Dilemmas of integrated development in post-socialist cities

Iván TosicsMetropolitan Research Institute, Budapest

Open days of the Regions 08A10 - Putting deprived areas back on track

Brussels, 8 October 2013

Structure of the lecture

1) The political and institutional context of urban development in CEE countries: the socialist past and the pecularities of transition

2) Integrated urban development: how to involve residents in post-socialist cities

3) Two cases to regenerate deprived urban areas in Budapest

4) Conclusions: challenges and difficulties to apply CLLD in post-socialist cities

The command society and the large housing estates

• The idea to build housing estates with prefabricated technology reached its peak in the socialist countries: the top-down, dictatorical political regimes created more than optimal circumstances to develop the technology into ideology

• The large-scale rebuilding of old cities and creating whole new cities was not allowed to be criticized openly

• Direct state subsidies to the builders and to the population made it easier to accept the estates

The changes in economic terms

• At the beginning of the 20th century the level of economic development of Hungary was equal to that of Austria, Finland, Italy and Spain.

• In the interwar period the country could only very slowly and gradually try to regain its importance on the international scene

• After WWII the 44 years of Soviet dominance and imposition of the socialist system Hungary sank down substantially, to the level of Greece and Portugal.

European cities on different economic development levels in the early 1990s

• Gross Social Product per capita on constant prices (showing the economic development level of the region, rather than the standard of living of the urban population)– 33.000 EUR: Hamburg, München, Helsinki– 27.000 EUR: Stuttgart, Paris, Brussels, Vienna– 20.000 EUR: Köln, Strasbourg, Utrecht, Marseille– 13.000 EUR: Birmingham, Dresden, Manchester,

Barcelona– 5.000 EUR: Athens, Budapest– 4.000 EUR: Prague, Warsaw

Dismantling the socialist system

• Following the collapse of the socialist system, the over-sized public housing sector had to be reduced and the top-down political and planning system had to be changed.

• However, in most post-socialist countries the overarching state control was replaced by free market relations, the “historic pendulum” went to the other side (Bertaud-Renaud, 1995).

• The main restructuring processes:– the privatization of the housing stock – the decentralization of the administrative structure

The change in property relations

• Margaret Thatcher privatised 2 million public rental units over a time period of 15 years

• East-central European countries privatised 3.1 million rental flats within only five years.

• The “winners” of this “privatisation race” were the south-eastern European countries, where 77 % of the public stock has rapidly been sold off to the sitting tenants.

• Discounts on sales prices for sitting tenants were usually above 85 %, there were even examples for almost 100 % discount.

• Tirana: the share of the public rental stock changed between 1993 and 1998 from almost 100 % to 0 %, in Budapest from 50 % to 10 %, in Prague from 71 % to 52 %.

Tenure categories in EU countries

0%

20%

40%

60%

80%

100%

HU BG PL EU25 F A NL

social rental private rental owner occupied

Countries Social (public) rental housing

Poverty rate

EU countries

NL, S, A 25 – 35 % 10 – 13 %

D, F, UK 15 – 25 % 14 – 18 %

ES, P, EL 1 – 5 % 19 – 23 %

Transition countries

CZ, POL 20 – 25 % 20 – 30 %

H, EST, ALB 2 – 10 % 20 – 30 %

The realities of the processes in the 2000s

• extremely high share of owner-occupied units in many of the countries

• decentralized decision-making, low cooperation level of public actors

• low efficiency of the public sector (no monitoring, no evaluation, no sanctions)

• urban governments became opportunity-led mechanisms of the neo-liberal transformation (Tasan-Kok)

Similarities and differences

• In the post-socialist period the market forces are similar everywhere but the cities themselves differ in the way their public sector works.

• The development of these cities depends on the changing relations and conflicts between the market forces and the public sector which wants to control them.

• The public sector can make substantial differences. Post-socialist cities will differ in a similar way to how Vienna differs from Italian or British cities.

