Students transferred under the general housing allowance on 1 August 2017
Both upper secondary and higher education students will be transferred under the general housing allowance on 1 August 2017. Student housing supplement under the current student financial aid system will still be available to students studying abroad and to students attending fee-based studies in a folk high school, a sports institute or the Sámi Education Institute and living in the school dormitory. The President of the Republic approved the amendments to the act on general housing allowance on 29 December 2016.
At the same time EUR 9.5 million worth of index-linked savings in the housing allowance expenditure will also be implemented in accordance with the Government’s 2017 budget proposal. The reform of students’ housing allowance is related to Prime Minister Juha Sipilä’s Government’s general government fiscal plan for 2017–2010.
Parliament requires that the Government monitor how the reform affects the subsistence of students with families and then evaluate whether the legislation should be further amended, for example by introducing a parent supplement to study grant. Parliament further requires that the Ministry of Social Affairs and Health initiate the necessary proceedings to assess what kind of a status students sharing an accommodation have in the housing allowance system and review the potential need to revise the concept of household.
The reform simplifies the social security system
The general housing allowance paid to households is targeted differently from the rigid and individually-based student housing supplement. The housing allowance will therefore target fewer students than it does currently, as well as those whose housing costs are high in comparison to their income. Compared to student housing supplement, general housing allowance takes better into account the real level of rents and the differences between municipalities in housing costs. The reform will place students on an equal position with other low-income earners in terms of housing allowance. It will also simplify the social security system.
The reform will increase the costs of general housing allowance by a total of EUR 22.5 million in 2017 and by EUR 54 million annually. The costs of income support to students are estimated to decrease by EUR 6.8 million in 2017 and by EUR 15 million annually.
The additional costs will be covered from the general housing allowance expenditure. While the maximum limit on households’ housing costs will not be increased in the greater Helsinki area (municipality categories 1 and 2) in 2017, it will be decreased by 5 per cent elsewhere in Finland (municipality categories 3 and 4). In relation to the level of rents, the maximum limit for housing costs in municipality categories 3 and 4 is currently higher than in the greater Helsinki area. For this reason, it is justifiable to decrease the maximum limit for housing costs in municipality categories 3 and 4.
Keeping the maximum limit for housing costs unchanged for municipality categories 1 and 2 and decreasing it by 5 per cent for municipality categories 3 and 4 will decrease the general housing allowance expenditure by EUR 37.8 million in 2017 and annually by EUR 66.8 million. The total savings will also cover the index-linked savings of EUR 9.5 million, as agreed in the Budget. Keeping the maximum limit for housing costs unchanged for municipality categories 1 and 2 and decreasing it by 5 per cent for municipality categories 3 and 4 will increase the income support costs by an estimated EUR 8.4 million in 2017 and annually by EUR 13.8 million.
In 2015 the housing supplement costs amounted to a total of EUR 267 million, of which EUR 20 million were paid to students studying abroad. The same year the costs of general housing allowance totalled EUR 918 million. The current housing supplement is EUR 201.60 per month at maximum. The low level of the housing supplement has had negative effects especially on the subsistence of students living alone.
Effects of the reform on students’ subsistence
The reform means that some students will lose their housing allowance completely, while for others it will decrease, increase or remain at the current level. It is estimated that there are fewer students who are entitled to general housing allowance than there are students who are entitled to student housing supplement, but the average amount of general housing allowance will 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.
The transfer to general housing allowance will mainly benefit students living alone. Those who lose out the most are couples and others who share accommodation and have a joint tenancy agreement, as general housing allowance is paid out per household. Eligibility for student housing supplement is not affected by the partner’s income even if it is very high. This means that in future 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 student housing supplement will lose out the most, as the household’s total income, including that of a partner, affects the amount of general housing allowance received.
Inquiries:
Sanna Pekkarinen, Ministerial Adviser, tel. +358 2951 63434