International Journal of Housing Policy
2023
Forsström-Tuominen, Blackwell, and Bengtsson and others
The article examines the institutional challenges faced by housing cooperatives in Finland, particularly as the country grapples with rising housing costs and a shrinking social housing sector. With a renewed political interest in cooperatives as a solution to housing unaffordability, the study investigates three cooperative projects within a state-subsidized pilot program, highlighting key ambiguities in Finnish land and housing policies that hinder their development. The research reveals three primary tensions affecting these cooperatives: the perception that they are not “social enough,” concerns over their long-term affordability, and the notion that they are not lucrative enough for municipal authorities. Despite the potential of cooperatives to provide affordable housing options, the lack of clear regulations around accessibility leads to skepticism from local authorities, who often prioritize traditional social housing models aimed at special needs groups. Moreover, the study underscores the challenges of maintaining affordability in the face of financial pressures and changing land use policies. As cooperatives navigate these complexities, they face an uphill battle against a framework that often favors market-driven approaches. The article ultimately calls for further research into the relationship between housing cooperatives and institutional policies across different contexts, aiming to shed light on how cooperative models can be better integrated into housing strategies to meet the needs of diverse populations. Overall, this exploration contributes valuable insights into the evolving landscape of housing cooperatives in Finland, as they strive to address the pressing issues of housing insecurity and affordability.
Abstract
This article explores some of the key institutional challenges hindering the development of a new ‘social’ housing cooperative model in Finland. In response to rising housing unaffordability and insecurity in the private housing sector, and a retrenching social housing sector, Finland is experiencing a resurgence of practical and political interest in housing cooperatives. Based on a document study and interviews with key stakeholders, this paper investigates three Finnish housing cooperatives, all of which are part of a broader state-subsidised pilot study. Despite different operational dynamics across projects, in this paper we identify three overarching ambiguities in Finnish land and housing policy which are hindering their development. Firstly, despite support from public authorities, cooperatives are difficult to categorise within existing social housing frameworks. Secondly, due to temporally-restricted regulatory instruments, authorities are also sceptical of their long-term affordability. Tying these together, we suggest, is also a further third factor. Namely that, due to its entrepreneurial real estate policy, the City of Helsinki refuses to lease land under market rent to housing cooperatives. Contributing to international scholarship on the public-cooperative nexus, this article investigates the impacts these institutional ambiguities and contradictions can have on contemporary housing cooperative developments.
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Introduction
Western European countries are rolling back social and public housing in favour of introducing more market-oriented housing tenures (Kadi & Lilius, Citation2022). Throughout OECD countries, large shares of the social and public housing stock have been retrenched and privatised (Blackwell & Bengtsson, Citation2023). While housing is commodified, private housing is treated increasingly as a financial asset. Global rentiers now accumulate wealth from the intensifying circulation of capital in, and assetisation of, the built environment and residential space (Christophers, Citation2022). In Finland, part and parcel to this commodification and assetisation of housing is the retrenchment of social housing into a selective social service for so-called special needs groups, subject to strict income limits (Hyötyläinen, Citation2020). This intensifying commodification of housing coupled with a growing demand for homes in urban areas sees housing prices and rents in large Finnish cities growing. There is now a significant population who are struggling to buy or rent on the market, whose incomes are too high to be eligible for means-tested social housing, and for whom the receding intermediate housing sector is not large enough to provide homes (Forsström-Tuominen, Citation2016).
In response to such problems, the Finnish central state initiated a pilot project in 2016 to trial a new ‘social’ housing cooperative model (Forsström-Tuominen, Citation2016). Around Europe, housing cooperatives are gaining significant political, practical, and academic interest for their potential as affordable and self-organised housing options (Ferreri & Vidal, Citation2022). Although many other Northern European countries have long histories with housing cooperativism, the model has historically played a limited role in Finnish housing provision (Bengtsson, Citation2013). Today, however, the Finnish central state is exploring new possibilities for housing cooperatives to provide a complementary alternative to a variety of already existing modes of government-subsidised housing. They will specifically target residents that do not meet restrictive criteria for social rental housing but also cannot afford housing on the private market (Valtioneuvosto ja ministeriöt, Citation2017b). Essentially, housing cooperatives in Finland, like elsewhere, are being designed to fill the gap left in housing provision by both public and private sectors (Ganapati, Citation2010). To accelerate the practical implementation of these experiments, in 2019 the Housing Finance and Development Centre (henceforth referred to by its Finnish abbreviation ARA) granted subsidies for establishing housing cooperative group construction projects. Since then, a dozen pilot projects have been launched across Finland.
Despite variations in ownership, financing, and levels of professionalisation across countries, all types of housing cooperatives share two key features. Firstly, that residents live in a self-governed, democratically-organised, and collectively-managed manner (Sørvoll & Bengtsson, Citation2018, p. 126). Secondly, housing cooperatives have the potential to dislodge housing from both its commodity form and role as top-down state-managed good. This is because they can promote the development of residential space emphasising its use-value over exchange-value (Balmer & Bernet, Citation2015). For these reasons, scholars, practitioners, politicians, and activists have expressed growing interest in the model.
