finland to start offering green finance for climate and environmentally friendly projects in 2016. In 2020, we also became the first to launch social finance, which emphasizes the social benefits of the projects: equality, communality, safety, welfare, or regional vitality.

“Our customers were among the first to learn about green and social finance, and we have persistently kept the topic on the agenda ever since. Nowadays, they have comprehensive knowledge of their alternatives, and they proactively seek green and social finance to give visibility to their projects. All their projects are significant for the Finnish welfare society, but the ones that fall under the green and social finance framework, are truly best in class”, Petäjäniemi explains.

Buildings and construction account for about a third of Finland’s greenhouse gas emissions*. The figures show that Finnish municipalities and non-profit housing operators are strongly involved in climate efforts.

The energy efficiency of affordable social housing buildings is generally higher than buildings in the private sector*. One factor is the forthcoming Corporate Sustainability Reporting Directive (CSDR), which is already directing the larger operators towards more sustainable choices. Also, the residents of newly constructed homes are increasingly demanding more energy-efficient housing solutions.

“More and more buildings are built in energy class A, which is the minimum demand in our green finance framework. Our customers are bold and want to try new things, so I expect to see a rising number of projects that also consider the impacts of the entire life cycle and construction chain. The challenge for now is that costs may seem higher in the construction phase. Saved energy costs for example, show in the long run, and our customers have strict demands for affordability from The Housing Finance and Development Centre of Finland (Ara), which oversees the projects.”

The prerequisites for the approval of social finance projects consider the social benefits of the projects.

“Our customers are increasingly planning housing as a whole, and this is clearly visible in projects for special groups. For example, they want to provide every student with their own apartment, but there is increasing investment in shared spaces, which promotes community and prevents loneliness. Residents are also offered various services, such as car-sharing or resident counselling”, Petäjäniemi says.

Finnish affordable social housing supports social mixing and brings down homelessness

In Finland, affordable social housing is mainly provided by municipality-owned companies and nationwide non-profit organisations. The production is financed through interest subsidy loans. The loans are guaranteed by the Finnish state through The Housing Finance and Development Centre of Finland (Ara), which is administered by the Ministry of the Environment. Alternatively, housing projects can also be loans to municipality owned companies. These loans do not have a state interest subsidy, but they come with a 100% municipal guarantee.

MuniFin is the main financier of affordable social housing production in Finland. The loan periods are long, up to 41 years.

The Finnish government updated its housing policy development programme in 2021. Some of the main objectives of this programme include increasing housing construction in growing urban areas and eradicating homelessness within two government terms. Affordable social housing has played a remarkable role in tackling homelessness in Finland, especially family homelessness. Affordable social housing is also instrumental in preventing segregation and facilitating labour mobility.

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Finnish system for affordable social housing supports social mixing and brings down homelessness

Our sustainability agenda sets the direction until 2035

As outlined in our strategy, key aspects of sustainability at MuniFin include acting as our customers’ partner in building a sustainable society while efficiently managing climate-related and environmental risks.

Our long-term impact stems from the products and services we offer our customers. In our sustainability agenda published in 2023, we set the direction and goals for our sustainability efforts until 2035.

In this agenda, we commit to increasing the proportion of sustainable finance in our lending portfolio into one third by 2030. In 2023, the share was 21,3 percent. We also set emission reduction targets for financed buildings. Our target level is 8 kgCO₂/m² by 2035, representing reduction compared to the 2022 level.

MuniFin's Sustainability Agenda

*The Confederation of Finnish Construction Industries RT (CFCI):

*Finnish Affordable Housing Companies’ Federation:

More information

Karoliina Kajova

Senior Manager, Funding

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Finnish system for affordable social housing supports social mixing and brings down homelessness

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 through The Housing Finance and Development Centre of Finland (ARA), which is administered by the Ministry of the Environment.

ARA has a major responsibility in the implementation of Finnish housing policy. The main objectives of the government’s housing policy development programme, updated in 2021, are building a carbon neutral society and improving the quality of construction, supporting sustainable urban development, increasing housing construction in growing urban areas and eradicating homelessness within two government terms.

