General housing allowance reduced in 2024, will no longer be available for owner-occupied homes starting in 2025

Parliament has approved cuts to the general housing allowance, which will reduce the rates of the allowance in 2024. Most of the changes to the general housing allowance will take effect on 1 April 2024. The changes will be applied to general housing allowances currently in payment the nexttime they are reviewed. General housing allowance will also no longer be available for owner-occupied housing as from 1 January 2025. The changes in law affecting the general housing allowance in 2024 are summarised in this press release.

Parliament has approved the Government’s proposed cuts to the general housing allowance. Most of the changes to the general housing allowance will come into effect on 1 April 2024. The housing allowances currently in payment to households will be adjusted to the new rules when they are next reviewed. All new awards of housing allowance to households not currently in receipt of it will be made under the new rules.

A further change is that general housing allowance will no longer be paid for owner-occupied homes starting 1 January 2025.

The changes described in this press release do not apply to the housing allowance for pensioners. The Government has also proposed changes to the the housing allowance for pensioners.

Basic deductible increased, more lenient criteria for families with children

The basic deductible for the general housing allowance will go up from 42 percent to 50 percent.

When Kela calculates how much housing allowance a household can get, a basic deductible is determined for the household. The amount of the basic deductible is affected by the household income as well as the number of adults and children in the household. The bigger the income is, the larger the deductible. No basic deductible is determined for those with an extremely low income.

Under the new rules, the basic deductible is equal to 50 percent (up from 42 percent) of the income exceeding the minimum income limit for the general housing allowance.

Further, the calculation formula for the basic deductible will change, resulting in a lower coefficient for adults and a higher one for children. Due to the coefficient adjustment, the cuts made to housing allowances in 2024 will have less of an impact on families with children.

The changes to the basic deductible apply to all households that receive general housing allowance.

The changes will take effect on 1 April 2024. The housing allowances currently in payment to households will be adjusted to the new rules when they are next reviewed. All new awards of housing allowance to households not currently in receipt of it will be made under the new rules.

Reduction in the compensation percentage of the allowance

The compensation percentage of the general housing allowance is reduced from the current 80 per cent to 70 per cent of the difference between the acceptable housing costs and the basic deductible.

After this change, the general housing allowance will cover a smaller portion of a household's housing costs. This means that households will have to pay a larger share of the housing costs themselves.

The change, which will take effect on 1 April 2024, will mean a reduction in the general housing allowance for all recipient households.

The housing allowances currently in payment to households will be adjusted to the new rules when they are next reviewed. All new awards of housing allowance to households not currently in receipt of it will be made under the new rules.

Earned-income deduction abolished

The EUR 300 deduction under the general housing allowance scheme for earned income will no longer be available.

The earned-income deduction means that a sum of 300 euros per month is deducted from the total earned income of each household member. Currently, Kela disregards some income when calculating the income that affects the housing allowance. The deduction can be made from wage and salary income, self-employment income and farm income.

The abolishment of the earned income deduction will reduce the housing allowance of households whose members have wage or salary income, self-employment income or farm income.

The change will take effect on 1 April 2024. The housing allowances currently in payment to households will be adjusted to the new rules when they are next reviewed. All new awards of housing allowance to households not currently in receipt of it will be made under the new rules.

Reduction in the maximum housing costs taken into account in Helsinki

The municipality categories 1 and 2 for determining the maximum housing costs taken into account for purposes of the general housing allowance are merged and the maximum housing costs are determined according to the current municipality category 2. This means that Helsinki and the rest of the municipalities in the Greater Helsinki Area will be in the same category.

The law specifies maximum amounts for housing costs based on which one can get general housing allowance. They are referred to as maximum housing costs. 

The maximum amount of the housing costs is affected by such factors as the municipality in which the home is located. Finnish municipalities are divided into four groups according to the cost of living there.

Under the forthcoming rules, the maximum housing costs that are taken into account for households in Helsinki will decrease slightly. As a result, nearly all households in Helsinki that receive housing allowance will see a reduction in their allowance.

The change will take effect on 1 April 2024. The housing allowances currently in payment to households will be adjusted to the new rules when they are next reviewed. All new awards of housing allowance to households not currently in receipt of it will be made under the new rules.

The data for the image are shown in a table.

General housing allowance will no longer be available for owner-occupied homes in 2025

General housing allowance will no longer be paid for owner-occupied homes. The change will take effect on 1 January 2025.

December 2024 will be the last month for which general housing allowance is available for owner-occupied homes. Kela will stop paying housing allowance for owner-occupied homes automatically. The affected households do not have to take any action.

The change does not apply to right-of-occupancy or part-ownership homes. General housing allowance will continue to be available for such homes.

However, in the case of right-of-occupancy homes, interest payments on housing loans will no longer be recognised as housing costs. The change will take effect on 1 January 2025.

When should clients receiving general housing allowance apply for a review of their allowance?

Most of the changes to the general housing allowance will come into effect on 1 April 2024. The housing allowances currently in payment to households will be adjusted to the new rules when they are next reviewed. All new awards of housing allowance to households not currently in receipt of it will be made under the new rules.

Read more about when Kela customers should apply for adjustment of their general housing allowance.

Additional information for customers

Edited on 11.1.2024: There was an error in the Ilona's dates of the picture, a new picture has been changed.

Edited on 29.1.2024: There was an error in the Anni's water fees of the picture, a new picture has been changed.