Helsinki area housing production breaks records
An overview of construction and population trends in 1961–2019
In the Helsinki Metropolitan Area, 2019 turned out to be a record year in housing production. A total of 16,056 dwellings were completed in the three big cities of the metro area – Helsinki, Espoo and Vantaa – a number clearly exceeding any previous annual output. In the 2010s as a whole, the output was around 100,000, a record-high figure as well. In 2017–2019 the annual total was over 10,000 new dwellings – a figure exceeded in the area only in the early 1960s and 1970s, and in 1989–1990.
In all three cities, housing construction was at a record level in the late 2010s. Both Espoo and Vantaa reached new record levels in 2019, and in Helsinki annual outputs have been larger only in 1960, 1961 and 1962.
The large housing outputs in the Helsinki Metropolitan Area in the years after 2015 contrast especially with the situation ten years earlier, following an exceptionally calm period in construction. Whilst in 2016–2019 the annual average output in the area amounted to 12,650 dwellings, it was still only 8,800 in 2011–2015, after a historical low of only 6,350 per annum in 2004–2010. That is only half the annual figure for the last four years in the Helsinki Metropolitan Area.
Annual population growth in the Helsinki Metropolitan Area, now 17,501, is also now particularly strong. It has been larger only in 1963 and 1965.
Population and housing production in the Helsinki area – what reasons for the current trends?
Population growth was very rapid in Helsinki and the surrounding areas in the 1950s and 1960s, during a major wave of urbanisation. This structural change, which in Finland lasted well into the 1970s, was among the fastest in all of Europe. However, in the late 1960s, the national economy deteriorated, and Finland’s population decreased by 35,000 over 1969–1970, primarily due to emigration to Sweden and rapidly falling birth rates. Although the people moving to Sweden chiefly came from the countryside, the 1970s turned out to be a time of slower population growth for Helsinki and its surroundings, too. A brief economic upswing in the early 1970s brought full employment in the country as a whole, and migration to the Helsinki Metropolitan Area levelled out.
In 1970–1973, the capital region’s migration gain from the rest of Finland was 20 per cent smaller than it had been in the early 1960s.
Housing and infrastructure production were accelerated due to the earlier rapid population growth and the consequent forecasts, but also the need to raise the housing standards. Thus the early 1970s saw the construction of unprecedented numbers of new dwellings in the Helsinki Metropolitan Area – records not surpassed until the last few years. With the economic upturn of the 1980s, population growth also returned to the Helsinki Metropolitan Area.
During the economic depression in Finland in the early 1990s, Helsinki Metropolitan Area’s population grew faster than previously. Part of this growth follows the new Municipality of Residence Act which allowed students to register their residence officially in the city where they already lived. A new phenomenon in the 1990s was also that immigration from abroad increased – not having earlier influenced the population in any notable way. During the depression, market-initiated housing production more or less collapsed, and families held on to their smaller homes in Helsinki instead of moving to spacious housing in the periphery.
After the depression in the early 1990s, employment gradually picked up again, and interest rates fell. This led to a new phase of suburbanisation or exurbanisation in the early 2000s, often called the ‘Nurmijärvi phenomenon’. Families that had been cooped up in their flats in Helsinki were again able to move to more spacious housing, often located in the outer parts of the Helsinki Region. Furthermore, a recession in the ICT sector came down hard on a number of industries that are typical of the metropolitan area, and population growth slowed down considerably. But the Nurmijärvi phenomenon did not last for very long, and the metropolitan area soon saw rapid population growth again. This reversal of the trend was at least partly caused by the finance crisis starting in 2007, which not only increased foreign immigration but also reduced people’s motivation to acquire new homes.
Housing production decreased dramatically as the financing outlook tightened. Young adults, in particular, stayed in rented housing in Inner Helsinki, and this was associated with a cultural change: the renaissance of inner-city living. Although the population of the metropolitan area started to grow rapidly, the planning process could not react to the changed situation soon enough, and housing production remained slow. In Helsinki, the decision to move cargo harbours from the inner city to the suburban Vuosaari was delayed, and there was a scarcity of land for development. Housing production could not thus not keep pace with population growth.