Drawing on Bengtsson (Citation1992), scholarship on housing cooperatives can be broadly organised into two key areas. Firstly, one area concerns the fundamental challenges that cooperatives face, for instance in organising collective action, resident participation, and cooperative governance. Secondly, another area concerns the transitional problems they face with respect to their broader institutional contexts. This study contributes to the latter. It focuses specifically on the institutional framework of land and housing policies in Finland, and investigates their appropriateness for facilitating the development of housing cooperatives. To answer this question, it thematically analyses state policy documents, governmental reports, and online information, supplemented by a small number of expert interviews. Interest in this complex relationship between housing cooperatives and the state, or what Ferreri and Vidal (Citation2022) call the public-cooperative nexus, has proliferated in recent years (Balmer & Bernet, Citation2015; Ganapati, Citation2010; Lang & Stoeger, Citation2018). This study contributes to such scholarship through its empirical focus on Finland, a relatively understudied context to date, but also conceptually through its multi-scalar framing of the interactions between housing and land use policy and planning frameworks.
The paper is structured as follows. Firstly, we introduce literature on the relationship between housing cooperatives and the state. Particularly helpful here is the analytical framework developed by Ferreri and Vidal (Citation2022) on the public-cooperative nexus. We apply this framework to analyse the institutional tensions that housing cooperatives in Helsinki must navigate. Secondly, we discuss how housing policy in Finland has traditionally answered the housing question and give a brief overview of the history of housing cooperativism in Finland. We then outline our research design and introduce the ARA pilot project and three housing cooperatives in greater detail. The crux of the analysis is then built around identifying three institutional challenges which hinder their development. We suggest that these are largely the result of contradictory and ambiguous land and housing policy frameworks. Expanding on this, in the discussion and conclusions we then situate these findings with respect to existing scholarship and outline avenues for future research
A framework for analysing the state-housing cooperative relationship
Several scholars have pointed out that while it is relevant to understand the internal operation of housing cooperatives, it is also important to situate them within their broader socio-political and institutional contexts (Ferreri & Vidal, Citation2022; Ganapati, Citation2010). According to Sørvoll and Bengtsson (Citation2020, p. 395), this requires consideration of ‘the complex, changing and varied relationship between self-organised communities and the state’. Housing has been described as the ‘wobbly pillar’ of the welfare state due to its institutional peculiarities compared to other sectors like social security, education, or health care (Torgersen, Citation1987). Unlike these other sectors, housing is rarely seen as something to be universally provided by the state (Kemeny, Citation2001). It is simultaneously understood as both an ‘individual market commodity and as a public good demanding state involvement’ (Bengtsson, Citation2001, p. 257). Due to this, governments rely on various socio-legal and policy mechanisms of regulation and redistribution to support the provision of, and access to, housing. For instance, providing and maintaining social or public housing as an alternative to commodified housing. Or subsidising the private (or non-profit) sector through housing allowances, tax subsidies, or low interest loan guarantees. In return for these subsidies, public authorities often impose certain regulations on accessibility and affordability.
Housing cooperatives, like other forms of collaborative housing solutions, often seek to combine their independence and self-governance with recognition from the state and access to public and private resources and expertise (Mullins et al., Citation2018). As Ganapati (Citation2010) writes, they aim for a relationship of ‘embedded autonomy’ with the state and within the frameworks provided by its institutions. To explore this relationship, Ferreri and Vidal (Citation2022) have developed a simple yet adaptable analytical framework. Utilising this framework allows for politically meaningful and academically rigorous exploration of the public-cooperative nexus. Specifically, it helps understand how states might enable housing cooperatives through the promotion of favourable legal and policy environments. Drawing on Bengtsson’s (Citation1992) terminology, the framework is not designed to explore the organisational specificities of different cooperative models (i.e. their fundamental problems), but rather the institutional, legal, and policy frameworks they are embedded in (i.e. their transitional problems). Openly driven by a hope to support housing cooperative development, Ferreri and Vidal (Citation2022, p. 1) identify three ‘phases’ at which states may become involved in housing cooperative production and consumption:
- Production of housing cooperatives. Relates to measures enabling access to land, existing buildings, finance, economic resources, and technical support. Here, accessibility and affordability may be promoted through supporting alternative financing pathways, providing direct subsidies in the form of grants, or indirect subsidies in the form of loan guarantees, tax benefits, or access to below-market rent land or buildings. These play a determining role in the initial costs of projects.
- Access to and management of cooperatives. How the public sector regulates access to cooperative housing, prevents insularity and keeps the sector open to a diverse public. Long-term affordability and accessibility of housing cooperatives may be improved through providing subsidies for housing costs to low-income residents and supporting management. Public authorities may also set resident eligibility criteria, or selection mechanisms, such as waiting lists. Indeed, in the contemporary policy environment, such regulations are often necessary to politically justify aforementioned subsidies.
- Maintaining the model through time. Regulations may restrict the equity of housing cooperatives and possibilities of for-profit ventures. Public authorities can, for instance, set cost-based rents or promote targeted policies and legal frameworks to minimise the risk of capitalisation upon the exchange value of cooperative dwellings.
The objective of the above framework is not to build a deep understanding of the impact of legal and policy measures in a single context, but rather to produce a universal toolkit that may be repurposed, reassembled, and readapted in different housing contexts. As such, we adapt it to explore the Finnish context and the challenges presented by ambiguities and contradictions within state policy frameworks to produce, manage, and maintain housing cooperatives. Before introducing and analysing the pilot projects though, we find it useful to provide a brief account of three matters illustrating the Finnish context: state housing policy, municipal land policy, and housing cooperativism in Finland.
