Interest subsidy loans
The interest subsidy loan is granted by a bank or other financial institution. ARA accepts the loan thereby giving the loan a state guarantee and paying the interest subsidies. The interest subsidy loan covers a maximum of 90-95 percent (in the case of acquisition 80 percent) of building costs and price of the plot. The loan must be based on competition and ARA makes a decision on approval on interest rate and margin.
The borrowers
Social rental housing can be produced or acquired by 1) local authorities or other public corporations (i.e. principally Finnish municipalities), 2) corporations that fulfill certain preconditions laid down in regulations each time in force and designated by the competent authority, and 3) limited liability companies of various types in which one or more of the three organisations mentioned above have direct dominant authority. In many cases the limited liability company under dominant authority is a company owned by a Finnish municipality.
The second category corporations may include various borrowers such as organisations for social housing, old age housing associations and student housing associations. These organisations are engaged in providing social housing and they work within legislative framework as defined and set by the ARAVA Act, as amended.
Social rental dwellings are to be used as rental dwellings for 40 years.
Criteria for tenant selection
By virtue of legislation, tenants for social rental dwellings are selected on the basis of social appropriateness and financial need. More detailed criteria are specified annually by the Government, including the urgency of the applicant's housing need, level of income and property. Priority is given to homeless applicants and to applicants in urgent need of housing. Tenant selection procedures are also determined and supervised by the municipalities.