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

Metropolitan Research Institute 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 ( ) Rent-allowance program (2005- ) –Programs for owner occupation –Urban housing program Housing estates Inner city rehabilitation – social rehabilitation Conclusion

Metropolitan Research Institute 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 Main trends: privatization

Metropolitan Research Institute 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 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 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 Periods of housing policy after transition in Hungary : withdrawal of the state from the housing sector -- „shock absorber” : establishment of the housing finance institution system – „crises” : 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 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 Trends: outstanding housing loans

Metropolitan Research Institute Housing subsidies (in billion HUF)

Metropolitan Research Institute 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 Rental programs Grants for local governments –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 Average rent in 2004 (source: CSO and MRI estimates) EUR/month/m2 8,7 4,4 2,1 0,9 0,4 0,0 2,0 4,0 6,0 8,0 10,0 private rental: upper private rental middle private rental: lower cost rentsocial rent

Metropolitan Research Institute 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 Results of the „panel” program,

Metropolitan Research Institute Housing subsidies

Metropolitan Research Institute 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