Rent control Europe: Finland

Population: 5,488,543
GDP: $237,111,000,000
Avg. Weekly Earnings: €575.00
Avg. Apartment Price (Per. Sq. M.): €6,214.00
For 120-sq. m. apartment in city centre
Avg. Monthly Rent: €887.30

Our second foray into the Nordic countries takes us to Finland; similarly to Sweden, Denmark, and Norway, the Finnish economy enjoyed unprecedented growth from 1999, when it joined the European Union’s single currency, until the recession in 2008. In comparison with the rest of the Eurozone, Finland’s recovery has been strong; in 2012, the public debt in Finland was estimated at 50% of GDP, significantly lower than the beleaguered Germans, for whom public debt was 80% of GDP.

Measured differently, however, the Finnish recovery is less impressive. In Q2 2012, the Finnish GDP dropped by 1%, whereas its nearby neighbour Sweden enjoyed an increase of 1.4% in the same period. In the same year, the Swedish government ran an account surplus of 7% of GDP, whereas the Finnish government operated its first deficit since 1993.

The differences between Sweden and Finland extend to their handling of property: while Sweden is staunchly pro-tenant, the practices in Finland are more neutral. Rent is determined by landlord and tenant, with provision for correction from the courts if it significantly exceeds appropriate rents for comparable apartments. For fixed-term leases of greater than three years, the parties similarly decide upon the particulars of rent increases – typically, these increases will utilise an index such as the consumer price index, or cost of living index, with an additional stipulation of a minimum yearly increase.

Unlimited tenancies are common in the Finnish rental market, and may be terminated by either the lessor or the tenant by giving notice in writing. If initiated by the landlord for tenancies which have occurred concurrently for at least one year, six months’ notice is required for termination of the agreement, and three months is required for any tenancies of shorter period. No matter the situation, the tenant is required only to provide one months’ notice prior to vacation of the premises.

The Social Insurance Institution of Finland is responsible for providing housing benefits to Finnish residents, specifically low-income households. Each household is allowed to be paid one type of benefit, with four supplements potentially eligible.

Construction of residential buildings in Finland declined sharply following the economic downturn in 2008, down from approximately 57 million cubic metres of construction in 2007 to only 34 million in 2010. Construction continued to trend downward, ignoring temporary resurgences, until February to April 2016, during which time 10.1 million cubic metres of building permits were issued, up 9.3% from the previous year.

This increase in construction should help to address the housing shortages present in some of Finland’s more desirable metropolitan areas. In particular, Finnish university cities are hard-pressed to provide enough housing for the growing number of tertiary student numbers; from the late 1980s until 2008, the number of tertiary students in Finland tripled, from about 100,000 to some 300,000.

With an increase in demand, Statistics Finland has reported increases in rents of 2.8% during the first quarter of 2016. Rents of government subsidised dwellings rose by 3.0% throughout Finland, and rents of non-subsidised dwellings rose by 2.6%.[1]

According to the OECD’s Economic Outlook for Finland for 2016, the economic recovery is hinged on strengthening domestic demand. There is, however, the issue of still weakened export numbers, primarily due to the weakness of the Russian economy, who have been Finland’s primary trading partner for decades. Private consumption recently increased, but the OECD attributes this to external factors, and concludes that economic uncertainty is still at record highs[2].

While the growth rate of unemployment and debt has slowed, these values are still significantly above the long-run average. The government is currently in the process of sweeping structural reform, attempting to enhance market flexibility and improve competitiveness. Since 2007, productivity in Finland has steeply declined, and this reform would raise employment and curtail the decline, providing Finland with the domestic force necessary to affect its own recovery. Currently, the Finnish recovery is pinned to the economic future of Germany and Russia, and so Finland’s lack of control over its own destiny is limiting the potential of their economic recovery.

This post was contributed by Brandon Nero, University of Florida.

[1] Source: Rents of dwellings, Statistics Finland
http://www.stat.fi/til/asvu/2016/01/asvu_2016_01_2016-05-06_tie_001_en.html
[2] OECD Economic Outlook, Volume 2016, Finland
http://www.keepeek.com/Digital-Asset-Management/oecd/economics/oecd-economic-outlook-volume-2016-issue-1/finland_eco_outlook-v2016-1-17-en#page2

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