Editorial | Only increasing construction will truly lower the price of housing

Tthe greetings of those familiar with the logic of the sector to the decision-makers of the city of Helsinki thinking about housing solutions and the price of housing are clear: let’s build more.

Something should be done about the expensive housing in the capital region just because the voters are waiting for action.

The cost of housing also creates problems for the region’s economy. There would be work available in the capital city in downtown shops and small service companies, but due to the high cost of housing, the labor force remains far away from these jobs.

For many people, a long journey to work can be exactly the threshold that should not be crossed when you have to move from card shop to work. For small companies, the difficult availability of labor, on the other hand, can be a threshold that cannot be crossed when you want to expand your operations in Helsinki. This in part proves that expensive housing maintains unreasonably high structural unemployment.

Helsinki’s political decision-makers have been looking for ways to build more affordable square meters in the city. The background is that the hitas system was abandoned. The system distributed owner-occupied apartments at a lower price than the market price. The city organized affordable lots and determined resale prices.

The arrangement sounded better than it was. Hitas apartments could be bought by anyone and with any salary, and often the apartment ended up with a buyer by lottery if there were several applicants. The Hitas apartment could also be rented out and thus obtain rental income.

Bin elsing, we are now considering a rent-to-own model, which would be somewhere in the middle ground between the hitas system, rental housing and the right to housing. The resident would pay a small self-financing portion of their apartment, for example five percent of the market price. After that, he would live on rent for ten years and then he could buy his apartment at the original purchase price, from which the installments for the rental period have been deducted. Buyers would have income limits.

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There is no shortcut. The medicine is slow-acting and boring.

One of the model’s weaknesses is, like the slow system, that the social model leaks. Over the course of ten years, a low-paid person may end up with a high-paid one, who eventually buys his apartment as an investment property. At least if the “purchase option” has worked – if the prices have risen during the rental period. On the other hand, if this kind of income development does not take place, at the end of the rental period, a person may face exactly the same cost problem that was set out to be eliminated: there is not enough income to buy.

Presumably, the rent in the arrangement would not be lower than with a rental apartment purchased on the free market.

Problems can also arise for the city if, as expected, it bears financial responsibility for the construction and model. If the rents and the paid deductible are used for real estate investments, where will the refund be collected if the tenant is not interested in the purchase? Is the money accumulated over the years jammed somewhere? If this is not done, the capital collected elsewhere for the return will have its interest.

In any case, the system will remain small relative to the problem – the housing stock will not grow. The apartments leave the rental market redeemed or, in the absence of the redeemer, sold at the market price. Something new has to be done all the time.

OFas much as we want cheap housing, the truth is that there is no shortcut. The drug is slow-acting and boring, and no city decision-maker gets credit for inventing it. Then, when the supply exceeds the demand, prices and rents will naturally decrease – perhaps slowly, but truly.

City decision-makers should focus on the core of urban policy: zoning that increases construction and developing transport links between the city center and suburbs with cheaper square footage.

The editorials are HS’s positions on a current topic. The articles are prepared by HS’s editorial department, and they reflect the journal principle line.