Among other tasks addressed to the organisation, ARA grants guarantees for housing and construction as well as controls and supervises the use of the ARA housing stock. ARA also designates and maintains a list of non-profit organisations entitled to get interest subsidy loans.

MuniFin is the main financier of affordable social housing production in Finland. The loan periods are long, up to 41 years.

“This model ensures that the financing is long-lasting and predictable. At the moment, only MuniFin grants loans this long. The state guarantee affects the price of the loans making them cheaper” says Juha Kaakinen, a recently retired long-time CEO of Y-Foundation, one of the nationwide providers of affordable social housing and key developer of the Housing First principle in Finland.

“This is also a very inexpensive way for the state to produce affordable social housing”, Kaakinen continues.

ARA oversees the providers and projects. This ensures the apartments are of high quality.

“The quality of affordable social housing apartments is sometimes even better than the non-subsidised apartments.”

No family homelessness in Finland

Social mixing is a central and much valued pillar of Finnish housing policy. The right to housing is enshrined in the Finnish constitution. The biggest cities in Finland have for a long time had a principle of ensuring that 25% of new homes are affordable social housing apartments. Now the aim is to increase this share up to 35%.

The rent level of affordable housing apartments is significantly lower than in the private sector, especially in the Helsinki metropolitan area. Rising interest rates are increasing the funding expenses of the housing providers, which will also impact rents in the near future. ARA however recommends that the rents in the ARA housing stock should only be raised moderately.1

In clear contrast to other countries, e.g. the Netherlands and Austria, the residents are mainly people of low income, who are most in need of state-subsidised housing. The applicants are evaluated through three criteria: need, wealth and income. When comparing the applicants, homeless people and others in urgent need of an apartment, applicants with most limited needs and of lowest income are given priority.2 The ARA housing stock also includes homes for students, and residential homes for people with special needs, elderly people in poor health, and persons recovering from mental health problems.

The role of social housing has been remarkable in tackling homelessness.

“We have had a stable level of affordable housing production. Some years have been quieter than others, but 7000–9000 apartments have been built every year. The high and stable level of production differentiates Finland from other countries. And thanks to this, there’s no family homelessness in Finland”, Kaakinen says.

Social housing has also been instrumental in preventing segregation and facilitating work-related migration. Social housing influences rent levels in the private sector and lowers the costs of housing allowance granted by the state. The lower rent levels also makes it possible for people of low income to live closer to their workplaces and to manage on their salary.

“Living in a reasonably priced apartment may be the only possibility for many people to save enough money to buy an apartment of their own at some point, which is still something many Finns strive to”, Kaakinen continues.

Forerunners in fighting climate change

Many of the social housing providers have climate change high on their agenda. More and more wooden residential buildings are being constructed, and many of the providers have pilot projects for developing more sustainable buildings and construction methods. The energy efficiency of social housing buildings is generally higher than buildings of the private sector. According to Juha Kaakinen, the big question is how to transform social housing toward carbon neutrality in a way that maintains affordable rents.

“The social housing sector has shown its will and power to fight climate change. Still, new ideas are needed for example to transform existing buildings into affordable apartments”, Kaakinen says.


There are 3.2 million apartments in Finland. Around 62% of all apartments are owned and 34% rented. 3 Around one third of all apartments have been constructed using state subsidies.4

MuniFin is the only credit institution in Finland that specialises solely in financing the municipal sector and non-profit housing production. At the end of 2021, 48% of MuniFin’s long-term customer finance portfolio consisted of loans granted for housing.

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  2. (in Finnish)

Wood or concrete? TVT compares the environmental effects of construction materials

Two identical-looking buildings are rising in Arola, Turku. This time, however, looks are deceiving: one building is made of wood and the other of concrete. They are built in a project comparing the environmental effects of construction materials. The project is managed by TVT Asunnot, a housing provider owned by the City of Turku. 

“The city aims to be carbon neutral by 2029, and this is one of our ways to contribute towards that goal. As a company with social relevance, we have an opportunity to experiment”, says Johannes Malmi, development director at TVT. 

Using wood for construction is nothing new, but this is the first wooden apartment building built by TVT.  

