Thousands of new homes planned in Helsinki region

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The 14 municipalities in the Helsinki region are engaging themselves to increase the construction of new homes significantly from the present level.
      A letter of intent to be signed by the municipalities and the state on January 18th will confirm that a total of 13,000 new houses and apartments are to be built in the region within 12 months. The figure is 5,000 higher than last year.
      Around one-fifth of the new dwellings will be moderately-priced rental apartments.
     
The municipalities promise to speed up the currently almost nonexistent production of rental flats with the help of a new state subsidy.
      In February, the contract will be handled by the government. It will also be subject to an approval by both the city and municipal boards in the region.
      "All parties to the contract are now serious about implementing the jointly and severally responsible housing policy in the capital area", said Minister of Housing Jan Vapaavuori (National Coalition Party), describing the atmosphere in which the contents of the letter of intent were drawn up.
     
The goals of the letter of intent are at a really high level. In Helsinki alone, the production of apartments is to be doubled from last year’s figure to some 5,000 homes. Around 1,000 of them should be state-subsidized rental apartments.
      The City of Espoo has also promised to double the number of new dwellings and to increase the number of hard cash apartments by several hundreds, while the City of Vantaa is facing a relatively smaller obligation.
      In the municipalities surrounding the Helsinki region, no rental apartments were produced in 2006. Moreover, the number for previous years was just a few dozens.
      The municipalities are willing to supply moderate-priced residential land, though they suspect that even new attractions are not enough to encourage large construction companies and developers such as VVO and YH-Rakennuttajat.
     
"The construction companies should have been linked with the letter of intent somehow", says Olli Salakka, the CEO of the VVO Group.
      According to Salakka, VVO informed 20 municipalities of their willingness to accept residential land for rental houses last summer. For example Tuusula and Nurmijärvi were not interested in the proposal, while Vantaa was.
      "An EUR 10,000 start-up subsidy is rather small, reducing the rent just by EUR 0.70 per square metre. The high costs of building material are a real stumbling block to the construction of rental flats”, Salakka concludes.
     
At present, Helsinki is not a particularly tempting location, owing to the shortage of properties and the correspondingly high prices being asked.
      A recent survey indicated that it was not economically sensible for a family with two children to move into the Helsinki area unless the monthly salary offered in the new workplace was appreciably over EUR 3,000 a month. A long commute from a home further away would be a more attractive alternative, even with its attendant discomforts.
      For someone living alone, the threshold figure for taking up a job and moving to the Helsinki region would be a salary of EUR 2,600 or more.
      The figures were arrived at by the research centre PTT, which noted that families' economic incentives to move to work in the Helsinki area are currently rather slim.
     
By the same token, the municipalities of the region urgently need to attract new people in as residents, for every individual who commutes from outside the area to a workplace in the Greater Helsinki area is bringing in no local tax revenue but contrastingly is further burdening the area's traffic and emissions levels.
      The worst-case scenario for the likes of Helsinki, Espoo, or Vantaa is that employers, too, would take the hint and move their operations out to places like Lahti or Hämeenlinna, where employees can find reasonably-priced housing. This would be a double blow.


Links:
  Pellervo Economic Research Institute PTT

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