Finnish state housing policy
In the Nordic welfare states, housing policy has traditionally been arranged so that a minimum universal standard of quality and security in housing are maintained. Historically, in Finland, the housing market has been assigned with major responsibility over housing provision (Hyötyläinen, Citation2020). The role of the state has been to govern regulation and provide supply and demand subsidies for developers and consumers of the housing asset. In terms of tenure, Finnish housing policy is based on a combination of homeownership and renting (private and social). In the EU there is a great deal of contextual variation regarding how the subject of social housing is approached and understood (Kadi & Lilius, Citation2022). Today in Finland, social housing is understood as ‘government-subsidised rental housing’, which is akin to non-profit or public housing in other housing systems (ibid). Historically, state subsidies were provided to support the production of both owner-occupied and non-profit rental housing. Indeed, between 1945 and 1957, up to 70 per cent of all housing production was carried out through state-subsidised construction (Juntto, Citation1990). From the 1960s onwards however, supply-side subsidies were increasingly directed as loans towards the development of social rental housing. This is predominantly developed by municipal and non-profit organisations and subsidised via grants and state loan guarantees (Lilius & Lapintie, Citation2020). By 1962, social rental housing in Finland accounted for more than half of all state-subsidised housing production (Ronkainen & Eskelä, Citation2022). A large portion of this stock was subject to regulations on price and quality and universally available to a wide range of income groups, at least initially (Ruonavaara, Citation2017).
Since joining the EU in 1995, Finnish housing institutions must also comply with EU state-aid legislation. This stipulates that the distribution of state subsidies must be targeted at those unable to access market-rate housing. From the 1990s, social rental housing in Finland has become increasingly residualised, with tenants required to meet certain criteria of maximum income and wealth, and urgency of housing need (Hyötyläinen, Citation2020). In addition to social rental housing, during the 1990s ARA also began subsidising so-called intermediate tenures, including regulated rental housing, price-regulated owner-occupation, and right-of-occupancy housing. In recent years, subsidisation of these intermediate tenures has been a subject of heated debate (yle, Citation2020, Citation2022). At the heart of this are concerns around accessibility, affordability, and the redistributive role of the state.
The City of Helsinki’s housing and land policies
While the central state conducts housing finance policy and oversees building quality, the local state is largely responsible for planning and land allocation for housing. From the early 1960s, the City of Helsinki started developing comprehensive City Housing Programmes outlining goals for housing production, affordability, quality, and diversity. In the 1970s, it also introduced inclusionary zoning mechanisms specifying different modes of housing provision for new developments. These distinguished between (1) regulated state-subsidised rental housing, (2) intermediate housing tenures, and (3) unregulated owner-occupied and rental housing. Historically, this second category of intermediate tenures has served working-class households whose incomes are too high to apply for social rental housing, but who also struggle finding housing on the private market. In the words of one government official: ‘the middle people’ (ARA Interview, 2020). In Helsinki, this includes right-of-occupancy housing, some regulated rental housing, and Helsinki’s own price-controlled owner occupation model, Hitas. In the Hitas-system, municipal land is leased at below market rent to housing developers (of mostly owner-occupied dwellings) in exchange for their adherence to certain regulations on quality and re-sale price. From 2022, this category of intermediate tenures will also include regulated housing cooperatives (Ronkainen & Eskelä, Citation2022). From 2023, the City plans to reduce proportions of intermediate housing from 30% to 20% in new developments (Ronkainen & Eskelä, Citation2022). At the same time, the share of unregulated market housing in all new developments will increase from 45% to 50% (ibid). Although, in reality, numbers of the latter have far exceeded this in recent years (City of Helsinki, Citation2022a). To understand these changes however we must examine broader transformations in municipal housing and land use policy over the past decades.
After the deregulation of the financial sector in the 1980s, Finland faced a severe recession in the 1990s. This recession was used to justify large-scale transformations in urban governance (Hyötyläinen & Haila, Citation2018). As will be discussed later, these changes were also influenced by Finland joining the EU in 1995. During this period, a new state urban policy was introduced. New strategies of redistribution called upon municipalities to adopt programmes of new public management. These entailed the privatisation, marketisation, and competitive restructuring of municipal government roles and services. Finnish cities would now compete for state funding. As financial burden over welfare provision transferred from the central state to municipalities, cities were encouraged to find ways to attract affluent taxpayers. These reforms have played a key role in the ongoing corporatisation of municipal real estate departments, which aim to put public resources—e.g. municipally owned land—to their most economically efficient use (ibid). This is particularly important in cities like Helsinki, where the municipality still owns more than 60% of land (ibid). Land is mostly allocated via bidding competitions and only allocated below market rent for projects that the city is convinced will cater to unemployed, low-income, and so-called special needs households (City of Helsinki, Citation2022a). Part and parcel of this is that aforementioned intermediate tenures, particularly Hitas, have been under fire for misdirecting subsidies to middle-class residents (yle, Citation2020). Now, Hitas is being driven to the ground and the share of state-subsidised affordable housing is plummeting (City of Helsinki, Citation2022a). It is into this shaky legal and policy environment that new housing cooperatives are trying to establish themselves.