Johannes Malmi, development director at TVT, is happy the project is advancing according to the plans.

“We have nearly 500 apartments in old wooden buildings, built in urban areas in the early 1900s. Wood is a very common construction material, but other materials have been more popular in large buildings in recent decades”, notes Teppo Forss, CEO at TVT. 

The project to construct the seemingly identical but internally different buildings was initiated three years ago. The work has progressed according to schedule, and residents should be able to move in at the end of this year. The traditional celebration marking the completion of the roof was held this May, although only in a small way due to the still ongoing coronavirus pandemic.  

At the moment, the wooden construction has progressed slightly further than the concrete one, and the construction sites look different because the wood frame is built under a weather cover to protect it from rain.  

“If you hear music blasting from under the cover system, that’s just the builders in their natural habitat”, Malmi chuckles, also noting that the wooden construction is looking very nice and convincing so far. 

The finished buildings will not only look very similar, but they will also have almost identical floor plans. The wooden building uses cross-laminated timber, and only a very keen eye can see that it has slightly larger outer dimensions for technical reasons. The design and type of structure of the buildings, however, is entirely different, resulting in different acoustics and fire safety solutions, for example. 

“We left some wooden parts visible as a visual element, especially in the walls that have windows. We would have liked to leave even more, but couldn’t because of fire safety reasons. We also used some concrete as a visual element in the concrete building”, Forss explains. 

Learning from other projects 

The two buildings are monitored in many ways. Their construction waste is known by the kilogram, their carbon footprint and handprint are calculated carefully, and their energy use is measured and compared. Resident surveys will be conducted frequently, for example to find out how residents experience the sounds and acoustics in the buildings. Malmi is also looking forward to finding out if one of the buildings will prove more popular in residential applications. 

Proven materials and construction practices that have been tried and tested are used in the project, says Teppo Forss, CEO at TVT.

According to Malmi, neither of the two different construction materials required any significant compromises, but the wooden building was somewhat more expensive to construct. 

“Unlike in concrete construction, ready-made packages are not available for large timber construction, so orders have to be customised individually. Volumes are also smaller and suppliers don’t have as much competition as there perhaps ought to be. This makes wooden construction more costly”, Malmi summarises.  

Before initiating the project, TVT studied a similar project by A-Kruunu, including their environmental calculations.

“We had access to this information from an excellent Finnish example that we could make use of. We developed our carbon footprint calculations and added resident satisfaction as a measured goal based on A-Kruunu’s project”, Forss reports.  

Forss and Malmi agree that the project was a learning experience that will likely yield rewards long after the construction phase. They are eager to share their experiences and have received inquiries also from outside Finland.  

“Better homes, one building at a time” 

So far, TVT’s experience in constructing a wooden apartment building has been a positive one, and worth considering in the future, too. 

“Unfortunately, urban planning prohibits wooden apartment buildings in many areas in Turku. Even this project required changes to town plans. It seems that urban planning follows changes in regulation very slowly and does not encourage experimenting”, Malmi comments. 

Forss emphasises that non-profit companies must build long-lasting homes that are safe and healthy to live in. He has a neutral approach towards the construction materials: “It is important for us to use proven materials and construction practices that have been tried and tested. Experiments must therefore be kept limited in number, but when the construction volume is large and there is a high level of know-how involved, the experiments tend to be successful.” 

This experiment in wooden construction is one of TVT’s steps towards carbon neutrality, and the company also watches the development of the concrete industry closely. TVT implements numerous sustainability measures throughout the building’s entire lifecycle, from land acquisition and construction to habitation and renovation. Residents are encouraged to take climate action through waste, heat and water consumption practices. 

In addition to environmental measures, affordability is another major point of consideration. Many rental apartments have recently been built in Turku and many more are planned, but housing is nevertheless becoming more and more expensive, which is a worrying trend. 

“Every sector of the city should give thought to how we could make housing more affordable. The process from town plans to finished apartments is a long one, and costs can be affected throughout the entire process. It is our own city that we’re building, and we should remember that”, Malmi states. 

