Finnish municipalities increasingly lease new schools to free up funds for infrastructure

Finnish municipalities are turning to leasing, renting, or life-cycle models to finance up to half of all new school constructions, as shrinking student numbers and tight budgets force difficult choices, reports Yle.

The city of Heinola in southern Finland recently opened its fourth new school this decade—a 12-million-euro wooden building—funded through a financial lease to preserve capital for road and sewer repairs. With an unemployment rate exceeding 17% and dwindling tax revenue, Heinola’s property services director Jari Kousa explained that the city can sustain only about 6 million euros in annual investments. “Funds tied up in school construction can now go toward urgent infrastructure upgrades,” Kousa said.

The shift reflects a national trend. Mikko Simpanen, development manager at the Association of Finnish Municipalities, estimates that half of new schools are now built using alternative financing. Two key factors drive the change: severe budget constraints and a projected 25% drop in primary school students by 2032, leaving up to a third of school buildings empty by 2040. “Many municipalities are fighting windmills,” Simpanen said. “By law, they must provide education, but aging facilities and declining enrollment make traditional ownership unsustainable.”

School buildings account for nearly a quarter of basic education costs, with individual projects often exceeding 10 million euros. Heinola alone has spent 50 million euros of its own capital on schools in recent years. Simpanen noted that municipalities now split investments evenly between buildings and surrounding infrastructure like roads and sewers—areas where expertise is increasingly scarce.

Leasing through Kuntarahoitus, a state-backed municipal financier, has become the dominant model. By late 2024, about 90 municipalities will use its property-leasing contracts, averaging over 10 million euros each. While demand fluctuates, the approach allows cash-strapped towns to modernize schools without long-term debt risks.

For students like Alisa and Helmi Kettunen, the new Kirkkiksen School offers modern amenities like lounge-style seating for group work. Yet the broader reality remains stark: Finland’s birthrate decline means one in five desks may sit empty within years, forcing municipalities to weigh whether to build schools that could soon stand vacant.