József Hegedüs

Privatisation and rehabilitation in the Budapest inner districts

Abstract Inner‐city areas of Budapest have been almost exclusively dominated by public (state‐owned) rental housing since 1952 when massive nationalisation turned private rentals into state rentals. The last four decades have shown a slow but gradual deterioration of this housing stock (except for the CBD area) due to the problems of rent policy, bureaucratic and inefficient organisation of maintenance and also the slow, but continuous, exchange of population. Even if inner‐city areas never became low prestige contagious slum areas, young families tended to leave this part of the city, moving to the new flats on state‐built housing estates or self‐help building areas. At the end of the 1980s many aspects of inner‐city housing suddenly changed and this led to a completely new scenario. By far the most important change was, however, the implementation of a Right to Buy policy which made it possible for sitting tenants to buy their units under very favourable financial terms (at a very discounted market pric...

Rent Reform-Issues for the Countries of Eastern Europe and the Newly Independent States

The transitional economies share common, serious problems in their public sector housing stocks, including poor condition and repair, and low rents which neither cover the maintenance and managementcosts, nor reflect the market exchange value of the houses. The paper begins by looking at the general background of rental policy and alternative approachesto rent reforms in the East-Central European transitional countries, and then goes on to consider the restructuring of the public rental sector, taking into account price structure changes and price increases in relation to income changes, and affordability. Current trends and problems in regulating rent policy at central and local levels are then considered, including factors influencing the restructuring of the public rental sector, the level of rents and utility prices, and rent reforms in relation to other institutional changes. The paper concludes that no wholly satisfactory reform model has been developed,mainly because each aspect of necessary reform...

The Crisis in Housing Financing in Hungary in the 1990s

In the 1990s, housing finance reached a crisis point in the transforming housing sector. Loans practically disappeared as a resource for housing investments for households and were replaced by savings. Paradoxically, while the institutions of the market economy, including a competitive banking system, have been created in Hungary, in the housing finance sector, the Hungarian economy has become different from those of developed economies where 60-80 per cent of housing investments are financed from loans. By examining the processes impacting the supply and demand sides, this paper attempts to find the causes of the housing finance crisis. Besides the worsening income situation of households, two other factors have played a major role in the crisis: the decrease in the value of property and the high real interest rates of loans. The combined effect of the two factors cannot be offset by the housing subsidy system. Our conclusion is that overcoming the crisis is primarily a matter of macroeconomic changes.

Tenant satisfaction with public housing management: Budapest in transition

Abstract Poor maintenance, low rents, and high levels of occupants’ dissatisfaction with their housing have been hallmarks of state‐rental housing in Hungary and other countries in Eastern Europe. The introduction of private management has been touted as an efficient way to improve services and increase tenant satisfaction, thereby paving the way for higher rents. This paper uses a new data set for January 1992 for dwellings in Budapest which were state rentals in January 1990, the majority of which were still rentals at the time of the survey, to analyse the impact of private management on tenant satisfaction and willingness to pay. The central conclusion of this analysis is that the introduction of private management significantly improves the satisfaction with maintenance services of occupants of units owned by Budapest district governments and now typically managed by the public IKV management companies. Similar results were found for occupants of units privatised in the past two years. We take this t...

Economic and legal conflicts between landlords and tenants in the Hungarian private rental sector

After privatisation in the 1990s, the Hungarian public rental sector decreased sharply in size, from 23% to 3% by 2012. Meanwhile, against expectations, the private rental sector (PRS) did not undergo dynamic growth either, its official share now being 4%. The PRS seems to suffer from a number of defects. The tax and subsidy environment makes it unattractive for both potential landlords and tenants. Moreover, the legal environment – under-regulated tenant–landlord relations and an ineffective legal conflict resolution system – increases the risk inherent in private residential tenancy contracts. The absence of professional landlords is indicative of the lack of incentives to enter the private rental market. Yet, private rental lives on, if only for a lack of other options in many cases. Typically, landlords are accidental second homeowners and typical tenants are households that are excluded from other forms of housing provision. After a brief overview of the current state of the sector and its history, this paper will focus on the economic and legal conflicts between landlords and tenants, and will consider critically the constraints on the development of the PRS after the transition.

