József Hegedüs: Social housing in the transition countries -- case of Hungary

1. József Hegedüs:Social housing in the transition countries -- case of Hungary The future of social housing in Europe European colloquium 22-23 of November 2007 ENPC – Rue des St Péres - Paris Metropolitan Research Institute

2. Outline of the presentation • Overview of the transition countries • Privatization, restitution – different approaches • Need for social housing: programs (white papers) • Options: • Hosing allowances • Social rental sector: municipal housing, non-profit solutions, private renting • „low cost” housing • Case of Hungary • Development of the housing policy • Social rental sector: • Privatization • Rental programs (2000-2004) • Rent-allowance program (2005- ) • Programs for owner occupation • Urban housing program • Housing estates • Inner city rehabilitation – social rehabilitation • Conclusion Metropolitan Research Institute

3. What kinds of housing models are these countries heading to? • End of the East European Housing Model* • Collapse of state provision: new role • Structural changes: market and „non-market” spheres • Housing regimes (~welfare regimes) • Security (welfare programs) • Public sector involvement in development and management • Subsidy programs (targeted or general) • Divergence or universal models? • Different institutional solutions may lead to the same regimes • Same institutions may lead to different regimes *Hegedüs-Tosics, 1996 Metropolitan Research Institute

4. Main trends: privatization 1990 2001 Metropolitan Research Institute

5. Social housing policy after the transition: common structural problems • Poor housing conditions (housing need and substandard housing) • Affordability issues: paying the cost of housing and access to housing • Income distribution and the informal economy • Management of the housing stock (problem of urban housing: „new” housing estate, condominium) Metropolitan Research Institute

6. Housing policy alternatives • Housing allowances and social welfare support • Promoting the social rental sector • Public rental • Cooperative (TBS) • Private rental • Supporting (low-income) home owners • Contract savings • Interest subsidies • Tax advantages • Cash subsidies etc. Metropolitan Research Institute

7. Country experiences: no clear strategy • Different solutions were chosen, influenced by: • the existing legal and institutional background (legacy of the old system) • International experiences: private institutions (like contract saving, cooperatives, etc.), donor agencies • the dynamics of local politics and macroeconomic conditions • Different outcomes: • Innovative solutions without policy support • Policy support for unsustainable model • Windfall effects: lack of capacity to make public choices Metropolitan Research Institute

8. Periods of housing policy after transition in Hungary • 1989-1995: withdrawal of the state from the housing sector -- „shock absorber” • 1996-2000: establishment of the housing finance institution system – „crises” • 2000-2006: development of the new housing policy, creation of the new subsidy system, and corrections of the housing policy – „housing policy supporting the middle class” • After 2006 second transition (health care system, education, pension system, etc.) – possibilities for „new social housing” ? Metropolitan Research Institute

9. Housing policy after 2000 • Elements of the program • Subsidy program for housing mortgage • Rental housing program • Support for housing renovation • Social effects: wide possibilities • Politics: traps of election promises Metropolitan Research Institute

10. Trends: outstanding housing loans 1990-2006 Metropolitan Research Institute

11. Housing subsidies (in billionHUF) Metropolitan Research Institute

12. Evaluation of the interest rate subsidy program • Housing issue in the politics of 2002 • Regressive effects: political traps • Change in development and construction industry • Fiscal effects short-term and long-term Metropolitan Research Institute

13. Rental programs • Grants for local governments 2001-2003 • Social and „cost” rental • Elderly homes • Transitionary homes • Rent allowance 2005 for the private rental • HDB (Hungarian Development Bank) loan programs for rental investment • Evaluation: limited effect on social inequalities Metropolitan Research Institute

14. EUR/month/m2 10,0 8,7 8,0 6,0 4,4 4,0 2,1 2,0 0,9 0,4 0,0 private rental: private rental private rental: cost rent social rent upper middle lower Average rent in 2004 (source: CSO and MRI estimates) Metropolitan Research Institute

15. Programs for housing renovation • Soft loans in the 90s – no demand • Panel renewal: rule of 1/3-1/3-1/3 • Panel Plus from 2005 • Rehabilitation of inner cities • Other specific programs • Social effects: better targeting Metropolitan Research Institute

16. Results of the „panel” program, 2001-2006 Metropolitan Research Institute

17. Housing subsidies 1998-2007 Metropolitan Research Institute

18. Constraints on expanding the social rental sector • Local governments sector • No monitoring, they are under the pressure of middle class (same as the privatization pressure) • Financial dis-incentives (loss and no earmarked grants) – in the framework of the intergovernmental fiscal relation • Private sector involvement • The unpredictability of the market (rent arrears, tenure rights, etc) makes the big investors cautious • Individual owner are scared of the tax consequence (problem of informal sector) • Structure of housing finance subsidies and taxes – user cost problem („It is cheaper to buy than to rent”) • Lack of political commitment – rhetoric versus budget expenditures Metropolitan Research Institute