Land or Market?

Housing affordability cannot be achieved by solely relying on the state-versus-market debate. What is needed is vision, understanding, and experimentation.

Recently, concerns about housing affordability have been rising among Finns . Due to inflation, surging energy prices, and increasing interest rates and housing company charges, the rising cost of housing appears to be unreasonable to most Finns. This affects not only our wallets but also future prospects, both individually and as a society. Housing is overwhelmingly the largest expense, with low-wage earners and special groups particularly perceiving the situation as unjust (E2, 2023 ). Half of the Finnish population considers their housing expenses unreasonable. One-third of people estimate that over 40% of their household's net income goes to mandatory housing expenses, and one-fifth assess that housing costs swallow more than half of their income (Housing Foundation 2024 ).

Financial worries have a dramatic impact on people and society at large, including but not limited to: decline of work productivity and commitment , deterioration of mental health , negative future outlook, increase of societal injustice experiences, and there is a shift toward political conservatism (as seen in Finland ). Exorbitant housing costs also broadly affect society by hindering labor availability and raising its price, contributing to segregation, reducing purchasing power, and so forth.

Despite the alarming nature of this problem, there is a lack of strategic thinking and agency in addressing it. No one seems to have a vision for responding to exorbitant housing costs, nor does anyone appear interested or able to tackle them effectively.

The government program hints at reducing housing-related subsidies and emphasizing the necessity of market functionality. New models for individual subsidy forms are also being explored, but there seems to be no comprehensive picture of how to overcome the situation. The opposition has settled for opposing subsidy cuts, which were never adequate solutions to the challenges of just housing in the first place.

Pitting state subsidies against the market is futile. Neither can solve the challenge of just housing. Some key points include:

• The climate crisis and biodiversity loss make it difficult or very expensive to increase the housing supply. For example, calculations by 英国伦敦大学学院 indicate that the entire UK's carbon budget would be spent if the government's housing construction targets were met. Similar calculations for Finland do not exist, and the climate goals of cities include only a small part of construction emissions.
• Housing prices have not been kept in check in any growing city, whether they rely on extensive subsidies or an unregulated housing market.
• The rise in housing costs is driven by urbanization, with both an aging population and an economy based on innovations and services packing people close to each other. High housing costs are somewhat an external effect of a region's economic success.
• Housing markets are complex: houses are expensive, have high transaction costs, cannot be moved, and have long production and usage times. They are unique, part of both the housing and financial markets, and have extremely limited supply. Additionally, construction is always regulated and linked with public investments.
• Relying on subsidies is tricky, as they affect housing prices, and the short cycles of polarized politics make it questionable whether we can trust them.

What should be done? We believe it is essential to understand the difficulty of the situation, the new constraints brought by the climate crisis, and to look beyond individual models, subsidies, and market solutions. Previously, we asked what kind of subsidies could ensure that those in the weakest positions could afford a decent home. Now, the question is how can just housing be achieved in 21st-century Finland (and beyond)?

To answer this question, three things are needed: a vision for the future of housing, a comprehensive understanding of how housing costs can be influenced, and the courage to use all available instruments to achieve this vision. This requires recognizing the facts, expanding the range of means, and imagining a significantly better future for housing.

- Roope Mokka , Demos Helsinki