Budapest has been dealing with a housing crisis in recent years. As real estate prices rise, it has become nearly impossible to buy or rent in the capital. Those with Budapest residency struggle to find affordable housing.
The Affordable Housing Crisis
Nearly anyone with a Hungarian passport knows that Budapest has an unpredictable, expensive housing market. The city has developed a reputation for this.
This crisis is worsened by landlords not always obeying the law. For example, if a renter is late with a payment, the property manager might disconnect the utilities instead of working towards eviction.
Discrimination Is Also a Problem
Bálint Misetics, the chief housing and social policy advisor for the mayor of Budapest, says many members of the population simply cannot find housing. There is strong discrimination against Roma people, families with younger children, and minorities in general. This discrimination comes from individuals as well as rental and investment companies.
The Results of the Crisis
This unaffordable housing crisis has led people to move out of the city. Many now live in the outskirts of Budapest yet commute to its center for work or visit it for services.
That shift has led to not only a housing crisis but also an increase in traffic within the city.
The New Program
Budapest’s mayor, Gergely Karácsony, has made a commitment to improve the housing crisis. One of his first steps is to create a housing agency that supports building non-profit housing. This agency would also renovate and act as rental directors for the municipality’s properties. Additionally, it would help property owners with their foundation assets by finding ways to use their vacant homes.
Ideally, creating a housing agency—instead of relying on an international entity or company with a private equity fund—would provide more trust in the processes.
The agency model already accounts for tax planning and other elements of management. The property owners would use an agency to rent their apartment for about 20 to 25 percent under the market price. That agency would handle choosing tenants and collecting payments.
The idea is that the agency will handle all risks, leaving owners to only worry about personal or corporate taxes but not the details. This also leaves the agency free to consider social factors as they choose tenants.
This is simply a variation of the classic model where landlords use rental agencies. Instead of paying the rental agency a fee, which is a portion of the rent in exchange for handling tenants, landlords in this program simply charge less rent.
This program would benefit all parties involved. After all, property owners would be able to collect rent on currently empty properties. Even if it is less than the market rate, it provides them with greater rental income than they are currently getting.
Karácsony previously announced this plan for social housing management, and it is now well underway. The Utcáról Lakásba Association (“From Street to Home”) and the Városkutatás Kft are already working to create the organization. The agency could potentially be ready this year.
The team acknowledges that the ultimate goal of building new housing would have high fiduciary requirements. As such, they are beginning by talking to private owners and shareholders as well as local authorities first.
This does not limit the program’s options at all, given the high number of empty houses and apartments in Budapest. To help ease the taxes and other financial burdens, the agency will pay for the renovations as a way to thank property owners for participating.
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