Social Housing in Post-crisis Hungary: A Reshaping of the Housing Regime under ‘Unorthodox’ Economic and Social Policy
Introduction:
The aim of this paper is to summaries the main policy actions in the area of social housing after the GFC, which had a severe impact on the Hungarian economy. In our approach, housing policy is part of the broader economic and welfare regime, but individual housing policy interventions do not necessarily fit into any master plan, as they are more part of a ‘trial and error’ process. On the one hand, there are several quasi-independent players with their own mission and power, and the interactions between them can lead to unintended results. On the other hand, unpredicted social housing problems may force the government to take actions that conform to the principles of a master plan.
‘Unorthodox’ economic and social policy in a post-socialist housing regime:
Housing regimes are embedded in the broader social and political system and develop as a consequence of the interactions among their stakeholders under the given macroeconomic and social framework. The approach followed in this paper is close to the ‘structures of housing provision’ approach used by Harloe and Martens and Ball and Harloe, which argues that housing regimes emerged in interaction with economic development and expanded a particular set of institutional arrangements in response to specific development challenges. The conceptual chaos that has accompanied attempts to understand post socialist housing regimes is rooted in from the limited knowledge and available information about the specific development challenges of the political, economic, and welfare systems in the transition countries.
The main components of their economic and social housing policy were based on three pillars:
1. setting out an economic growth model based on EU transfers, and building up a ‘national capitalist class’ in control of the energy and utility sectors, banking, and retail franchises.
2. ensuring a fiscal balance by levying special taxes on foreign-owned economic enterprises and financial institutions, and by means of the ‘national integration’ of Private Pension Funds.
3. an important element of this ‘unorthodox’ social policy is that it openly ignores low income groups in favour of supporting the middle class; this focus/intention was signaled by the introduction of the flat Personal Income Tax, the structure of tax allowances for families with children, and so forth.
The effect of the GFC on social housing policy:
The GFC hit the Hungarian economy hard, partly because of its loose fiscal policy in the 2000s, and partly because of the huge FX mortgage portfolio that grew between 2004 and 2008. GDP fell by 5-6% after the crisis, unemployment increased substantially, the exchange rate of the HUF plummeted, and even the banks raised the interest rate to offset expected losses, which led to a huge crisis in the FX portfolio. The country entered into a recession that lasted for years but eventually stagnated and then turned into growth thanks to EU transfers and a strict fiscal policy. Below the consequences that the GFC and the new political system have had on the social housing regime will be analyzed in three areas:
1. managing housing costs affordability.
2. the consequences of the mortgage rescue programmes.
3. access of the poor to housing.
The consequences of the mortgage rescue programme:
The most significant shock after the GFC was in the FX mortgage stock, as 25-30 percent of households had mortgage loans. The story of the mortgage rescue programme provides insight into how public decision-making worked. First of all, there was no clear vision for solving this problem. Several programmes were launched in parallel, in order to test the reaction of the stakeholders. The strategy according to the ‘master plan’ was to put the burden on the banking sector, and let the middle and upper-middle class get rid of FX loans at a low cost.
Access to Social housing for low-income groups:
The very limited amount of social housing stock is one of the most general features of the CEE transition countries. In Hungary 3% of the stock is owned by municipalities, and privatisation continues. Investment in municipal housing is less than the number of units sold in any given period. This is a consequence of the financial and political interests of the municipalities, where the social rental stock generates both a financial loss and a political risk for the municipalities. Rents cover generally 30% of the costs of the sector, and 20-25% of tenants do not pay the rent, which basically forces the property managers to evict tenants, which is a political risk for the municipalities. Between 2007 and 2013 the volume of arrears increased. The number of evictions doubled between 2007 and 2015, which indicates that this tension in the system intensified; however, evictions concern only 1.5% of the social housing stock per year.
Conclusion:
After eight years with no specific housing policy the government once again introduced subsidy programmes to support housing investments. The most important recent programme is explicitly not a social programme. It supports instead young families with children to help them have better access to housing. The housing investment subsidy was reintroduced with special conditions, which gave a disproportionately high subsidy to families with three children, and (also granted them) optional access to a large housing loan. Families with two or fewer children are also eligible for a construction grant to build new housing units.
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