European cities on different economic development levels in the mid 2000s

GDP per capita on constant prices (showing the economic development level of selected cities)

80.000 - $: Dublin, Frankfurt, Helsinki, Milan, Stockholm70 - 80.000 $: London, Turin, Vienna60 - 70.000 $: Brussels50 - 60.000 $: Paris, Rome40 - 50.000 $: Madrid, Munich, Hamburg, Birmingham30 - 40.000 $: Athens, Budapest, Warsaw, Lyon, Manchester, Lisbon

Source: PwC, based on OECD data reflected on city boundaries

What is integrated urban development?

1) Horizontal coordination: between different sectoral policies– Brownfield commercial development with training for low educated

people to become sales-persons

2) Vertical coordination: between different levels of government

– National urban regeneration policy framework and financing system for regional and local projects

3) Territorial coordination: between different territorial units – Social mix strategy in poor neighbourhood with attraction of services

and development of community infrastructure

Economy/jobs

Sustainability/energy Social/inclusion

Horizontal coordination: between different sectoral policies

Vertical and territorial coordination

How to achieve integrated development in the post-socialist cities?

In the context of post-socialist transition with weak and uncoordinated public sectoral policies and no tradition of civic organizations (i.e. weak social capital) special methods are required to achieve integrated development

Place-based approaches are required with intermediary institutions:•in deprived areas with substantial public ownership intermediary management organization is needed (Rév8)•in deprived areas with overwhelmingly private ownership condominiums are the tools to involve residents (Ady)

Local programmes have only chance to achieve integrated development if local governments successfully use such catalyzators to ensure the involvement of the local community

CASE 1: a socially sensitive urban regeneration programme in Budapest:

Magdolna quarter

• Strategic plan of district VIII for fifteen years (2005-2020)

• So far two phases– Phase I (2005-2008): funded jointly by the Budapest and the

District 8th Municipalities – pilot project for Budapest Rehabilitation Fund socially sensitive subprogramme, 2.7 million eur total investment

– Phase II (2008-2011): ERDF funding (ROP) – key project and a model program, 7.2 million eur total investment

– Phase III – (2013-onwards) ERDF, 13 m eur total investment• Application for complex ESF funded project is going on • Integrated programmes: both physical and soft projects

(housing is compulsory element)• Extended partnership

A projekt terület

Nagyfuvaros utca - Népszínház utca – Fiumei út – Baross utca – Koszorú utca által határolt terület

Budapest belvárosának határán, Józsefváros középső részén

L: 12.068 fő

T: 263.800 m2

The project area

It’s bounded by Nagyfuvaros – Népszínház – Fiumei – Baross – Koszorú streets

Location: in the periphery of the downtown of Budapest, in the middle of the district 8. of Budapest

Inhabitant: 12.068

Area: 263.800 m2

Elhelyezkedés Location

Main pillars of the Magdolna I. programme

The aim of the programme is not to turn Magdolna into a rich area,but to bring back the colourfullness of Józsefváros and terminate deep poverty.

• Urban renewal: special programme for the tenants– To involve them into the renewal

• Programme for creating communities– Create a community house, give rooms for civil

organizations• Public space program

– Improve the central square (Greenkeys, Interreg IIIB)• Educational program, safety program

– De-segregate the school (from 98% to ‘normal’ share of Roma kids)

Main interventions of Phase II

• Hard investments– To improve housing conditions (60% of the

project): 7 condominiums, 16 social housing buildings (2 fully, 10 partially, 2 facades)

– To improve living environment: public spaces

• To strengthen local social services

• To improve the educational service

• To improve the employability of people

• To improve public safety conditions

Results and problems of the integrated approach in Magdolna quarter

1. Management structure of social urban renewal

2. Link between politics and management

3. Public participation

4. The level of improvements

5. National policy framework and financing

1. Management structure of social urban renewal

Mayors offices are too bureaucratic and thematically focused (silos). •RÉV8, as publicly owned company, outside the office, is a good solution to develop long-term integrated solutions •Interdisciplinary company, international learning is very important – RÉV8 has learnt a lot from other countriesNational policy and financial frameworks are needed. •In Hungary also the ministry has learnt a lot and created the policy for Integrated Urban Development Planning. Unfortunately, only with short term EU financing.

Conclusion: integrated urban renewal is a difficult and long-term intervention which needs national policy framework, long term financing and dedicated local management.

