Housing cost control at Helsingin kaupungin asunnot Oy
Heka is Finland's largest lessor. One in seven Helsinki residents live in a Heka home. The cost of housing in rental housing and the growth of rents have been contained, but Heka has limited abilities to influence the underlying City construction and plot lease prices, energy prices and the tenant selection process. Costs are also affected by the economic cycle and interest rates.
The goal of the assessment
The main question of the assessment was whether the increase in the cost of housing in the rental apartments of Helsingin kaupungin asunnot Oy (Heka) has been successfully curbed. This was examined by assessing whether Heka has taken into account the financial challenges and risks associated with interest rate volatility and taken measures to contain the increase in housing costs in terms of interest rates. It also examined whether Heka has taken measures to mitigate the impact of general cost increases on housing costs and to improve the occupancy rate of rented accommodation. Heka has around 55,000 rental dwellings. Heka operates on the prime cost principle, i.e. the rental income is used for the construction of housing and the costs of repair, maintenance and administration.
Conclusions
The cost of housing and the increase of rents in Heka’s rental housing have been successfully curbed. However, economic fluctuations and Heka’s limited ability to influence the City’s new housing production and plot leases, energy prices and the tenant selection process make controlling housing costs difficult. Heka monitors interest rate levels and risks, prepares interest rate forecasts and follows a risk management plan. The aim is also to raise the level of interest rate hedging. However, the increase in the loan portfolio is influenced by the quantity and quality of new production, over which Heka has little control. Heka monitors the formation of cost items and anticipates cost fluctuations, but cannot control the market price of energy or the City’s plot lease prices. Heka has taken steps to improve the occupancy rate of housing. The occupancy rate is also affected by the general housing market situation, housing benefit cuts, the needs of applicants and the tenant selection process, among other factors.
Recommendations of the Audit Committee
As the body responsible for corporate governance, the City Executive Office must
- steer Helsingin kaupungin asunnot Oy towards strengthening the tenant selection process in cooperation with the Housing Services of the Urban Environment Division so that the occupancy rate of the rental apartments administrated by Helsingin kaupungin asunnot Oy can be increased in a sustainable manner.
- steer Helsingin kaupungin asunnot Oy towards promoting measures related to the loan interest rates, energy and repairs of the rental housing companies that it administrates in order to control housing costs.