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Housing regimes in post socialist
countries
Brno 13 of November 2015
József Hegedüs
Metropolitan Research
Institute
Outline of the presentation
1. East European Housing Model revisited
Conceptual framework: economic development model,
varieties of capitalism, welfare regime theories, housing
regimes
2. Trends toward convergence and divergence
between 1990-2008
Effects of three trends (market creation, market
correction and path-dependent schemes)
3. The effect of the GFC – will it lead to new
models?
1.
The starting point: the role of the state
and the market in socialist housing
system
• The empirical research on
housing estates published in
1969
• Novelties:
– Connection to the mainstream
sociology
– „Ideology critics” – facts against
the ideology
– Effect on policy: Housing Law
1971
Intelligencia
Middle class, white color workers
Working class, blue colr workers
Pensioners
Cities
11%
15%
56%
19%
100%
Housing
Estates
34%
22%
40%
4%
100%
Source: Szelényi-Konrád: Sociological Problems of the
new housing esates (Az új lakótelepek szociológiai
problémái, Akadémia, Budapest, 1969 p. 35.
There was no theory of socialist
housing system:
- Redistribution of the stock
- No exploitation through
property (private and
personal property)
- But no advice on the
institutional form of the
provision
2
Debates on the role of the „market and
state” in housing systems
• Western sociology – the state intervention
revisited
• Hungarian literature:
– How we define the market and the state?
– Market correction (as it lead as secondary mechanism
to inequalities) -- „socialist welfare model” (ManchinSzelényi, 1984)
– Hegedüs-Tosics – both market and state cause
inequalities (vacancy chain studies)
Housing units built
between 1961 and 1990
Transactions in Budapest 1977-1979
* estimated from years 1986/1987
Metropolitan Research Institute
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A classification of
Housing Systems
based on two
dimensions
Hegedüs-Tosics, 1996
Metropolitan Research Institute
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The options for
transition countries
Metropolitan Research Institute
Hegedüs-Tosics, 1996 7
„This is an attractive idea (and a very f0shionaable one in eastern
Europe today!), but it has to be further elaborated to become
believable. I would like to see how exactly ‚society’ will intervene into
the state or and I need more proof that there is any need for more
intervention – be it by the state or by ‚society’ –into east European
markets, which are so badly overregulated already. Society is an
abstraction, not an actor. Society cannot intervene into anything,it has
to create institutions through which it can act. What are those
institutons, how will they be funded, what is the garantee that they
remain seperated from the state and the party, what will be their
relationship to the state and the party, to classes, strata within society
etc. These are some of the question I would like to see answerred
before I can take seriosly the Hegedüs and Tosics proposition about
social control of the state and the market.” p. 4.
New approach of the housing systems
• Housing models were changing („developing)
„cracks” in the models  force the system to react and change
the institutions
• Housing systems embodies to the wider
social/economic structure; two approaches
– Welfare regime theories (Esping-Andersen, 1990) and
its modifications (transition countries, and southEuropean model) – its critics
– Varieties of Capitalism literature (Hall and Sockie,
2001) – but its relevance on housing is not clear
Sub-models in the EEHM
EXAMPLE: Hegedüs J (1992).: 'Self
help housing in Hungary' in: Beyond
Self-Help Housing Kosta Matey (ed.)
Profil Verlag, pp. 217-231
The approach of the analyses
P o l i t i c a l s y s t e m, d o m i n a n t p o l i t i c a l v a l u e s
Housing regimes
Welfare regimes
Economic Regimes
Economic
develoment
models (position of
the economy in the
global economc
systems)
• Political economic
approach
• Different theories:
Housing outputs:
Tenure structure
Housing shortages
Housing affordability
Social segregation
Substandard housing
Homelessness
– Variety of Capitalism:
Liberal, Coordinated and
Mixed economies
– Welfare regimes: Esping
Andersen (1990) and its
versions
– Housing systems: Kemeny’s
unitary and residual models
(and its variations)
Some research questions related to the
approach
• Overlapping factors in and interaction among the
blocks of „varieties of capitalism”, „welfare regimes”
and „housing regimes”
• Convergence and divergence in the economic systems
in EU – its consequences on explanatory framework
• The importance of the regional markets
(neighborhoods) in the national models
• Typology of regional markets and the adequate social
housing measures
Economic/political regimes and the housing system
1980 - 1990
1990 - 2000
Moving towards an authoritarian market societyTransition to the liberal market system
1982
Housing Law: expanding
subsidies to private sector
1989
Housing Fund
and new housing
loan subsidy scheme
1985
Emergence of Saving
Cooperatives as lenders
1994
Law on Contract
Saving Bank
2000
Mortgage
subsidy program
1997
Law on Morgage Banks
1993
Housing Law: right to
buy (privatization)
2000 - 2008
2008 - 2015
Unbalanced economic growth Toward a patrominal capitalist model
2004
Cut the morgage
subsidies: expansion
of FX morgage
2009
IMF loan:
cut the subsidies
2011
Mortgage Rescue 1:
Prepayment scheme
2012
Mortgage Rescue 2:
National Property
Management Institute
2013
Mortgage Rescue 3:
FX loan rate-cap scheme
2014
Mortgage Rescue 4:
High Court ruling
2015
Mortgage rescue 5:
Conversion if FX loan,
into HUF loans
Mortgage Rescue 6
Personal Bankrupcy Law
Political and economic regimes and housing
market cycles (1980-2015)
Moving towards an
authoritarian market society
Transition to a liberal
market system
Unbalanced growth
Towards a
patromonial
capitalist model
Mortgage crises,1989
Price increase without
mortgage expansion
Process of welfare regime „building”
Fiscal stress
Structural changes
(marketization)
Public policy
Private interest (lobbies)
International Agencies
Social cost of changes
Informal economy
Individual
State welfare policy
adaptation, help
from family
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Housing reforms in transition countries – forming
new welfare and housing regimes
• “market making” (structural) changes
–
–
–
–
–
Privatization of the building industry, banking sector, maintenance companies
Price liberalization (housing related services, rents)
Legal changes (property right, land registration, etc)
Privatization of state owned housing stock
Subsidy programs promoting market transactions
• “market correction” steps
– Benefit programs, housing allowances
– New social housing programs (home for the homeless, social rental programs)
– Rehabilitation programs
• retaining old structures
– Rent control, property rights of the tenants
– Old maintenance companies, state construction
– Price control and „across the board” subsidy system
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No real divergence till 2008
• Tenure structure - privatisation
• Housing finance:
– When did mortgage market started?
