VATT: Generous housing allowances not a factor in rent hikes

Differences in general housing allowances are not reflected in the rents of the allowance recipients – at least not to the extent that is widely believed in Finland, states the Government Institute for Economic Research (VATT).

VATT on Wednesday published the results of a study on the effects of housing benefits on rents that contradict both public assumptions and previous studies.

“The assumption that housing allowances trickle largely down to rents has been repeated in the public debate, but our findings show that such concerns have been exaggerated,” Essi Eerola, the research director of VATT, tells in a press release.

Helsingin Sanomat reported last year that the number of housing benefit recipients has risen over the past roughly one-and-a-half decades by 20 per cent to 820,000. The Social Security Institution of Finland (Kela), in turn, revealed that spending on housing allowances rose to an all-time high of 1.7 billion euros in 2015.

The Finnish government has acknowledged the concerns that the up-tick in housing allowance spending is benefiting primarily lessors rather than the recipients. In April, it cited such concerns as the main reason for re-instating a square metre-based cut-off point for rents for calculating housing benefits.

The cut-off point had been abolished in 2015.

VATT examined the effects of housing allowances on rents by taking advantage of certain characteristics of the housing allowance system that was in place in 2015. Housing allowances were at the time calculated progressively based on the floor area of the house, with the cut-off point for rents being higher for a 30-square metre flat than for a 31-square metre one.

Eerola and Teemu Lyytikäinen, a senior researcher at VATT, argue that their study provides clear evidence that differences in the cut-off point have no impact on the relative rents of allowance recipients.

They also warn against drawing too far-reaching conclusions based on the findings.

The findings, for example, provide no indication of whether or not the housing allowance system in itself has contributed to the increase in rents, according to Eerola and Lyytikäinen.

The study focused particularly on housing allowance recipients living in privately-owned small flats in large cities. With the square metre-based cut-off point being binding for over 80 per cent of such allowance recipients, the differences in the cut-off point had a notable impact on the allowances.

The research data were obtained from the database of the Social Security Institution of Finland (Kela). The data cover all housing benefit recipients between 2008 and 2013.

housing allowances rents Finnishgovernment Finland
If you notice an error, highlight the text you want and press Ctrl + Enter to report it to the editor
I recommend
No recommendations yet


Post your comment to communicate and discuss this article.

The coach of a sports club in Hyvinkää, southern Finland has been remanded into police custody on suspicion of sexual abuse of minors he was coaching, the Itä-Uusimaa police department said on Thursday. Officials said that they are investigating the case as suspected child abuse but did not disclose the ages of the alleged victims. The suspect in the case, a 50-year-old man, was remanded into custody on Wednesday. The suspected sexual abuse is believed to...
Finns increasingly forego do-it-yourself construction of prefab elements in favour of completely completed homes. Turnkey homes (where homes are fully finished and owners can immediately occupy them) have become more popular than traditional house packages, says the Finnish Association for Manufacturers of Prefabricated Houses. “About 7,500 detached homes are built in Finland every year, and about 70 percent of them are prefabricated houses of some kind,”...
THE FESTIVE ATMOSPHERE in the Helsinki neighbourhood of Arabianranta was visibly subdued on Tuesday, as residents mourned the death of a local child who is believed to have been murdered. While little information has been released to the public, it is known that the victim was murdered near their home on the night of Christmas Eve (December 24). The police apprehended a suspect at the scene of the crime, who has been confirmed as a 36-year old male. Whethe...
One of Finland’s most famous seafaring vessels, the titanic icebreaker Otso, was deployed on its first mission of the winter season last night, keeping sea routes open for the 22nd year in a row. Late in the evening of Christmas Day, Otso, the crowning glory of Arctia Oy’s extensive fleet, departed from Helsinki’s Katajanokka Harbour, heading north to the Bay of Bothnia. The 7000-ton Polar icebreaker has been tasked with keeping waterways open between Oulu...
Eight Finnish political parties have published their a statement on future climate policy goals in Finland. Prime Minister Juha Sipilä (Centre) in November invited all nine parliamentary parties to join a task force established to find an agreement on new, more ambitious climate goals for Finland. The one-month project was led by Kimmo Tiilikainen (Centre), the Minister of the Environment, Energy and Housing. The Finns Party abandoned the task force last w...
A 25-year-old man suspected of the sexual abuse of a girl under the age of 15 in Oulu, northwestern Finland, who was arrested in Germany last Tuesday is now reported to be at large. According to law enforcement officials in Oulu, the suspect was released by German police before he could be transferred to Finnish custody due to "a breakdown in communication between authorities". Oulu District Court ordered the suspect to be reprimanded into custody in absen...
Finland’s high earners saw their real income grow more in 2017 than their peers in middle and low income groups, according to new data released by Statistics Finland on Tuesday. Incomes among the country’s highest income decile rose by 4.4 percent in 2017 compared to 2016, while the year-on-year increase was 1.3 percent for middle income earners. Incomes for the four lowest income deciles meanwhile grew by 1.2 percent over the one-year period. However amon...
A man wanted in connection with a suspected arson attempt on a home in Helsinki’s Käpylä district was remanded into police custody on Sunday. The Helsinki district court has remanded a man suspected of attempted arson and attempted murder into police custody, ending a short-lived manhunt, police said on Sunday. The 25 year-old is suspected of using a Molotov cocktail to cause a fire at a flat in Käpylä, Helsinki last Monday. The apartment was completely de...
Helsinki Central Library Oodi will opened its doors to the public on 5 December at 8am, a day before Finland’s 101st birthday. Designed by ALA Architects, this library of a new era is an ode to Finnish culture, equality and freedom of expression. Oodi offers everyone an open, public urban space at Kansalaistori Square, right opposite Parliament House. Central Library Oodi is an active and functional meeting point with 2.5 million expected annual visitors....