Cuts in general housing allowances and unemployment benefits will impact around 500,000 of Kela’s customers starting from 1 April 2024

Based on a series of legislative amendments approved by Parliament, the general housing allowances and unemployment benefits available from Kela will be cut on 1 April 2024.

According to Pasi Pajula, head of Kela’s Centre of Expertise in Income Security Benefits, Kela is getting ready to implement the amendments while preparing for a potential increase in the number of basic social assistance recipients.

General housing allowances will be reduced on 1 April 2024, at which point the compensation percentage will be scaled down and the basic deductible increased. The cuts will reduce general housing allowances for all current recipients. As of February 2024, a total of 406,226 households of one or more persons received general housing allowance.

However, not all recipients will receive a smaller allowance right away. Instead, their allowance will be reduced the next time it is reviewed. Kela reviews general housing allowance at least once a year to make sure that it is paid out at the appropriate rate. The housing allowances paid for pensioners will not be affected.

Exempt amount removed from unemployment benefits, tighter criteria introduced for housing costs under the social assistance scheme

Everyone currently receiving basic unemployment allowance or labour market subsidy from Kela will be affected by the changes in unemployment benefits immediately in April. Unemployment benefits will be reduced by the elimination of child increases and a EUR 300 per month exempt amount.

The elimination of child increases will affect approximately 100,000 persons annually, while the elimination of the exempt amount will affect persons who work part-time or do incidental work and receive unemployment benefits. In 2023, a total of 72,244 persons had earned income while drawing unemployment benefits.

Also scheduled to take effect on 1 April 2024, a further legislative amendment will affect the treatment of housing costs under the social assistance scheme. Kela will no longer pay social assistance for housing costs that exceed municipality-specific maximum limits unless there are specific reasons for the excess costs as spelled out in the law. If no such reasons exist, Kela will advise customers to seek more affordable housing. Alternatively, customers can pay the excess themselves.

The cuts will impact about half a million of Kela’s customers

The cuts and other changes in social security scheduled to take effect in April will impact about half a million of Kela’s customers. They are expected to have the greatest impact on young people who are unemployed and/or living alone.

According to Kela’s calculations, the biggest impact will be seen among those young people who already now subsist on a small income. Students will be impacted by the fact that they are generally not eligible for social assistance. The cuts will therefore reduce their income significantly if the government guarantees available for student loans are disregarded.

The elimination of the exempt amount and the child increases supplementing unemployment benefits will affect those currently receiving such benefits from Kela. The cuts may make some customers eligible for social assistance or qualify them for more assistance than previously.

Kela estimates that the cuts will increase the number of applications it receives for social assistance. Basic social assistance can compensate for the cuts in general housing allowances and unemployment benefits for those with the lowest incomes.

Pasi Pajula says that Kela has taken several steps ahead of the changes, including providing staff training, reconfiguring information systems, increasing customer communications and preparing for higher call volumes for customer service.

The changes will be carried out automatically

All the changes will come into effect automatically, so customers do not have to contact Kela because of them. Kela has posted information on its website in Finnish, Swedish and English explaining the changes and their impact on customers. In addition, Kela will make necessary updates to its online calculators by 16 March 2024, allowing customers to estimate how the changes will affect their benefits.

In addition to the cuts scheduled for 1 April 2024, there will be further changes to unemployment benefits and general housing allowances later on in the year. At the beginning of September, the work requirement that all who are unemployed must meet in order to qualify for unemployment benefits will be extended from 6 to 12 months. Further, starting 1 January 2025, general housing allowance will no longer be available for housing costs in an owner-occupied home.