Housing cooperatives in Finland
Nordic and Scandinavian countries have a rich history of experimentation with housing cooperatives (Larsen & Lund Hansen, Citation2015; Sørvoll & Bengtsson, Citation2018). Compared to its Nordic neighbours, however, housing cooperatives have played a limited role in Finnish housing provision. In the 1920s, the first Finnish housing cooperatives were established by members of the working and middle classes. Then, following a burst of post-war rental housing cooperative production, a decision was made by the central state in 1969 to stop all state funding for housing cooperatives (Government of Finland, Citation1969; Pitkänen & Alanen, Citation1963). As a result, most remaining housing cooperatives converted into market-priced limited liability companies (Ruonavaara, Citation2005).
Following decades of inaction with housing cooperatives, the 1990s recession spurred a renewed wave of interest. This resulted in right-of-occupancy housing being established in 1990. Although initially based on the Swedish bostadsrätt model, some saw the resulting model as a watering down of cooperative democratic ideals (Fredriksson, Citation2003). Attempts at rectifying this were made with the introduction of the Associations Act in 1995, which made it possible for resident associations to also build and own right-of-occupancy dwellings. Nevertheless, today, right-of-occupancy homes are still predominantly developed and managed by large private housing companies and the number of association-based right-of-occupancy projects remains relatively low in comparison (Patentti- ja rekisterihallitus Virre, Citation2023). Today, rising housing challenges have spurred a renewed interest in housing cooperativism in Finland once again. Currently, there are thought to be approximately 50 housing cooperative projects operating in Finland (Leminen et al., Citation2020). Whether the new state-subsidised ‘social’ housing cooperative pilot project will attract more interest remains to be seen and depends on whether current institutional frictions can be solved.
Data and methods
The findings of the paper are based on a case study of contemporary Finnish ‘social’ housing cooperatives. Firstly, we look at the broader ARA-funded pilot project, initiated in 2016. Secondly, we focus on three housing cooperatives involved in this initiative. These three projects were deliberately selected because they were all negotiating with the City of Helsinki for plots of land on large-scale waterfront development sites.
The data for this study was collected by the first author. Fieldwork was carried out between 2019 and 2020. Research methods included a document study, supplemented with six semi-structured interviews. Documents include one government report (Valtioneuvosto ja ministeriöt, Citation2017b), two government-funded studies (Forsström-Tuominen, Citation2016; Leminen et al., Citation2020), and blog posts (ARA, Citation2017, Citation2019a, Citation2019b). At the local governmental level, official policy and planning documents (City of Helsinki, Citation2020, Citation2022a), reports (Ronkainen & Eskelä, Citation2022), and web pages (City of Helsinki, Citation2019, Citation2022b, Citation2022c, Citation2022d) were analysed. Additionally, interviews were conducted with representatives from each of the three housing cooperative projects, two from ARA, and one from the City of Helsinki Economic Development and Planning Division. Thematic analysis of the data identified three key institutional tensions in the Finnish public-cooperative nexus.
The ‘social’ housing cooperative pilot project
The public-cooperative nexus operates across multiple scales—national, supranational, and local. At the national level, the Finnish ‘social’ housing cooperative was initiated by ARA in 2016. In 2017, the Ministry of the Environment appointed Hannu Rossilahti, Director General of ARA, to examine the suitability of the housing cooperative model in Finland (Valtioneuvosto ja ministeriöt, Citation2017a). After an open call for applications in 2019, ten projects were selected to partake in the pilot (Leminen et al., Citation2020). Each project received a modest starter grant from the Ministry of Environment, which allocated altogether €400 000, and the possibility to apply for a state-guaranteed construction loan (ARA., Citation2020). At the supranational level, because the pilot project involves state subsidies, it must also comply with EU state-aid (SGEI) legislation. The implications of this will be discussed in more detail later. At the local governmental level, all three projects are negotiating with the City of Helsinki for municipally-owned plots of land.
The Finnish Cooperative Societies Act (1488/2001) does not explicitly define housing cooperatives. Due to this, new cooperatives must operate using a range of legislative tools not specifically designed for them. This has led to a large variation in models (Leminen et al., Citation2020). In terms of organisation, the ten initiatives involved in the pilot project range from developer-led, municipality-led, to resident-led projects. In terms of tenure, they take two forms: rental model or rent-to-own (ibid). In the former, the cooperative owns the building and residents do not accumulate equity through payments. Elsewhere, such models have been referred to as zero-equity rental cooperatives (Sørvoll, Citation2014). In Finland, rental housing cooperatives, like all rental housing, are governed under the Act on Residential Leases (481/1995). In the rent-to-own model, tenure begins as leasehold but converts to owner-occupied housing once the state-backed loan is repaid (Leminen et al., Citation2020). The three projects in this study exhibit variations of these features.
Project A is a resident-led housing cooperative, registered in 2018. They are negotiating with the City for a plot in the brownfield development site in the inner-city harbour of Jätkäsaari. They adopt a rent-to-own tenure model. Upon converting into market-rate owner-occupied housing however, several units will remain at below market rents on a long-term basis to promote social mix. The cooperative stresses aspirations to tackle segregation and promote the development of housing for a diverse resident base.
