A survey published today by the Finnish Competition and Consumer Authority (FCCA) shows that a shortage of building plots, plot allocation terms that favour large operators, as well as strict regulation, reduce the interest of small and medium sized buildings firms particularly from entering the market in the Helsinki region. The problems are especially acute in the construction of state supported rental accommodation which is difficult to build at the prices and conditions offered.
Demand in housing markets in the Helsinki region constantly exceeds supply, which can be seen in the price increases of both old and new housing. Getting new players involved in housing construction in the region will be key to increasing supply. However, not all firms consider it worth entering the market under the current conditions, although strong demand and high prices should support market entry.
According to the FCCA’s survey, the problems of supply lie largely in land use and public sector regulation. There are few reasonably priced plots that are suitable for building land in the Helsinki area and the plot allocation terms are often structured to favour the large players. The regulation of construction and the interpretation of regulations are also stricter in the Helsinki region than elsewhere in the country.
In the light of the survey, all methods of resolving these problems should be adopted as soon as possible because increasing the supply will, in any case, take time. In addition, there are many contradictory interests linked in to the problems of land use and regulation. Difficult choices will have to be made however so that the price of the housing situation to the national economy does not rise too high.
Lack of building plots and strict regulation especially restricts the construction of housing under the ARA system
Many small and medium sized companies consider that a shortage of supply of building plots, and strict regulation especially, restrict production of rental accommodation subsidised by the state under the ARA system. The conditions for building housing for the ARA system are simply too strict. Most of the criticism is levelled at the requirement for the property to be on the rental market for 40 years.
The main problems associated with land use, public sector regulation and ARA conditions can be broken down into a large number of sub-questions such as the restrictions on building right-of-occupancy housing. The survey shows that there is demand for right-of-occupancy housing, but that regulations link the building of it to the building of rental accommodation under the ARA system.
FCCA’s survey is part of the programme of measures taken by government on housing policy as well as the programme to promote healthy competition. The survey and reporting was carried out by Ramboll Management Consulting Oy in accordance with the terms of reference set by the Authority. In accordance with the terms of the housing policy programme, the survey only considered the perspective of entering the sector.
Read the survey (in Finnish):
Asuntotuotannon kilpailun esteet pääkaupunkiseudulla (pdf)
Head of Research Ari Ahonen, tel. +358 29 505 3368
Assistant Director Seppo Reimavuo, tel. +358 29 505 3602