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Presentation given by József Hegedüs, Vera Horváth, Eszter Somogyi, Hungary, at the 2013 FEANTSA Research Conference, Alice Salomon Hochschule Berlin, 20th September 2013
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EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
Social Rental Agencies in
Hungary – Overcoming Legal
and Financial Constraints
J. Hegedüs, V. Horváth and E. Somogyi
METROPOLITAN RESEARCH INSTITUTE
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
The presentation is based on
two ongoing projects
1. TENLAW (Tenancy Law and Housing
Policy in Multi-level Europe) project under
EU FP7
2. MRI joint project with Habitat for
Humanity Hungary supported by the
Open Society Foundation
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
Outline of the presentation Economic, social and demographic trends after transition
Toward a new housing regime – failures of the
municipality based social housing system
Housing affordability – key element of the housing
problems
Innovative solutions – their limits and constrains
Social Housing Agencies – a new possibility
International experiences
Market/state failures regulating private rental market
Hungarian model proposed by MRI/HFHI
Macro economic/social factors influencing the
housing market
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
Macro economic/social factors
influencing the housing market Economic growth
Priority of economic policy: growth (and
structural adjustment)
Stages of the growth: 1990-1996, 1997-2002,
2003-2008, and the crisis
Low employment rate, informal economy,
income inequality and insecurity
Demography (low fertility, migration, etc.)
4
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
Toward a new housing regime? Post-socialist welfare
Critical elements of the social housing
problems
Housing conditions
Lack of social housing stock
Affordability
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
Housing policy and its social
elements
Social housing is a „shared” responsibility
between the national and local government
– but no (financial and political) incentives to
build up an efficient social housing system
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
Lack of social housing policy Early attempts - failures
Social construction subsidy (1994-1998)
Investment in public rental sector (2000-2004)
Rent subsidy and tax advantages (after 2004)
Why?
Lack of political commitment to social housing,
and the ideology of the private ownership
Local level: mixture of mission and
rational/financial oriented behaviour –
privatization as prefered option
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
Diverse startegies of municipalities
Attitude towards privatization
Allocation of vacant units
Contract type (one year, etc.)
Social accommodation for non-paying
tenants
Eviction practice and arrears
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
Housing affordability Housing affordability related to macroeconomic
trends: incomes, income distribution and
housing cost (rent, house-price and utility)
Conflicts between households, utility companies
and municipal/government institutions (with a
possible role of NGOs) – different strategies
Facts:
Public utility arrears
Rent arrears in municipal housing sector
Mortgage arrears
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
Innovative, but fragmented solutions at
local level - examples
Public sector
Social „accommodation”
in Szombathely
„Lélek-program” in district
8
Mortgage rescue
program: National Asset
Management Agency
Ocsa social housing
construction program
Private rental and NGO
Trambulin house
Veszprém „Hell’s Tower”
– Maltese Charity Service
Rent subsidy programs
for private rentals
Mortgage rescue
programs – private rental
sector
Social real estate
brokerage
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
Constraining factors on expansion of
good practices Difficult to standardize related procedures –
complex individual cases, marginalised target
group
No monitoring over the financial performance of
the programmes (not the interest of the
participating institutions)
Limited financial resources
Political concerns: increasing the threshold
increases the eligible population
disproportionately
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
Opportunity to use private
rental sector for social housing Tenure structure
large privately owned
housing sector
No reliable data on private
rental
Tenure structure, 2011
12
Unhabited homes
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
Private rental sector – after transition Notes on PRS in socialist housing systems
PRS in post-socialist systems:
Financial aspect: user cost approach Long term relative advantage: owner occupation means higher „profit”: No imputed rent; No tax/financial incentives to potential landlords; Tax exemptions and support to home ownership.
Legal aspect: under-regulation Rental regulations: only provides general framework; details of contract are freely negotiable.
Current system avoids risks of overregulation, but does not address typical sources of landlord-tenant conflicts.
Court and law enforcement system expensive and slow
Outcome: PRS becomes a residual sector
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
What can we learn from the SRA
models used in different countries?
Sufficient incentives for
the demand and supply sides
and for the intermediary institutions
Different target groups
Central or local programme management
Legal framework: stable and predictable
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
Unmanaged risks related to
PRS in Hungary
Risks of the landlord
Rent arrears
Cost of the evictions
Utility cost non-payment
Damages to the property
Risks of the tenants
Rent
stability/predictability
Legal residence
Long term lease
Consequences: informal „risk management” and
under-utilization of the privately owned housing stock
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
Opportunity - advocacy Economic crisis – mass problem of FX
loans
National Asset Managament Agency: special
state owned rental sector (largest program in
the last 23 years)
Social housing construction - pilot
Strategy: creating a new public tenure
form („charter” city approach)
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
Proposal for introducing SRAs in
Hungary: organizational structures
Program managmenet
Type of SRA Centralized Decentralized
SRA as an intermediary
agency
A B
SRA as a managment
agency
C D
17
Issue: risk sharing schemes between
• SRA and Landlord
• Central Government – (Municipalities)- SRAs
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
Organizational structurte of new
public sector – pilot project
Metropolitan Research Institute 18
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
Elements of the design:
Pricing the risks
Market rent = return on „investment” + cost of
risks and management
Subsidies
Housing allowance
Tax allowance
SRA management support (e.g. risk fund)
Institutional/organizational elements
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
Summary of pricing the risks
Metropolitan Research Institute 20
Risk types Estimated probability Rent level (HUF/month/m2)
400 600 800
rent payment risk 20% 80 120 160
vacancy risk 8% 32 48 64
utility non-payment 10% 40 60 80
quality risk constant 120 120 120
Total risk HUF/month/m2 272 348 424
Gross rent HUF/month/m2 672 948 1 224
1-(gross rent/net rent) % 68% 58% 53%
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
Housing allowance proposal
Metropolitan Research Institute 21
Submarkets Rent allowance in different allegible income groups Rent
level A lowest B middle C highets
I. 50% 30% 5% 400
II. 50% 30% 10% 600
III. 70% 40% 20% 800
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
Organizational elements Planning – expected cost/size of the
program
Registration of SRAs
Registration of landlords/contract
Allocation of units
Rent setting
Housing assesment
Conflict resolution
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
Estimates for program cost for
10 000 units Subsidies
1000 EUR
/year Note
1000 EUR
/year Note
1. PIT allowance 2 560 Everybody eligible 2 560 Everybody eligible
2. Supplementary income benefit 624 15% of the clients use it 624 15% of the clients use it
Tax expenditure 3 184 3 184
3. Rent allowance 7 200 18 000 HUF/unit/month 4 800 12 000 HUF/unit/month
4. Risk fund contribution 5 088 20% of the rent 1 872 5% of the rent
5. Programme management 800 5000 HUF/family/month 800 2000 HUF/family/month
Budget expenditure 13 088 7 472
Total cost 16 272 10 656
Year 1 Year 10
EUROPEAN RESEARCH CONFERENCE
Housing First. What’s Second?
Berlin, 20th September 2013
What is the strategy?
Incentives
Landlords
Tenants
SRAs: institutional interest of exisiting
organizations
Cost of the program
Politics of housing