Project B is a resident-led housing cooperative, established in 2005. They are developing an intergenerational rental housing cooperative in Kruunuvuorenranta in Eastern Helsinki. Their project encourages collaboration between different generations and special needs groups. At the time of data collection, they were negotiating a partnership with one of Finland’s largest affordable housing foundations.
Project C is a developer-led rental cooperative, with a two-tiered governance structure. The developer cooperative is responsible for managing the design and construction and a separate resident cooperative is in charge of day-to-day management. They are negotiating with the City for a plot in Kalasatama, a high-end brownfield development area in Helsinki’s old industrial harbour.
Findings
Using the analytical framework developed by Ferreri and Vidal (Citation2022), we find the development of Finnish ‘social’ housing cooperatives hindered by three key institutional tensions (or transitional problems) relating to their production, maintenance, and longevity. We find these to be the result of contradictions and ambiguities across national and supranational legislation, but also between central and local state land and housing policy frameworks which deem housing cooperatives ‘not social enough’, ‘not long-term enough’, and finally, ‘not lucrative enough’.
Not ‘social’ enough
Despite the potential to increase affordability and resident autonomy in housing, cooperatives still often struggle with—or indeed sometimes deliberately refrain from—promoting high levels of accessibility (Ferreri & Vidal, Citation2022). Whilst they may create their own internal regulations (in their statues and bylaws) to address these issues, these are not necessarily mandatory and can be subject to change (Bossuyt, Citation2022). Due to this, public institutions may intervene through enforcing external regulations, particularly when state subsidies are involved (Blessing, Citation2012).
ARA’s objective in proposing the ‘social’ housing cooperative pilot project is to provide housing for working and middle-class people who have increasing trouble affording housing in the market, but who also do not fall under the restrictive requirements of social rental housing (Valtioneuvosto ja ministeriöt, Citation2017a). In order to justify the use of public subsidies for this experiment the respondent from ARA explained:
the state cannot give money or guarantees, except if there is a social housing purpose. So, my aim was to find some new ways for financing cooperatives, where the state could be giving some assistance […] and to connect the social housing idea, state subsidy or guarantees, and the cooperative. (ARA Interview, 2020)
However, the state loan guarantee for cooperatives does not itself impose any regulations on accessibility, such as waiting lists or restrictions on occupants’ incomes or assets (Leminen et al.,
). Resident income/exclusion rights are thus internally dictated only by the cooperatives bylaws. Despite receiving state subsidies, this lack of external regulation on accessibility renders the ‘social’ classification of cooperatives ambiguous, particularly with respect to EU state-aid legislation.
The Maastricht Treaty was enforced in 1993 to fulfil the EU’s central goal of a single internal market and ensure the free movement of goods, services, capital and people. National housing policies are expected to be compatible with the dictates of the treaty. The basic principles of the single internal market have led to regulations which significantly impact housing, including fiscal, competition, and state subsidy rules. Particularly affected are those parts of the housing sector receiving so-called state aid. ‘State aid is defined as any form of assistance from the public or a publicly funded body to selected undertakings (entities that supply goods or services in a given market), which has the potential to distort competition and affect trade between EU member states’ (Czischke, Citation2014, p. 336).
Since 2005, EU legislation has also set out the conditions under which state aid to public service providers can be considered compatible and does not have to be reported to the Commission. As social housing providers operate in defined territories and reinvest profits from rents and sales in new housing, the risk that state aids would distort competition is limited. Social housing providers are generally relieved from the notification obligation provided they supply housing for disadvantaged groups, whom due to income constraints are unable to access market housing. This restrictive understanding therefore does not correspond with more universalist approaches to housing provision. Using this narrow conception of social housing, the Commission sees a ‘manifest error’ in giving SGEI status to social housing not directly linked with disadvantaged groups. Over recent decades, Finland has been transforming its social housing sector towards this selective approach (Hyötyläinen, Citation2020).
Despite ARA framing the cooperatives as a new type of ‘social’ rental housing (Valtioneuvosto ja ministeriöt, Citation2017a), the City of Helsinki remains unconvinced. This creates challenges for the cooperatives in their negotiations with municipal land authorities. This was particularly evident in the case of project B. Even though they adopted a permanent rental model, they were only able to enter into serious discussions with the City once they began negotiating a partnership with a well-established Finnish affordable housing provider. The City was then confident that housing developed in collaboration with this foundation would result in social housing as they understood it—housing for those who cannot pay market rent. As the representative from the City explained:
If the City subsidises land prices, they want to see that the subsidies are going to the right people…If we subsidise something it would have to be allocated for the right person, for the right project and income group. And in some cooperative projects the people are not so low-income, so the city thinks that the subsidies are not correctly allocated. (City of Helsinki Interview, 2020)
Before joining the European Union, land policy authorities were not concerned with whether land in some other use might potentially produce higher land rent. Market valuation of land did not enter public land use decisions, and neither was land provided below market rent regarded as a subsidy. In the 1990s however, joining the EU brought local land use decisions under supranational legislation and soon new, entrepreneurial public land management ideas were adopted. Municipal legislation was reformed in 1995 and again in 2015 to reflect changes within institutional settings of municipalities, like EU membership and its requirements for public procurement, competition rights, regulation regarding state subsidies and the overall change towards a more market-oriented approach to public administration. The municipal legislation now also required municipalities to allocate land through auctions to increase transparency in competition. Only state-subsidised housing for ‘disadvantaged groups’ should now be allocated land below market rent (City of Helsinki,
). Any alternative forms of partly decommodified housing targeting a more universal population are seen as misdirected subsidies.
