Housing Helsinki City Council decides on principles for renting residential plots – City wants market price for rented plots

Helsinki the city council has decided on new principles for renting residential plots.

We want to make the rents at market prices in the future. This will raise the rent level of land owned by the city.

In the future, prices will be determined so that the annual rent for the plot is the market value of the plot, multiplied by a return target of 3.5%.

The return target was previously set at 4 percent, but the city government previously decided to lower the target to 3.5 percent. This presentation now went through the city council.

The proposal was approved by a majority of all parties except basic Finns.

Now the decision directly determines the level of rent for the new leases, which must therefore be aimed at a return of 3.5%.

With regard to the old contracts, more detailed guidelines are to be submitted to the Board for decision this year. They outline whether the renewed contracts will be subject to reductions and transition periods that would stagger the impact of the yield target on rising land rents.

The decision now made thus fully aligns the city’s goal of raising all rents to market prices, but more detailed decisions on old, renewable contracts will be made later. Existing agreements are not affected by the decision.

Rent level raising the market price means that the city will earn more from renting its plots than before. According to a study conducted by the city, with a return target of 4%, land rental income would be 45-63% higher in the city’s coffers than at present.

The return target was lowered to 3.5 percent, which is calculated to mean 12.5 percent lower land rent than the 4 percent target. In any case, the city’s revenue will increase significantly compared to today.

Helsinki has already set a return target of 4% for land rent in the 1980s, but the current model achieves an average of less than 2%.

The city is lined upthat in the future residential buildings will be built mainly on rental plots. Raising rents will therefore have a big impact on how much the city earns on the land it owns in the future.

PROVIDED Helsinki residents live in an owner-occupied apartment on the city’s rental plot, the rent for the plot is paid for maintenance or a separate plot rent.

When leases are renewed in the future in accordance with the principles now decided upon, rents and thus consideration will increase in many areas. Market prices, on the other hand, mean that in the cheapest areas rents can even be reduced.

On the other hand, the decision states that rents at market prices may also curb the rise in house prices: when consideration rises with the increased rent, it affects the selling price of the dwelling.

With regard to rental housing, the decision states that the rental of housing is determined by market conditions according to supply and demand. The costs paid by the landlord therefore have no effect on the level of rent paid by the tenant.

Council also decided that new leases will be made for at least 80 years and that rents will be revised approximately every 20 years.

In addition, plots to be handed over for slow-moving housing production will no longer be granted a separate relief from the market rent. It has already been decided to abolish the Hitas system and replace it with a new system of affordable owner-occupied housing.

According to the decision, the plots of state-subsidized Ara residential buildings will be granted a discount on the market rent.