– How fast was the development?
– Role of FX loans – was it a housing regime question?
• Housing investments
• Housing management
The most important questions related to the economic
model (GDP growth, income inequality, etc.)
Hegedüs, J. – R. Struyk (2005): Divergences and Convergences in Restructuring Housing Finance in Transition Countries in Housing
Finance: New and Old Models in Central Europe, Russia and Kazakhstan (edited by J. Hegedüs and R.J. Struyk) OSI/LGI, p. 3-41
Hegedüs, J: The Transformation of the Social Housing Sector in Eastern Europe - a Conceptual Framework in Hegedüs-Lux-Teller (ed):
Social Housing in Transition Countries, pp. 1-32 Routledge 2013.
Hegedüs,J: Housing privatization and restitution in post-socialist countries (to be published in Hegedüs-Lux-Teller (ed): Social Housing in
Transition Countries, pp. 33-49 Routledge 2013.)
Hegedüs, J – Teller,N: Social Landlords and Social Housing Management Introduction: Trends in Social Housing Management In HegedüsLux-Teller (ed): Social Housing in Transition Countries, pp. 81-97 Routledge 2013
Main trends: privatization
1990
100%
90%
80%
70%
1
1
100%
2
75
other
owner-occupied
co-operative
19
60
31
3
public rental
0
24
0%
70%
BS-3
2
62
60%
50%
other
91
93
30%
20%
10%
SEE-7
Metropolitan Research Institute
owner-occupied
co-operative
40%
public rental
19
15
1
7
05
CEE-5
BS-3
SEE-7
0%
CEE-5
2
90%
80%
50
30%
20%
10%
0
37
60%
50%
40%
2001
18
Housing construction (new unit/1000 person) in
selected new member states 1990-2009
Different versions of recovery
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Mortgage market development, 20022008
Bulgaria
Croatia
Czech
Estonia
Hungary
Latvia
Lithuania
Poland
Romania
Slovenia
Slovakia
2002
0,7%
6,9%
4,6%
7,9%
4,8%
4,2%
2,3%
3,5%
1,0%
0,8%
4,0%
2004
2,6%
10,3%
7,6%
16,6%
10,4%
11,5%
7,0%
5,5%
1,4%
1,5%
6,1%
2006
7,0%
12,7%
14,5%
32,3%
15,0%
29,1%
28,0%
10,7%
1,8%
5,1%
10,3%
2008
12,2%
15,1%
18,0%
38,6%
23,2%
31,0%
36,4%
12,8%
3,7%
7,2%
17,8%
Source:
European Mortgage Federation (Hypostat),
European Banking Statistics, 2009,
for Hungary Hungarian National Bank
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Housing policy and social inequalities
• Housing policy through the interplay of policy, institutions and households may
enlarge or lessen social inequalities
• The main types and examples (in Hungarian housing policy):
– A. It increases the social differences (regressive transfer of public resources)
•
Housing privatization, “old loans” mortgage subsidies, over taxation of the private rental sector
– B. It lessens the differences, but in combination with the market mechanism it contributes to
the increasing distance between social groups (exclusion)
•
Housing construction grant, subsidy to home purchase, allocation of social rental flats, equity mortgage for low-income
households
– C. It lessen the differences
•
Program of refurbishment of the housing estates, housing allowances, rent allowances
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Housing policy is implemented through the
mediation of different institutions
• Housing regime: structure of interactions among different institutions
(developers, local governments, social landlords, etc.) and households – the
outcomes of these interactions depend on several factors (power of the
interest groups, etc.) – unintended results
• Fragmented governmental structure and low level of regulatory capacity (in
the area of housing) increase the probability that private interest groups
successfully influence housing policy
– Examples: lobby of construction industry, bank lobbies
• Competition among different organizations is an important factor in policy
development, which may lead both to innovative solutions and to distortions
– Examples: Contract saving institutions -- restructure home saving grant into a cash subsidy,
role of the mortgage brokers
• Conclusions: the capacity of the government to balance competing
institutions and a transparent subsidy system
Metropolitan Research Institute
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Elements in the new welfare regimes
• Weak governments – strong private interests
– Capacity of the public sector
– Political democracy – wobbly pillar
– Dominance of private interests
– Limited role of the donor agencies
• Informal economy as a constraint on efficient
welfare programs (targeting failure)
Metropolitan Research Institute
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The effect of the GFC – new/old model:
Hungary
• There is a trend from the liberal market capitalism
toward the regulated (or coordinated) market
capitalism
• Element of an extreme solution (Hungary)
– Centralization and renationalization of the service
companies (utility cost decrease)
– Narrowing the role of the municipalities (bank loans has to
be approved)
– Special bank tax – nationalizing the banking sector?