Not ‘long term’ enough
According to Ferreri and Vidal (Citation2022, p. 163), ‘for cooperative housing to be an alternative to the dominant system of housing provision…there needs to be a long term view to the mechanisms that enforce the decommodification of the housing projects’. As mentioned earlier, the Finnish pilot projects adopt two different tenure models: rental and rent-to-own. The rental model is supposed to increase the share of so-called normal affordable rental housing—social rental housing not for special needs groups—and thus reduce the pressure on existing social rental housing (Leminen et al., Citation2020). The rent-to-own model is designed to enable low to middle income groups access to owner-occupied housing without taking on huge mortgage debts (ibid).
In terms of affordability, under the Finnish Act on State Guarantee for Rental Housing Construction Loans (856/2008),Footnote1 the cooperatives must operate as costs-based rental housing for the duration of the loan liability period, usually around 20 years. In order to qualify for this loan guarantee, the cooperatives must meet ARA criteria for quality and affordability (Leminen et al., Citation2020). In Finland, costs-based rents are based on construction, land-lease, maintenance, management, and loan repayment costs (Lilius & Lapintie, Citation2020). This means, at least for the loan liability period, rents should not include profits pocketed by landlords and should be affordable i.e., below market rents. However, the cooperatives differ in what happens after this loan period ends. For example, after tenure conversion, residents in rent-to-own cooperatives will be free to accumulate equity through buying and selling shares on the open market. In fact, even in the so-called permanent rental projects, cooperatives would theoretically be free to charge higher rents once they are no longer bound by rent regulations. Again, this ambiguity creates conflict between cooperatives and the City. Despite the pilot project being established and subsidised by the central government, the City of Helsinki is unconvinced that the cooperatives can ensure long-term affordability. As the respondent from the City explained,
If we could ensure that the project is really for low income [residents] and it is really affordable in the long term then maybe the city could help, could subsidise these projects, but…we can’t be sure that they are really affordable for a long time, we have no promises of that. There are no regulations, no Acts, like with social housing there is Acts that ensure these things. I think this is the whole of this problem. (City of Helsinki Interview, 2020)
Given that the City generally leases plots for 70-80 years such ambiguity is cause for concern. However, underpinning this conflict, we suggest, is also the City’s approach to public land use, where rents from alternative uses are calculated as costs; namely, if the city leases the land below market rent for 80 years, only for the cooperative to turn from leasehold to private equity in 20 years, then it will calculate the 60 years of potential rents as a misdirected subsidy. Such tensions therefore lead us to the final tension, that housing cooperatives are ‘not lucrative’ enough for municipal land policy.
Not ‘lucrative’ enough
Whilst ARA provides supply-side subsidies to promote the development of affordable housing, these have received little interest from developers in recent years (Forsström-Tuominen, Citation2016). One reason for this is that private financing has been extremely cheap, which drives the development of private market housing. In 2021, 66% of new production in Helsinki was private market housing, with a majority of newly produced units going to buy-to-let landlords (City of Helsinki, Citation2022a). Social rental housing was only at 16% and intermediate housing at 18% (ibid). The representative from the City also highlighted this, explaining that more actors interested in developing affordable housing are needed. Additionally, the City also aims to support new resident-oriented/led group construction housing projects (Fin. Ryhmärakentaminen) (City of Helsinki, Citation2022b). Despite this, all three group construction housing cooperatives in this study ran into conflict with the City around access to municipally-owned land. For example, the respondent from project B lamented,
At the strategy level the City is kind of supporting these group construction ideas, but then despite this there isn’t land available. There is normally a clause [in land auctions] that they are targeting only professional construction companies or the consultants who then initiate the project. The City still has a fair level of scepticism towards these kinds of tenant-driven projects. (Project B, 2020)
Thus, whilst the City highlights the need to support new developers of affordable housing, they are reluctant to provide group construction cooperatives with access to subsidised land. As the respondent from project B explained, plot location plays a key role in this conflict: ‘We talked with the City, but they said we cannot assign this plot for you, this land is too expensive, this is just too valuable, it’s next to the sea’ (Project B Interview, 2020). The respondent went on to argue that if the City truly wants to support affordable housing, then they need to ‘back up on land prices’. Herein, we suggest that at the public-cooperative nexus there can arise significant tensions between affordability in housing cooperatives and entrepreneurial municipal land policies.
When asked about this conflict, the representative from ARA explained that the current distribution of state and municipal responsibilities for affordable housing is contradictory. At the national level, ARA’s support for housing cooperatives is underpinned by a need to find financially sustainable alternatives for housing provision. With billions of euros paid annually in housing benefits and both working- and middle-class households struggling to find affordable and adequate housing in cities, such alternatives are direly needed (Valtioneuvosto ja ministeriöt, Citation2017b). From the central state’s perspective, the housing cooperative model offers an attractive way to develop affordable housing with limited public liability (ARA, Citation2019b). After the loan guarantee period ends, the cooperatives essentially become financially independent, with no ongoing public costs, such as investments in maintenance or renovations. Cooperatives are also a financially efficient option for another central state actor, the National Insurance Institute (Fin. Kela). As housing is increasingly treated as a commodity and rentier asset (Christophers, Citation2022), even middle-class tenants are forced to rely on housing benefits to meet market rents. Kela now pays up to two billion euros annually in demand-side housing subsidies (Valtioneuvosto ja ministeriöt, Citation2017a). Housing cooperatives potentially do away with the rentier, decreasing the need to pay such benefits.