Land use, housing and transport agreements
The problems in housing production during the first decade of the 2000s gave birth to a new kind of development-oriented cooperation between the Finnish state and the major city regions. The essential idea was to link transport projects and land use planning closer to each other. The aim was to launch projects that would support the population growth of the major city regions and to increase housing production.
On 20 June 2012, the State and the municipalities of the Helsinki Region signed a letter of intent, the MAL Agreement on Land Use, Housing and Transport 2012–2015. Its objective was to strengthen the functionality and competitiveness of the Helsinki Region, as well as to increase housing production and its conditions in the region, and to help achieve the goals of metropolitan policy. The vital elements of the letter of intent are sustainable community structure, energy efficiency and shared responsibility in housing policies.
In the MAL agreement, the State pledged to work for sustainable solutions through shared responsibility by co-funding measures for transport and other infrastructure and taking supportive action for affordable housing production. The municipalities committed themselves to co-fund measures for transport infrastructure and other infrastructure. For the Helsinki Region, the housing production goal was to have 12,000–13,000 dwellings built per year. The State took the commitment to relinquish land that is no longer in its use, is suitable for redevelopment and complies with the goals of the agreement, against a fair compensation. The condition was set that the municipalities had to plan affordable housing on the land handed over by the state.
The municipalities were also to ramp up their efforts to exploit primarily those land areas relying on existing or soon-to-be-completed rail links or other public transport, or on transport development projects specified in the agreement.
The second agreement for 2016–2019 placed importance on responding to the housing demand brought about by the strongly increasing immigration. The goal was to build, over the four-year period, a total of 60,000 new dwellings in the entire Helsinki Region, of which 45,000 in the metropolitan area. Another goal was to complete housing plans for 6.2 million square metres of dwelling floor space, of which 4.5 million in the Helsinki Metropolitan Area.
The outcome was that 51,000 dwellings were completed in the Helsinki Metropolitan Area in 2016–2019 – in other words, 6,000 more than the goal stated in the MAL agreement .
Housing production in Helsinki, Espoo and Vantaa
In 2019, the number of new dwellings completed in Helsinki was 6,736. Only in 1960–62, with the onslaught of suburban development, had there been more dwellings built in the capital. However, over the 1960s and 1970s, the dwelling stock did not grow at the same pace as the housing production, because an estimated 23,000 dwellings disappeared in Helsinki due to demolition or conversion into offices. This figure was obtained by comparing the dwelling numbers in the censuses in 1960–1980 with the contemporary production figures.
Over a 15-year period in 1996–2010, only an annual 3,200 dwellings on average were completed in Helsinki. In the early 2000s, the population of Helsinki decreased slightly as people at large showed an increasing interest in lower-density detached and terraced housing. Ten years later, things looked very different. This was bound to have an effect on city planning.
After 2005, population growth started accelerating, and although housing production picked up again when the new Vuosaari harbour had been completed, it took ten years until housing production outputs finally matched the need caused by the population growth. Population growth in Helsinki has been characterised by rapid changes as in-migrants to the Helsinki Region from the rest of Finland or from abroad typically move to Helsinki proper, and economic fluctuations are also usually experienced immediately in the capital. Migration has usually influenced the population numbers in Helsinki more than in the neighbouring municipalities, where natural population growth has played a more significant role.
The 2016 implementation programme for housing and related land use (Hometown Helsinki 2016) set the goal of building at least 6,000 dwellings annually in Helsinki, either as new construction or through change of use. Another objective was to create the prerequisites for increasing the annual housing production to 7,000 by no later than 2019. In fact, the number of new dwellings started growing: in 2019, especially, a considerably larger number of new dwellings were completed than in any other year since 2000.
In 2019, Espoo also saw more dwellings completed than ever before, namely 4,300. The annual output has not varied to a similar degree in Espoo since the 1970s, but it was at its lowest in the years 2006–2009. Since the signing of the MAL agreement, more dwellings have been built than earlier. In 2017–2019 an annual average of 3,800 dwellings were completed, compared with 2,300 in 2000–2016.