2. Link between politics and management

RÉV8 has gradually lost decision-making power over the years

Cooperation between politics and management should be close and consistent

•residents expressed at the beginning that they will not contribute to renewal because the mayor promised them (10 years earlier) that they will get other flats…

•RÉV8 has learnt that it should be very careful to reach agreement with residents – many times both sides promised something but later the municipality did not help the company to be able to fulfil the promises…

Conclusion: politicians should keep strategic decisions but should devolve everyday management

3. Public participation• First phase: 2 mill eur, working with 4 publicly owned buildings, making

the cellar areas clean. 350 th eur per building was announced as upper limit for renovation. The own work of residents was taken into account when determining the new rent level.

• Second phase: 7,4 mill eur, 85% funded by the EU. Renovation of 16 publicly owned buildings, support to 7 condominiums.

The use of EU money is extremely rigid and requires too quick decisions which makes the involvement of people difficult. People only start to believe and being interested when the contract is signed and the money assured. In the contract very detailed plans have to be prepared which can not be discussed any more with the people…

• Third phase: 13 mill eur, out of the 28 programmes only one (public space renewal) will be implemented really with the people together – in all others the municipality found it too risky to accept real involvement of people

Conclusion: the more EU money, the less opportunity for participatory planning (under present rules of Cohesion Policy and national application)

4. The level of improvements

• Second phase: in Dankó 16 all flats got WC and shower. Rent increased 2-3 times and utility payments even more drastically. Tenants did not want to move back.

• The national social safety net has been drastically cut recently, to a fraction of the original level (upper limits introduced, limitation of money for one family…)

• The higher quality of renovation, the less is the chance to keep the original residents

Conclusion: local actions have their limits, for the success of social renewal the national social benefit system has to follow the increase of the housing costs of original residents

5. National policy framework and financing

• In France Politique de la Ville exists since the 1980s, and also a Ministry exists for integrated policies (this is not the case in Hungary at all)

• France recognised that from the million level projects now there is a need to go for billion eur projects to achieve better results

Conclusion: in Magdolna the fate of the area can not be changed with 2+8+13 mill euros. The problems with school, crime, bad houses, employment remain unsolved and the neighbourhood will face serious difficulties after EU money dries out

How integrated was the approach in Magdolna?

• Horizontal cooperation: some cooperation exists between local government departments

• Vertical cooperation: social renewal gets EU funding; no Budapest strategy exists; district strategy continues

• Territorial cooperation: only on district level

Hungary’s innovation: introduce integrated development in poorest urban areas of the country, bringing back public leadership after privatization, organizing interventions in areas neglected by the market, keeping the original residents.

However: only 162 million eur from 24 bn eur total spending (0,6%) – integrated urban renewal is not popular on local level

The socially sensitive urban renewal depends totally on EU resources and is financially not sustainable if in the future EU support terminates

CASE 2: Csepel Ady project in Budapest

- Csepel: one of the 23 districts of Budapest- Ady estate: appr. 5000 inhabitants in 2064 apartments- Ten 10 storey high buildings: 5 of them are cooperatives

and 5 are condominums. (About 94% of the units are owner occupied and 6% are public rental.)

- Social composition: one of the least prestigious estates in Budapest. (However not deeply marginalised.) The schools are also socially segregated on the estate.

- The aim is to stop the further degradation of the estate and in parallel to improve the social position of the inhabitants living in the estate (not crisis management but PREVENTION)

Project content

- Project budget: 4,5 million Eur of which 2,85 million ERDF contribution- Project duration: Okt 2009 - March 2011 - June 2012 - Content:

- Partial renovation of 7 large prefabricated residential buildings (out of the 10 being located in the estate – as 3 rejected to participate), affecting 1549 housing units

- Renewal of the public spaces and public buildings- Upgrading of the commercial buildings- Creation of a new Community Centre- ESF types of measures (vocational trainings and community building activities)

Results of the Ady project

- Energy saving: 6-40%, resulting in 10-100 euro saving/year/flat. (The fixed part of the district heating fee limits the amount of savings.)