However, as the respondent from project C pointed out, if their objective is to ‘promise a cost-based rent for the tenant, where the costs are the lease on the land, construction, and development costs’ this means that ‘any reduction in any of those costs will lower the rent for the tenant.’ As a result, ‘The land lease is a big cost, and it has the potential to have a great impact’ (Project C Interview, 2020). Due to this, the City’s approach to land use generates conflicted feelings. As the respondent from project C reflected,
The City of Helsinki has a strategy to generate a lot of money from land and that is contradictory to affordable housing, because those land costs will undoubtedly affect what you pay in rent [for housing]. So, the City has shown some interest in exploring and negotiating new [affordable housing] models […] but it is very hesitant to give exceptions to anyone about the land prices. (Project C, 2020)
Indeed, at the time of writing, project A was the only cooperative to have successfully negotiated a plot from the City. Adopting a rent-to-own tenure model, they appear to the City as a more traditional approach. The respondent from ARA also reflected on the implications of this complex arrangement of municipal and central state responsibilities,
The municipalities try to sell their land at as high a price as possible. They don’t care about the situation after they have sold the land. They sell lands to a lot of construction companies at very high prices and then the construction companies produce expensive housing. I have asked, is this a service to the people that the municipality is doing? The state is then responsible for housing benefits. This means the municipality tries to profit from the housing benefits allocated by the state. It would be a much different situation if the municipality should pay all the housing benefits, they would really have to think about how to organise affordable housing. (ARA Interview, 2020)
The above statement highlights inherent contradictions in the responsibilities and agendas of local and central state housing and land use institutions. These hinder the development of new affordable housing initiatives, such as cooperatives.
In summary, the aim of this paper was to investigate why recent experiments with housing cooperatives in Helsinki have been slow to get off the ground. A particular focus was on whether the institutional context of housing and land use policies are behind this sluggishness. Applying Ferreri & Vidal’s analytical framework to the Finnish public-cooperative nexus, we find Finnish housing cooperatives at an institutional gridlock.
Discussion
Ambiguity in accessibility and long-term affordability
The first institutional tension identified in this paper was that housing cooperatives are considered ‘not social enough’. Or, in other words, that the question of accessibility is ambiguous. As mentioned earlier, the state loan guarantee does not itself impose any regulations on accessibility. In this way, despite the pilot project being both initiated and subsidised by the central state housing authority (ARA), the cooperatives do not necessarily fit approaches to accessibility in either EU state-aid legislation or local government policy and planning frameworks. This ambiguity has implications for whether subsidies (particularly in the form of land) are considered politically justified. We find similar arguments on this ‘misallocation’ of public subsidies are also at the forefront of ongoing debates on reform of another mode of intermediary housing in Helsinki, namely Helsinki’s subsidised owner-occupied housing model Hitas (yle, Citation2020). Such debates are underpinned by the idea that the default should be for citizens to access housing through market mechanisms and only those wholly unable to do so are deserving of state assistance. This not only stigmatises welfare recipients but also legitimises cuts in state spending on wider social protection measures and justifies reductions in housing subsidies. Finland is not alone in attracting such debates. Similar institutional tensions regarding the redistributive role of the state have also been identified in other European housing contexts. Some examples include Blessing’s (Citation2012) study on the restrictive role of EU public/market dualist institutional requirements on the Dutch non-profit sector; and Christophers’ (Citation2013, p. 893) recount of allegations against Swedish municipal housing companies for ‘distorting competition’ and therefore ‘breaching’ EU state aid legislation. In the Finnish case, imposing restrictive definitions on the target groups for state subsidies creates frictions in the national and supranational legal environment which, in turn, hinders the development of affordable and accessible housing cooperatives.
In developing their framework, Ferreri and Vidal (Citation2022) also implore researchers to turn their attention towards questions of temporality, or ‘accessibility over time, and the thorny issue of permanent decommodification’ (p. 166). This connects to the second tension identified in this paper: that ‘social’ housing cooperatives are not ‘long term’ affordable enough. Drawing on Savini et al. (Citation2022), affordability can be regulated internally through a continued non-profit ethos in housing projects but also through external interventions, state or otherwise. In the Finnish case, all state-subsidised cooperatives are only required to maintain cost-based rents for the loan liability period. Due to this, long-term affordability in both rental and rent-to-own models is ambiguous. This is not just a problem with housing cooperatives, however. Temporal limitations on regulatory instruments have been identified as a barrier to long-term affordability in other types of state-subsidised housing also. For instance, Ruonavaara (Citation2017) has discussed the trend of previously non-profit developers converting social rental into market-rate properties once their own loan liability periods end. As such, even though an internal non-profit ethos within cooperatives is important, without external regulations held in perpetuity, housing cooperatives (and other third sector alternatives) always face risks of privatisation and commodification (Bossuyt, Citation2022)—as experiences in Denmark (Larsen & Lund Hansen, Citation2015), Norway, and Sweden (Sørvoll & Bengtsson, Citation2018) have shown. In this way, individual cooperative housing projects, and even entire sectors, are often at pains to tackle structural problems in housing systems and pressures to deregulate and commodify housing. In the Finnish case, it also raises important questions about whether adding yet another tenure to the smörgåsbord of Finnish housing provision is necessarily the best solution to Finland’s housing question.