Population growth has accelerated in Espoo as well, and 2019 broke the all-time record, with 6,069 more inhabitants than the previous year. In the background, there are some major transport infrastructure investments – the West Metro in particular – and related housing construction, possibly also the zone reform of the HSL public transport service. Espoo’s net migration gain from Helsinki was significantly larger in 2019 than any previous year in the 2010s.
Of the municipalities of Helsinki Metropolitan Area, Vantaa has had in relative terms the biggest increase in housing production in recent years. In Vantaa, as in Espoo, the number of dwellings completed (5,020 in 2019) was the largest ever. During the period 2015–2019, more than twice as many new dwellings were built compared to 2000–2014. In 2018, around 4,500 new dwellings were completed, and in 2019 over 5,000. Such high numbers were not attained even in the 1970s, when the population occasionally grew by over ten per cent a year. The large transport infrastructure investment in the Ring Rail Line made it possible to create new well-connected neighbourhoods. Housing production has also increased in those older neighbourhoods that are within comfortable reach from rail links. Vantaa’s migration gain from Helsinki has also grown significantly.
In the last few years, housing construction in the Helsinki Metropolitan Area has been extensive even on an international scale. Among other Scandinavian capitals, only Copenhagen has in recent decades seen more than 6,000 new dwellings built within one year, namely in 2018.
Stockholm has 50 per cent more inhabitants than Helsinki and its annual population growth in 2015–2019 was 1.3 per cent, versus 1.0 per cent in Helsinki. Yet, the number of new dwellings completed per annum during that time was the same in both cities, 5,000 on average.
Greater Stockholm has twice as many inhabitants as the Helsinki Metropolitan Area, and annual population growth in Greater Stockholm over the last five years has been around 1.6 per cent, slightly faster than in the Helsinki Metropolitan Area (1.4%). With notable increases in housing production in Espoo and Vantaa, the number of dwellings completed in the Helsinki Metropolitan Area in 2017–2019 was only 10 per cent smaller than in Greater Stockholm. In absolute numbers, 1,000 dwellings more were completed in the Helsinki area in 2019 than in the Swedish capital region.
In Oslo and Greater Oslo, 30 per cent fewer new dwellings were completed in the last few years than in Helsinki and the Helsinki Region. Both Oslo and its region are roughly the same size as Helsinki and the Helsinki Metropolitan Area. In rough terms, population growth has long been equally fast in both regions, but in the last few years, it has been faster in Oslo proper than in Helsinki proper.
Today’s Copenhagen (Københavns kommune), or the core municipality of its region, is slightly smaller than Helsinki and with its 630,000 inhabitants. In 2015–2019, it had the fastest annual population growth of all Scandinavian capitals, namely 1.7 per cent. The number of dwellings completed during that period was as large in Copenhagen as in Helsinki: 5,000 per annum on average. In the two-million inhabitant Copenhagen Capital Region, fewer new dwellings built than in the Helsinki Metropolitan Area.
In other words, although population growth has been slightly faster in the Scandinavian capitals than in Helsinki and its region, more new dwellings have been built here than in our Scandinavian peer cities.
Prospects for housing production in the 2020s
Finland, Europe and the rest of the world are going through exceptional times due to the coronavirus pandemic. No one knows how long it will last and what effects for business and the national economy it will have at the end of the day. It would seem probable that housing construction in 2020 – maybe also a few years ahead – will turn out slightly smaller than the record figures of 2019. The international workforce needed on Finnish construction sites are not allowed to enter the country, and there are difficulties in acquiring construction material, especially from abroad.
Without the coronavirus crisis, housing construction in Helsinki would probably have continued under good economic conditions, and some 6,000-7,000 new dwellings would have been completed annually for another few years. In Espoo, the assumption was that last year’s output, over 4,000 completed dwellings, could have been equalled for a few years more, subsequently to approach the long-term average again. In Vantaa, building starts for dwellings began to decrease already in 2019 as compared with the previous year, and therefore the record number of dwellings completed is not expected to be broken in the forthcoming years.
The next few months will show what kind of consequences the economic downturn caused by the coronavirus crisis will have for construction in Helsinki and its neighbouring municipalities, and how permanent these changes are likely to be.
Pekka Vuori is a senior specialist working on population projections, population statistics and data systems.
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