- The decrease of real estate prices slightly moderated (but continued as a result of economic recession)

- 45 inhabitants got certificates of vocational training (appr. 46% of them are still employed after 6 months)

- The attandance of the new community centre is well above the expectations

(250-270 people/week in average)

Key findings I.

To what extent is there evidence of ERDF housing investments contributing to integrated sustainable urban regeneration of the target areas, i.e. highly populated deprived neighbourhoods?

- Housing was relevant part of the interventions: appr. 50% of the investments

- Inhabitants evaluated housing interventions as the most important part of the programme

- Without ERDF no major renovation could have happened for decades

Key findings II.

What are the main challenges encountered in the preparation and implementation of these regeneration projects?

– It was a new experience for the whole management system → high burdens of administration → low level of flexibility and innovation

– Public participation existed through the cooperatives and condominiums but its level was relatively low (lack of culture in this field)

– The time frame (1.5 years) even with the unexpected extensions was not appropriate to reach the most marginalised layers of the society

Key findings III.

What lessons could be learned from the current ERDF regulation framework regarding housing interventions and its practical implementation?

– ERDF with housing element provides opportunity for integrated interventions in the most marginalised areas (compared to national programmes lower leverage effect but higher social effect: a trade-off)

– Housing is a decisive element to reach the ‘critical mass’ of investments in order to re-position (but not over-position) the target areas

– In privatized areas the cooperatives and condominiums have to be used as intermediary organizations to include residents

1) The contradiction between the requirement of transparency (resulting in too high administration burdens and too rigid programming structure) and the need for flexibility in such complex programmes has to be addressed

• a mentor system (with mentors provided and empowered by the managing authority to bring quick decisions) could solve some of the problems in the preparation and implementation phase, while also contributing to the controlling of the process

2) Enough time for planning and implementation has to be ensured (especially in the case of ESF type of measures) in order to enable the programme to work intensively with marginalised inhabitants

• the 7 year long EU planning periods allow for such longer-lasting, more participative type of programmes. The national programmes should avoid the division of the 7 year period into rigidly separated shorter planning periods which make integrated programmes with long lasting effects impossible

3) The roles of politicians and managers should be separated• politicians should decide the strategic aims but not influence the

implementation phase. Managers should be open to democratic tools to capitalise all the knowledge of the stakeholders.

Integrated urban renewal: physical and social changes

• The level of physical renewal has to be determined very carefully (the higher this level is, the more will be the population change)

• In very segregated areas some population change is unavoidable, and also the high level social services are needed to continue for long, to ensure the sustainability of the renewal

• Interventions in deteriorated areas have to be done in time, otherwise only demolition remains as solution

• Deprived areas in different parts of the city with different land value have to be approached differently

Drift throughurban spaceand time

t 0 t n t x

Position of communitiesin fragmentedurban space.

Which strategies?

A 1

A 2

A 4

A1 decline

A2 steady state

A3 gentrification

A4 coherencebest practice

Urban value

A t0

A tn

Time

A 3

Space

Marketchange

Public intervention

Urban regeneration in post-socialist cities

Over-privatization of housing and weak public leadership lead to sub-optimal models of urban regeneration. EU funds are the main sources for area-based urban renewal but these are used to growing extent for energy improvement aims, with no or weak social targetingPerspectives for urban renewal in the future:•Building-by-building decisions of private owners•Private developer-lead renewal (gentrification)•EU supported area renewal (increasingly energy-led)What might go lost: area-based integrated renewal.

Summary: integrated development• Integrated development is needed, in the times of financial crisis it is

even more necessary to look for interventions which are not mono-sectoral

• Sustainable social results can only be achieved in combination of horizontal and area-based interventions

• Area-based interventions may only have limited results if the higher level policies (welfare systems) do not work properly

• Area-based interventions have to be carefully designed, the level of physical improvements determine to large extent the social outcomes, the involvement of residents is crucial (CLLD can help)

• Hungary’s innovation: introduce integrated development in poorest urban areas of the country, bringing back public leadership, after privatization, organizing interventions in areas neglected by the market, keeping the original residents.

• However: only 162 million eur from 24 bn eur total spending (0,6%) – integrated urban renewal is not popular on local level