Contradictory housing and land use policies
Although the aforementioned institutional tensions play important roles in the contemporary development of Finnish housing cooperatives, this study revealed that underpinning both of them is a third tension. Namely, that cooperatives are ‘not lucrative enough’ for the City of Helsinki’s entrepreneurial approach to land use.
We find the Finnish case particularly interesting because, despite the ‘social’ housing cooperative housing project being started and subsidised by the central state housing authority, it is during their interaction with local housing authorities where the cooperatives faced the most significant challenges. The central government is primarily interested in enabling housing cooperatives because it believes they can reduce expenditure on housing subsidies (Valtioneuvosto ja ministeriöt, Citation2017b). At the municipal level however, we find quite a different situation.
Previous studies have shown that favourable planning and land use instruments, such as inclusionary zoning and below-market-rent ground leasing, are key mechanisms through which states can facilitate affordability in housing cooperatives (Lang & Stoeger, Citation2018). Indeed, with the growing lack of affordable and suitable plots for housing developments in urban areas, Lang and Stoeger (Citation2018) regard public land release to be a crucial factor in the future development and growth of housing cooperativism more broadly. In the case of La Borda housing cooperative in Barcelona, for instance, Larsen (Citation2020) has shown how affordability is conditional on the long-term below-market rent lease of municipally-owned land. Balmer and Gerber (Citation2018) also stipulate that leasing of municipal land has been instrumental in the success of Switzerland’s cost-rental cooperative sector. Two key factors often determining a project’s eligibility for public funding are plot location and pricing (Lang & Stoeger, Citation2018). For instance, new projects located on potentially lucrative development sites are oftentimes deemed ineligible for public subsidies (ibid). Indeed, prior research on land and housing policy in Helsinki has shown that, over the past decade, the City of Helsinki has directed seaside plots of land towards projects that maximise land rent, i.e. private market housing for high income households (Hyötyläinen & Haila, Citation2018). In this way, underlying the conflicts between the City and the cooperatives is the City’s role as a real estate entrepreneur - motivated to maximise land rent, calculate opportunity costs, and view land allocated below the market rent as a subsidy.
On the one hand, Finnish ‘social’ housing cooperatives do not meet the strict criteria of social housing i.e. they are not intended for special needs groups, so the City does not believe they are justified access to subsidised land. They are also deemed not ‘long term enough’ with respect to affordability regulations. At the heart of this conflict though, we suggest, are moral arguments around the redistributive role of the state. As Haila (Citation2016, p. 206) writes, ‘a state can use its landed property for the public good or trying to maximise fiscal rent’. Housing cooperatives are not looking to maximise profits from the apartments they develop, at least in the short term. This means that they are not considered a profitable tenure form to take part in auctions and offer competitive bids on municipally-owned land. Similar institutional tensions have also been identified elsewhere. For instance, in Hoekstra et al’s (2022) study on socially-oriented cooperative housing in the Netherlands. In their case, the municipality was reluctant to sell land to cooperative builders because they would receive a lower price compared with if they were to sell to professionals. Whilst the relationship between housing cooperatives and planning institutions has been a topic of interest in recent years, these tensions between affordability in housing cooperatives and entrepreneurial public real estate policies have been relatively understudied to date.
Conclusion
This case study explores some of the key institutional challenges hindering the development of long-term affordable and accessible housing cooperatives in Finland. At the heart of these, we find, are ambiguities and contradictions in the political responsibilities, agendas, and policy frameworks of national, supranational, and local housing and land institutions. The first tension reflects ambiguities in how accessibility is approached and understood in a housing system. As the Finnish case shows, such ambiguities have particularly negative implications for housing cooperatives which are heavily reliant on state subsidies. In light of this, future research would benefit from more comparative studies on the relationship between accessibility in housing cooperatives and the housing-welfare policy approaches adopted in different housing systems. We suggest that the multi-scalar perspective adopted in this paper can contribute to such a task, particularly through fore fronting the complex (and oftentimes contradictory) interplay of local, national, and supranational institutional frameworks and instruments. The second institutional tension revealed in this study highlighted ambiguities with respect to long-term affordability. More specifically, the negative implications of temporally restricted regulatory instruments. Whilst this issue has already been pointed out by a number of scholars (Balmer & Bernet, Citation2015; Bossuyt, Citation2022; Ferreri & Vidal, Citation2022), we suggest that more research is needed on how such tensions are being negotiated and navigated in different housing contexts. Recent literature exploring the role of tenure and the nature of autonomy in self-organised housing could be useful for this (Savini et al., Citation2022). The final institutional tension explored in this paper relates to contradictions between affordable housing provision and entrepreneurial public real estate policies. Such topics have been relatively understudied to date. Due to this, we suggest that future research on the public-cooperative nexus will benefit from a deeper exploration of this complex interplay between housing, welfare, and land-use institutions across multiple governmental scales.