“It is important for us to make apartments that the residents can afford and enjoy. In the best case, we can do so while also developing methods that have wider social benefits. We are building better homes, one building at a time”, Forss concludes. 

Carbon footprint 

Carbon footprint refers to carbon dioxide emissions caused by human activity. In most cases, it is reported in carbon dioxide equivalent (CO2e), which also accounts for other significant greenhouse gases, most importantly methane (CH4) and nitrous oxide (N2O). 

Carbon hand print

Carbon handprint describes the climate benefits of a product, process or service. Anyone can create a carbon handprint – a state, a company, an association or an individual. For example, when a company generates a carbon handprint for its customer, the customer can reduce their own carbon footprint. 

In addition to developing their own operations, companies can improve their carbon handprint by actively introducing to the market new innovations, products, solutions or services that generate positive environmental impacts during their use. Many solutions of circular economy produce their customers a carbon handprint when compared to a similar, more conventional solution. The carbon handprint highlights the positive future effects on emissions, whereas the carbon footprint focuses on the negative effects on emissions. 

Written by Hannele Borra
Photos by TVT Asunnot

Ambitious targets drive the City of Helsinki’s housing production

Three new buildings for the Helsinki City-owned housing company, Heka, were recently granted Green Financing. The buildings’ E-values represent the best in the industry: for example, the annual efficiency of their heat recovery ventilation is extremely high, between 70% and 79%.

This is not unusual for Heka buildings, as energy efficiency is an important factor in all the company’s construction. As the largest lessor in Finland, Heka’s actions carry considerable weight. The company’s nearly 50,000 dwellings are home to more than 92,000 Helsinki residents. The company orders its new building and renovation projects from the City of Helsinki’s Housing Production Department, which manages the projects in full from design to implementation.

“The City of Helsinki aims to be carbon neutral by 2035. This is a tough goal, and we will have to employ all the measures possible to achieve this,” says Minna Launiainen, HVAC Design Manager at the City of Helsinki’s Housing Production Department.

The three new buildings with Green Financing will be built in the districts of Kulosaari, Myllypuro and Mellunmäki. The energy efficiency class of one of the buildings will be A and the others B.

“These new buildings will have efficient heat recovery ventilation, LED lights both inside and out, and solar panels. Our goal has long been to produce buildings with an energy efficiency class that is above the regulated level and with E-values below 80,” Launiainen says, describing the City’s energy saving measures.

The will is there but more solutions are needed

The City of Helsinki’s Housing Production Department is continuously seeking ways to also reduce the energy consumption of its existing buildings. The thermal insulation capacity of the buildings is improved in connection with façade renovations, the windows are replaced, and the ventilation is replaced with mechanical supply and exhaust ventilation and equipped with heat recovery. Some buildings are also fitted with exhaust air heat pumps, and the heat obtained from them is used in heating domestic water.

Renewable energy is utilised wherever possible.

“We have installed solar panels in some of the existing buildings. We have also investigated utilising geothermal heat, but have not yet succeeded in making it work for one reason or another. In some locations, for example, the reserve in the underground formula prevented the drilling of geothermal holes,” Launiainen explains.

A centralised and remotely controlled building automation system is installed in all new and renovation projects implemented by the City of Helsinki’s Housing Production Department. For example, the indoor temperature of the apartment in addition to the outside temperature is utilised in controlling the heating.

“We are already able to apply a wide range of automatic functions to optimise energy consumption. We will be able to do much more in the future. Adding smart functions is just a matter of programming.”

There is plenty of will to improve energy efficiency, but the solutions are not always easy to find.

“Sometimes the absence or complexity of ready-made solutions prevents the implementation of plans. We need equipment manufacturers to create ready-made concepts and solutions that would be easy to plan and implement even outside renovation projects,” Launiainen says.

Money can also present an obstacle to the most energy-efficient solution, especially if the cost of the renovation verges on that of a new building.

“It’s truly vexing if, for example, heat recovery, which is the most effective way of conserving heating energy, cannot be installed for economic reasons. It’s important to consider life-cycle costs, instead of just investment costs,” Launiainen emphasises.

In its housing production, the City of Helsinki examines life cycle costs more and more also when constructing new buildings.

