This is how the cuts for the general housing allowance will affect students income

Parliament has decided on cuts to the general housing allowance, which will have a particular impact on students, as almost half of the recipients of the general housing allowance are students. On average, the housing allowance for students will decrease by 76 € per month, but in reality the changes will range from a few euros to hundreds of euros per month.. 

Below we present two different scenarios that illustrate how the cuts will affect students' daily lives.

Steve the Student, a 22-year-old third-year student living alone in a 35-square-metre studio apartment in the centre of Vaasa. Steve’s rent is 550 €/month, including water and electricity. Steve lives a normal student life, playing football on Thursdays and regularly attending student events. 

First scenario

In the first scenario, Steve has a job and earns 1000 €/month and has also drawn 279.38 €/month in student allowance. Steve has also taken out a student loan, but this is not taken into account as income when calculating the housing allowance. 

In the first scenario, Steve’s housing allowance will therefore decrease by 152.5 €/month.

Second scenario

In the second scenario, Steve does not work besides studies at all. However, they have taken out a student loan and continue to receive monthly student allowance. In this case, Steve’s income is only 279.38 €/month in student allowance.

In the second scenario, Steve’s housing allowance will therefore decrease by 44.7 €/month.

In both scenarios presented above, Steve’s housing allowance will be affected by the following changes that will come into force on 1.4.2024:

• The basic deductible for the general housing allowance increase from 42 % to 50 %
• The compensation percentage of the general housing allowance is reduced from the current 80 % to 70 %
• The 300 € deduction for earned income will no longer be available

What do the terms mean?

Basic deductible 

The basic deductible is the amount deducted from the amount of eligible housing costs (e.g. rent and separate water and heating costs). The upper limit for approved housing costs in Vaasa is 447 €/month. The amount of the basic contribution depends on the income and the number of adults and children in the household. The cuts will increase the basic deductible from 42 % to 50 %, which means that the basic deductible from the eligible housing costs will be higher and the amount of allowance available will be lower.

The compensation percentage

The general housing allowance consists of the approved housing costs minus the basic deductible. This sum is multiplied by the compensation percentage of the general housing allowance, and the result of the calculation is the amount of allowance payable. When the compensation percentage decreases from 80% to 70%, the amount of housing allowance is also reduced.

The deduction for earned income

Before the cuts came into force, a deduction of 300 € was made from the income taken into account. When the income deduction is removed, the basic deductible will also be higher, resulting in less general housing allowance.

Please also note the following changes to the general housing allowance:

• For residents of Helsinki, the maximum amount of housing costs taken into account will be reduced after 1.4.2024.
• From 1.1.2025 onwards, no general housing allowance will be paid for owner-occupied housing

You can find out about the effects of the cuts in housing allowance in your case by using Kela's general housing allowance calculator. You can compare the amount of housing benefit before and after the cuts by setting the starting date in the calculator as 1.3.2024 and 1.4.2024 thereafter. 

So what should you do?

• You do not need to contact Kela separately, as all changes will be applied automatically at the time of the annual review. You can see the date of your annual review on the OmaKela service. 
• If your income, housing costs or other circumstances in your household change before the annual review date, you must apply for an interim review of your housing allowance. When you apply for a review, the changes mentioned above will be applied when the decision is made.

For more information, please visit the Kela website.
 

Jenni Hiltunen
Board member, Social affairs

Maria Saita
Board member, Municipal affairs

Emma Lehtonen
Chair of the Board