What Finland can teach us about ending homelessness in Hawaiʻi

As a result of 30 years of policy efforts, Finland has all-but eliminated street homelessness. While, today, not everyone in Finland has a home of their own—multigenerational living, couch surfing and other forms of shared living arrangements are classified as homelessness—almost without exception, no one is sleeping out on the streets there. 

How did the Finnish government achieve this? Finland has adopted a “Housing First” approach to ending homelessness. That means the government guarantees housing to anyone that needs it, regardless of ability to pay or mental health status, with priority given to the people who need it most. 

Importantly, drug abuse, criminal record and other factors that often disqualify people in the United States from many housing programs do not disqualify Finns from their Housing First model. By treating housing as a human right, Finland provides a stable foundation on which people can more successfully build and heal as they work to overcome problems like drug addiction or mental illness.

How to do Housing First

Key to the realization of the importance of the Housing First model in Finland was the centering of people with lived experience with homelessness on steering committees, task forces and other decision-making entities created to adequately address the problem. In both Finland and Hawaiʻi, indigenous people have been historically disenfranchised by the process of colonialism. This impact manifests in different ways, from poorer health outcomes to disproportionately high rates of homelessness. The voices of indigenous people must therefore be lifted up within the policy discourse to develop solutions that will be both effective and equitable.

This is why advocates with lived experience testified during the 2022 legislature on bills relating to ʻOhana Zones and kauhale-style communities. Specifically, they asked lawmakers to include in their bill the creation of a community council to inform the development of transitional housing, with seats reserved for formerly houseless individuals, but the provision was left out of the final bill that passed. This is also why the 2022 Homelessness Awareness and Housing Solutions Conference featured many stories from people with lived experience of homelessness.

In addition to including the voices of people who have experienced houselessness, we also need enough affordable housing. We cannot have Housing First without building the housing first. Easy to say; much harder to implement. 

To provide an affordable home for any adult in Finland, the government needed to do two things: build a lot of affordable housing, and provide rent subsidies for those who earned too little to afford to pay the rent charged in these affordable housing units. 

The country achieved both by making large, consistent investments of public money over multiple years and multiple administrations into both supply-side (housing construction) and demand-side (tenant rent assistance) government subsidies. Too often in the U.S., policymakers tend to focus only on supply subsidies—incentives to build housing—while ignoring the need for adequate demand subsidies such as rent assistance or housing vouchers for tenants. The lesson from Finland is that good housing policy does both. 

On the supply subsidy, the Finnish government guarantees low-interest loans to affordable housing developers, such as the Y Foundation, to finance projects. This government-backed finance source keeps both the investment risk and the project price tag to a minimum. 

The government of Finland guarantees about $2.3 billion-worth of loans per year to build affordable housing. These guaranteed loans are given to the affordable housing developers as 40-year loans at a 1.7 percent interest rate. For developers this is much cheaper financing than securing loans from banks or investors that would likely charge at least 5 percent interest, and would require repayment within 20–30 years instead of 40. 

In addition to low-cost loans, the Finnish government also provides direct subsidies in the form of grants worth $330 million for the construction of very affordable housing for special groups such as students, the elderly, people with disabilities, and formerly homeless people. 

Through this $2.3 billion dollars of low-cost loans and $330 million in grants, the Finnish government has facilitated the construction of over 10,000 new affordable apartments in 2022 alone. 

Keeping Housing Affordable

A Finnish regulation requires that developers set “affordable” rents based only on the cost recovery principle. That means rents can only be as high as the necessary cost to pay back the construction loans, plus operational costs used to maintain the building. Additional price inflation to generate profit is strictly prohibited—the trade-off for obtaining low-interest rate, government-backed loans. This translates into rents that are generally 10–40 percent lower than market-priced rents, which have no price restriction. 

However, since even these affordable rents are out of reach for some low-income Finns, and because about half of Finnish renters still rent in the private market, the government provides a demand (or renter) subsidy as well. To keep low-income Finns housed, the government spends another $2 billion annually on rent subsidies. 

An additional regulation also requires landlords to give tenants 6 months notice prior to eviction, as opposed to the 45 notice that is standard in Hawaiʻi for many eviction cases. This is yet another safeguard to prevent new cases of homelessness from occurring. 

Today, about 30 percent of Finns live in some form of government-subsidized housing. In Hawaiʻi, that figure is about 7 percent. And on the rental assistance side, only about 3 percent of people in Hawaiʻi can access a housing voucher, and an even smaller amount succeed in using their voucher to secure housing (another problem the legislature took some action on last session). 

In Finland, there is still market-rate housing developed for-profit as well. But the proportion of market-priced development as compared to affordable housing development is much more balanced in Finland than it is in Hawaiʻi. Any new development area in Finland must be 50 percent affordable housing and 50 percent private market. In Hawaiʻi, the proportion is usually closer to only 20 percent “affordable housing” (determined by Area Median Income levels) and 80 percent is private market-rate. 

Unfortunately, that 80 percent of new, market-rate housing in Hawaiʻi is largely unaffordable at local wages. The result is that many of these homes are being increasingly sold as investment properties for people who will not live in them. In other words, our housing model is producing much less affordable housing and much more investment housing than the Finnish model. 

By investing heavily in the creation of affordable housing from the start, Finland ensures that 50 percent of all new housing development is affordable and price-restricted. This also provides a check on market rate rents because, as the government subsidized rentals compete with the private market rentals, the market rate rents remain lower than they would otherwise be, ensuring that even the private market renters pay lower rent. Overall, housing costs in Finland are about 20 percent of a person’s income as compared to 30–50 percent (and sometimes even more) in Hawaiʻi.

Finnish studies show that the cost savings to society for ending homelessness this way are huge: more than $15,000 per person housed per year. Beyond those direct savings to the medical and judicial systems, for example, the savings to society are incalculably high. While Finland is a country and Hawaiʻi is, of course, a state within a federal system, there is a lot we can borrow from the Finnish finance model to move our housing system closer in alignment with our values of ʻohana, kuleana and aloha for all.

Hawaiʻi can end homelessness. It starts with a mindset shift: housing is a human right, and the cost to provide housing to each and every person in Hawaiʻi is well worth the necessary investment in public resources.