Questions and answers concerning the transfer of the student housing allowance to the general housing allowance
Housing allowance can be granted for a permanent residence located in Finland. The purpose of the general housing allowance is to reduce living costs for people on a low income. Currently it can be granted to families with children, married couples, cohabiting couples, people living on their own or people in shared accommodation.
The current student housing supplement is a maximum of 201.60 euros per month. This makes the livelihood of students living alone more difficult. The general housing allowance is better than the student housing supplement in taking into account the real level of rents and the differences between municipalities in regards to living costs. The reforms will also put students, as far as the housing allowance is concerned, on a par with other low-income earners. In addition it would simplify the social security system.
During the autumn of 2016 the government has prepared a proposal for transferring students in both secondary and higher education to the general housing allowance. Those who study abroad would, however, still be covered by the housing supplement included in the student financial aid system. The increase in housing allowance costs caused by the transfer would be covered within the spending limits of the administrative branch of the Ministry of Social Affairs and Health. This reform is related to Juha Sipilä's Government’s 2017–2020 plan for the public finances.
The student housing supplement intended for paying rent has been a maximum of 201.60 euros per month. In 2015 a total of 267 million euros was paid out in student housing supplement. The housing supplement costs for students living in Finland were 247 million euros, while for students living abroad they were 20 million euros.
The costs of the general housing allowance in 2015 totalled 918 million euros. The costs of the general housing allowance would increase by 137 million euros in 2017 and by 304 million euros in 2018 if the student housing supplement were included in the general housing allowance. The costs of the student housing supplement would decrease by 114.5 million euros in 2017 and by 250 million euros in 2018. It is estimated that the costs of social assistance would be reduced by 15 million euros on an annual level. Thus public expenditure would increase by a total of 39 million euros.
The plan is to cover the increased costs caused by the transfer with the general housing allowance expenditure so that public expenditure is not increased due to the change. In the greater Helsinki area (municipality categories 1 and 2), maximum housing costs would not increase in 2017. Elsewhere in Finland (municipality categories 3 and 4), maximum housing costs would decrease by 5 per cent. In relation to the level of rents in the greater Helsinki area, the maximum housing costs in municipality categories 3 and 4 are higher. For this reason, it is justifiable to direct the decrease in maximum housing costs to municipality categories 3 and 4.
Not increasing the maximum housing costs and decreasing the maximum housing costs for municipality categories 3 and 4 by 5 per cent will decrease the general housing allowance costs by 37.8 million euros in 2017 and by 66.8 million euros annually afterwards. The total savings would also cover the index-linked saving of 9.5 million euros, as agreed in the State budget, of the general housing allowance. Income support costs are estimated to increase by 8.4 million euros in 2017 and by 13.8 million euros annually afterwards.
When calculating the general housing allowance, the maximum amount defined for housing costs is taken into account. In practice this means that those receiving the allowance will have to pay for the housing costs that exceed this maximum amount. The purpose of the housing allowance is only to support reasonable housing costs. The maximum amount of housing costs depends on which municipality the property is located in. The maximum housing costs vary by municipality category, and are exceeded by approximately 70 per cent of people receiving this benefit in all municipality categories.
The maximum amounts for the general housing allowance are linked to changes in the rent index of Statistics Finland. In rented housing the maximum housing costs are €362–508/month for single-person households, depending on the location of the property, €527–735/month for two-person households, €675–937/month for three-person households and €804–1,095/month for four-person households.
The maximum housing costs for the student housing supplement is 252 euros per month, and students have to pay any amounts exceeding this themselves. When students are covered by the general housing allowance, the same maximum amounts for housing costs will apply to them as to others who receive the housing allowance.
In order to make savings in the public finances, the maximum housing costs for the general housing allowance have not been increased in 2015 and 2016. They will also not be adjusted in 2017.
Because of the differences between the two systems there will be changes to the level of student housing allowance when the students are transferred to the general housing allowance. This is caused by the fact that the general housing allowance, which covers the household’s housing costs, is allocated differently from the more formal student housing supplement. Changes are also caused by differences in how the maximum acceptable housings costs and the allowance are determined for the general housing allowance and the student housing supplement.
Due to this reform some students will lose their housing allowance completely, while for others it would decrease, increase or remain on the current level. It is estimated that there are fewer students who are entitled to general housing allowance that there are students who are entitled to the student housing supplement, but the average amount of housing allowance would be higher than the student housing supplement. The housing allowance would therefore target fewer students than it does currently, as well as those whose housing costs are high in comparison to their income.
Being transferred to the general housing allowance would mainly benefit students who are living alone. Those who would lose out the most in this reform are couples and people flat sharing who have a joint tenancy agreement, as the general housing allowance is paid out per household. With the student housing supplement, the income of a person’s partner does not affect the entitlement to receive the housing supplement even if their income is very high. This means that in future the housing allowance will be allocated to low-income households. Couples where one person has a high or moderately high income and the other is the only one currently receiving the student housing supplement would lose out the most, as the household’s total income, including that of a person’s partner, affects the amount of general housing allowance received.