According to VTV, the overall reform of the general housing allowance made in 2015 increased the state’s expenses significantly more than previously estimated.
Still more working Finns receive general housing allowance. The share of working people among subsidy recipients increased after the earned income deduction was introduced, according to the inspection report of the State Audit Office (VTV).
In the fall of 2015, a 300-euro earned income deduction was introduced in the general housing allowance, which made it possible to receive housing allowance with higher earned income than before. In addition, the reform simplified the criteria for granting housing allowance, increased maximum rents and reduced deductibles.
According to the report, the share of those receiving earned income among those receiving general housing allowance increased from 24 percent to 39 percent after the reform. Students are not included in the chapter.
“Based on the example calculations, the reduction in earned income has also increased the incentive for the beneficiaries to work part-time. The change increased the income limits of the housing allowance and thus increased the income in the hands of the recipient”, says VTV’s leading performance inspector Ville-Veikko Pulkka in the bulletin.
According to VTV, an even greater number of benefit recipients will have to rely on income support if the conditions of housing support are tightened. According to VTV, when social security is reformed, it should be taken into account how much the livelihood of those with earned income is supported by housing allowance and how much by other benefits.
“The use of income support reduces the financial incentive to work and makes receiving work bureaucratic,” says Pulkka.
of VTV according to the overall reform of the general housing allowance, increased government spending considerably. The annual increase in expenditure was estimated at 68 million euros when the reform was carried out, but estimates of the actual annual increase in expenditure vary between 150 and 259 million euros.
“The government’s presentation did not discuss the spending effects or goals of the earned income reduction at all, even though the reduction was a significant part of the reform. The impact assessments were thus incomplete,” says VTV’s project assistant Pauliina Hakkarainen in the bulletin.
In the report, VTV analyzed the effect of the reduction in earned income made in the overall reform of housing allowance on who receives general housing allowance, based on Kela’s register data. The inspection also assessed the incentive effects of the earned income deduction and the compatibility of the housing allowance with the study allowance and income support. In addition, the financing process of the general housing allowance was inspected from the perspectives of auditing and legality inspection.
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