“We have acquired a tool that allows us to calculate a project’s life cycle costs already at the start of project planning.”

From an expert point of view, what would be the best way to achieve the climate goals in the housing sector?

“There should be a lot more renewable energy in buildings! Of course, producing district heating in a renewable way would be the best solution.”

From individual houses to energy efficient city blocks

A new residential area will be built during the next decade on the north side of the district of Pasila where the former ground transport centre used to be. The area has an environmental theme and energy efficiency targets consistent with it. According to Launiainen, the new areas will be built in one city block at a time. The same block may include rental, right-of-occupancy and owner-occupied dwellings.

“All the buildings in the four city blocks currently being planned will belong to energy efficiency class A, and all will have the Finnish RTS environmental rating. In addition to solar panels, the buildings will include waste water heat recovery, which is a fairly effective way to save on heating costs.

According to Launiainen, it is not heating but water heating in modern, energy-efficient buildings that eats up a large proportion of energy and euros.

“We strive to reduce water consumption by using new technologies and equipment. Our new buildings have apartment-specific water meters, which seems to clearly reduce water consumption.”

Text: Hannele Borra
Photos: Lahdelma & Mahlamäki Architects

The Guardian praises Finland’s measures to tackle homelessness – Kaakinen from Y-Foundation: “Our approach is very pragmatic”

The Guardian explains that in Helsinki hardly anyone has to sleep rough anymore, while in England, for example, the number of rough sleepers has rocketed. The article also explains the background to social housing production in Helsinki.

This is not the first time the British newspaper has written about the Finnish model, the previous time being about a year ago. For its most recent article, the Guardian interviewed, among others, the Y-Foundation’s CEO, Juha Kaakinen, who says that the topic has attracted tremendous interest.

“We receive comments and enquiries about it all the time from all over the world. I have been interviewed, for example, by a radio station in South Africa,” Kaakinen says.

He has toured several countries, presenting the Housing First model, and at the same time learned about the various ways homelessness is fought in different locations.

“The special strength of the Finnish model is our wide-ranging cooperation between the state, municipalities and the organisations involved. While people elsewhere are talking about homelessness, we are taking action. Our approach to it is very pragmatic.”

Positive outlook on the future

Kaakinen also praises the new government programme, one of the aims of which is to halve homelessness during the current parliamentary term and ultimately to eliminate it entirely over the next two terms, that is, by 2027.

“This is a very promising, historic goal. I am optimistic about the programme also because we have experience from the last decade of how to build a model like Housing First and actually implement it collaboratively,” says Kaakinen.

He calls for active measures.

“We have to invest in auxiliary resources. The supply of affordable rental dwellings is a key structural factor in preventing homelessness and, at the same time, the route out of homelessness. From the point of view of housing production for the public good, I also consider it a positive fact that the interest subsidy system is still being developed to make it more attractive. We need affordable alternatives, whether they are rental or owner-occupied dwellings,” Kaakinen says.

Although huge improvements have already been achieved, as shown by the results of the Housing First model, there is still plenty to do in honing the details and deepening the work.

“There is no room for complacency. Even small delays in housing production and supply can translate as problems in the homelessness situation. We have seen clear signs of this in some cities. If the production of affordable housing is neglected, it shows as homelessness at the other end of the chain. We must stay alert constantly.”

According to Kaakinen, Finland needs to learn how to find special solutions for homeless women, among others.

“Fortunately, we have the support of international cooperation and a broad network to draw new ideas from, as well as present new ideas to.”

What does reasonably priced housing production mean?
Reasonably priced housing refers to the state-aided production of rental and right-of-occupancy dwellings by developers who operate on a non-profit-making basis. The rent paid by the tenants consists of the direct expenses incurred in the construction, maintenance and repair of the building. The state supports the construction of affordable housing by providing interest subsidies for the financing of buildings. Interest subsidies may be granted to housing operators and projects which the Housing Finance and Development Centre of Finland (ARA) has defined as a public utility. Municipality Finance Plc is Finland’s largest sponsor of social housing.

Text Pihla Hakala | Photo Sanna Liimatainen