POTENTIAL EFFECTS OF SUBSIDY PROGRAMMES ON HOUSING AFFORDABILITY: THE CASES OF BUDAPEST AND MOSCOW

Mortgage markets are coming of age in a number of Eastern Europe and CIS countries. As they do, governments are looking to mortgage-loan associated subsidy schemes to respond to the popular demand for improved housing. This paper presents a detailed examination of the impact of two types of subsidy schemes–mortgage interest rate write-downs, both universal and income-targeted, and income-targeted down-payment subsidies–on the housing purchase capacity and the potential demand for mortgage loan volume in two very diverse markets: Budapest and Moscow. An accounting model that performs detailed calculations at the household level using information on household resources (income, savings and home equity), mortgage terms and conditions, and housing costs (unit prices plus an assortment of closing costs) was developed for the analysis. The down-payment subsidy is found to be better in both markets at stimulating housing purchase capacity in terms of efficiency and the distribution of subsidies in favour of moderate-income families.

Owner-occupation, Mortgages and Intergenerational Transfers: The Extreme Cases of Hungary and the Netherlands

ABSTRACT Societies are trying to cope with ageing and the consequences of the global financial crisis. In most societies collective welfare arrangements for the elderly are under pressure, and drawing on housing equity can be considered as a potential source of augmenting ones pension and financing ones care in old age. This article explores the way in which housing equity is perceived as a financial back-up for old age in Hungary and the Netherlands: two completely different contexts. Hungary and the Netherlands are at opposite poles in many respects when it comes to old age and the role of owner-occupation. In Hungary the large majority of the population is owner-occupier, in the Netherlands the proportion is much smaller. In Hungary most home owners are outright owners; in the Netherlands they invariably have a mortgage. These differences appear to impact on household strategies. In Hungary housing equity plays a key role in the financial strategies of families, whereas it plays only a minor role in the Netherlands. Moving to the rental sector to release housing equity appears an obvious strategy in the Netherlands, whereas this strategy is non-existent in Hungary.

Hungary: The Growing Role of a Hidden Sector

The share of private rented housing in Hungary has been growing steadily for over a decade. At the same time, reliable surveys about the sector are almost inexistent. Private rental market actors conceal their tenancy or their rental income because of the financial incentives in place, which strongly favour owner-occupation, while all but ignoring rental tenures, but also because of deficiencies of the legal environment of private renting. As a consequence, surveyors and census officials have no means of obtaining reliable data—even when they themselves are aware that a significant share of the sector remains hidden. The chapter examines private renting in Hungary, with the aim of understanding what factors contribute to the pervasive informality and ‘invisibility’ of private renting.

The effect of GFC on tenure choice in a post-socialist country – the case of Hungary

In Hungarys housing system, home ownership has become the dominant tenure, covering 85%–90% of the housing stock after the first decade of intensive privatisation in the 1990s. Mortgage loans were heavily subsidised between 2000 and 2004 as a part of pro-homeownership housing policy. After cutting the subsidies in 2004 (as the cost of the subsidy programme was unsustainable), the tenure preferences of households have not changed: the low interest rate, high risk foreign exchange mortgage became the typical loan product. After 2008 the housing and mortgage market collapsed: new construction decreased by 70%--80%, housing transactions plummeted, house prices decreased and mortgage arrears become a huge social problem. The mortgage crises proved that homeownership could be as risky and unpredictable as renting. It is expected that there will be a shift in tenure choice as a consequence of the mortgage crisis. The paper sets out to assess if stakeholders in the housing sector (households, government, banks, etc.) will learn from these experiences, and start showing a stronger preference and support for renting, which could result in a more balanced tenure structure and more stable housing system.

The Policy Environment of Private Renting After 1990

The private rental sector in many transition countries has been growing dynamically since 2000. However, this dynamic growth often remains invisible to official statistical surveys, including national censuses and Eurostat data gathering. With some important exceptions, private renting in the majority of Central and Eastern European countries is plagued by informality, and consequently many landlords conceal their rented dwellings not only from tax authorities but also from surveyors. The chapter sets out to analyse the factors reinforcing this informality, with particular attention to the legal environments and perverse financial incentives that perpetuate this informality, takes a look at market practices through the behaviour of actors on both the demand and the supply side, and discusses potential remedies for this pervasive informality.