Tuesday 23 January 2018

Why we could learn a lot from what's happened in Helsinki

Paul Melia

Paul Melia

THEY do things differently in Helsinki.

The Finnish capital has learned the lessons of its early 1990s property crash, when house prices fell by 44pc, and now developers are not allowed to decide where new homes and offices are built.

The reason is simple -- the city council owns 70pc of all land in the city, meaning it makes the plans, and sticks to them.

It's a system that Ireland, with its legacy of ghost estates and unoccupied retail units, could learn much from.

"In Finland and Helsinki, we are very close to design, and the city has had an opportunity to realise this because we hold two-thirds of all the land," Deputy Mayor Hannu Penttila told the Irish Independent.

"That means when we make plans, we keep to them. We have had master plans since the city was founded. Land is reserved for blocks, and investors and construction companies prepare detailed plans and bid to construct the buildings."

They decide how much land is needed for offices and retail, based on shortfalls in these types of property, while also deciding how many housing units are required for workers. The locations are then pinpointed on a map and companies submit detailed designs and bid to construct the buildings.

The winning company then leases the land from the city at a set rent -- typically 4pc of the land value plus inflation -- for periods of up to 100 years.

Since 2009, land will only be leased to companies which can build 'A' rated buildings -- the most energy efficient.

Prime office space rents for €300 per sqm, which is similar to Dublin prices, but unlike the Irish capital just 9.6pc of office units are empty, according to research from Jones Lang LaSalle. Vacancy rates in Dublin are currently running at 19.9pc.

Retail units are far cheaper to rent, about €130 per sqm in Helsinki compared with €5,000 per sqm on Grafton Street or €3,000 per sqm in Liffey Valley.

The city also wants older office buildings to be converted into apartments, with about 500 units a year currently coming onto the market from this source.

This is because while no longer suitable for offices, there's no point in building for the sake of it. The buildings are worth converting into homes because they are still structurally sound, reasonably energy-efficient and can be put to good use.

The conversions are funded by the landlords, who range from development companies to pension funds, and then leased on the open market or through the city.

Just 200 years old, Helsinki is growing at a rate of about 1pc a year. There's 600,000 people in the city, and 1.3 million in the metropolitan area. Some 5.4 million people live in Finland.

It's consistently voted one of the most liveable cities in the world, and with good reason. It's well-designed, looks after the needs of its citizens over business and is constantly improving itself.

But there is a shortage of housing, and property is expensive - the best apartments cost about €6,000 per sqm, falling to €4,000 on the outskirts of the city. That equates to about €480,000 for a two-bed, 80 square metre apartment -- Celtic Tiger prices.

But the city gets around the affordability problem through 'hitas', a system of rent controls.

"We control the quality and the price of apartments," Mr Penttila says. "In any new development, 20pc of units are for social housing; 40pc have controlled rent and the remaining 40pc can be sold on the free market.

"We try to keep it so you cannot recognise the social housing. You have people on social welfare living on the same blocks as millionaires. There are no ghettos and we are very proud of that.

"Not everybody is so keen on the system. Private investors are not so happy, but affordable housing is the norm."

The city is currently on a drive to develop family-friendly housing that will allow people to remain in the city centre instead of moving to the suburbs.

Four big urban regeneration projects are currently underway, the biggest of which is at Kalasatama.

Formerly the location of the city's main port, which was decanted and re-opened on a site to the east of the city in 2007, the first phase of the harbour project covers an area of 250 hectares and will result in 17,000 new residents and 10,000 jobs.

There's nothing unusual about this, after all the city has been master planning since it was founded.

"People had traditionally moved out of the city but what has changed in the last 10 years is that families with kids want to stay," Matti Kaijansinkko from the city's planning department and project leader at Kalasatama says.

"The attitudes of young people have changed. Young families are keen to live in the city and be close to services. More than half of our growth is immigrants from Russia, Estonia, China and India."

But with all the development going on, isn't there concerns that the property market could collapse?

"It's difficult to see that on the housing side because we have a lack of apartments," he says.

"We also have one million square metres of empty offices and retail areas. We plan to transform those offices into houses because the offices are no longer up to standard.

"Infilling strategies are very important to us. These suburbs, which were planned in the 1960s and 1970s, have quite a loose structure and they can be improved."

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