It would be harmful to make cuts to state-supported housing production now that housing construction has stagnated to a historically low level. In the budget process, the government must ensure that, alongside adjustments, it also creates growth and use means to lift housing production and renovation construction out of the cyclical slump, emphasizes Aleksi Randell, CEO of the Finnish Construction Industry Federation.
The construction sector has continued to be exceptionally weak this year. Housing production has collapsed to a level that is far below the needs of urbanization and demographic development. In 2023 and 2024, only about 18 new housing starts were started per year, and in 000 the number is also set to fall below 2025. This is significantly less than the need estimated by VTT, which is 20–000 housing units per year. Renovation construction has also been declining for more than two years.
The Construction Industry Federation (RT) reminds that in the upcoming budget campaign, no decisions should be made that would further weaken the prospects for construction. Decisions have a direct impact on the growth of the entire economy, employment, tax revenues and the availability of affordable housing, especially in growth centers.
Interest subsidy mandate to be maintained at current level
State-supported housing production has taken on a more central role in the current economic cycle, where there is a significant lack of privately financed construction. The state has responded to the situation by increasing the interest-subsidized loan authorizations of the State-supported Housing Construction Center Varke for 2024 and 2025. Subsidized housing production supports the start of construction projects, especially in large cities and growth centers, while promoting a balanced housing supply.
In the current market situation, keeping the state's interest subsidy mandate at a sufficiently high level is essential to prevent further decline in residential construction. Although a very cautious recovery is now visible in freely financed production, it is not enough to make up for the decline in subsidized production.
The Construction Industry Association (RT) believes that the interest subsidy loan mandate should be maintained at the current year's level, i.e. EUR 1,75 billion. A reduction to EUR 1 billion as proposed in the budget would be too large given the current situation and would lead to a decrease in the number of housing units produced, estimated at approximately 3 units in 700. In addition, the terms of interest subsidy loans should be amended without delay to make them more suitable for the changing economic situation.
The interest subsidy mandate is not directly payable by the state, but costs arise when interest is paid based on the interest subsidy agreement. It is also good to remember that housing construction is very tax and labor intensive and its indirect effects on the growth of other industries, such as trade, are significant. In this situation, the continuation of the historically weak economic situation in construction will certainly be more expensive for the state than maintaining the interest subsidy mandate at the current level. More than 30 people have already left the workforce in the industry.
A boost for renovation projects
Alongside housing construction, renovation construction also needs to be accelerated. The Finnish Construction Industry Federation (RT) is proposing a fixed-term 10 percent investment subsidy that would encourage housing companies, municipalities and other property owners to launch already planned renovation projects.
For example, a grant of EUR 100 million would trigger an estimated EUR 14 billion in investments, increase employment by 000 person-years, and return over EUR 400 million to the state in taxes and tax-like payments. The grant would curb the growth of renovation debt, boost energy efficiency, and particularly support small and medium-sized enterprises, for which renovation construction is a key area of activity.
See also
More information
Aleksi Randell
CEO
aleksi.randell@rt.fi + 358 9 129 9201Confederation of Finnish Construction Industries (CFCI)
Assistant: Lotta Räty
Merja Vuoripuro
Director, Communications and Responsibility
merja.vuoripuro@rt.fi + 358 40 587 2642Confederation of Finnish Construction Industries (CFCI)