– Construction companies?
The story of the FX loan boom – the „blame game”
• Government: irresponsible fiscal policy -- deficit
• Government housing policy: subsidy cut in 2004
(unsustainable)
• HNB or Financial Supervision Board: monetary policy –
high interest rate because of government deficit and no
control over FX loan product
• „Greedy” banks: „risk competition”
• Irresponsible households – over consumption
Residential mortgage lending: social
and individual risks – social
consequence of the FX mortgage loan
crisis after 2008 in Hungary
Coordinators:
Adrienne Csizmady – József Hegedüs
Supported by the National Fund for
Social Research (OTKA) grant Nr.
109333 “Families in Mortgage Crisis.''
Housing subsidies 2000-2009
ALLOCATION OF PIT TAX
EXEMPTION IN 2002
120%
100%
80%
60%
40%
20%
0%
0%
20%
40%
Lower 60 %
got 20 % of
the subsidy
Metropolitan Research Institute
60%
80%
100%
120%
Upper 20 %
got 60 % of
the subsidy
26
The two periods:different trends
2000-2004
subsidized
mortgage
2004-2008
FX loan
regime
2009-2014
Mortgage crises
Real net household income change ( per capita)*
34%
-3%
-5%
CSO
GDP increase (average growth per year)
4,2%
2,2%
-1,0%
CSO
New housing construction (N /year)
32 121
36 796
16 666
CSO
Housing permits (N/year)
51 608
46 114
15 227
CSO
Housing transaction (average N/year)
207 143
191 198
89 911
FHB
Real house price change*
24%
-6%
-35%
FHB
Private sector rent change*
10%
0%
-5%
EST
Public sector rent change*
37%
34%
17%
CSO
Average interest rate on mortgage (without subsidy) %
14,6
10,0
9,0
HNB
5-6% (HUF)
4-6% (FX)
11-13 % (HUF)
EST
389,9
1004,0
-132,3
HNB
105
217
146
MED
Average interest rate on mortgage(subsidized, FX) %
Increase of the outstanding loan (billion HUF/year)
Housing subsidy - actual cost (billion HUF/year)
Source
Housing subsidy - commitment (billion HUF/year)
260
375
50
EST
Source: CSO=Central Statistical Office, HNB=Hungarian National Bank, FHB=FHB house price index, MED=
Ministry of Economic Development, EST= expert estimates
*Note: change between the end of the period and the beginning of the period
Source: Hegedüs-Nagy, 215
Some lessons from the mortgage boom
and the risks
• Subsidy programs and the
households’ incentives (not easy
to predict the behavior )
• House price increase and
mortgage: was it a house price
bubble?
• Regressive subsidy programs – its
effects on social inequalities (tax
level, budget deficit)
• LTV ratio was around 60 %, but
increasing
• Real dangers: no social houisng,
no affordable private rental and
social „net
Tenure structure, 1970-2011
“Unorthodox” economic policy – a master
plan or muddling through
• Resources – no austerity
– Reserves – short-term advantages (private pension fund, state
controlled utility fee cut, etc.)
– Foreign companies (banks, energy supply companies, etc.)
– Centralization and re-nationalization
– EU funds
• Redistribution –
– Flat PIT -- middle class support
– Forced public work program replacing the social benefit
programs
• Supporting economic growth
– HNB programs –2013 Funding the Growth Scheme
Change of the real income by income
percentiles between 2009 and 2013
• 2009 and 2013
Grwoth of the GDP (prognozis of
theEU Comission, 2015)
The political context
• Government – two third majority
• Experts – media
• Hungarian National Bank, Hungarian Financial
Supervisory Authority Hungary
• Banks, financial intermediaries
• Legal system – society of lawyers
• Civil movements
Actual Programs
Program
Early Repayment
Start-End
November 2011 –
February
Moratorium and quota
2009-2012, 2014-2015
FX Loan Cap scheme
2012-2015
National Asset Management
Company
Compensation of unfair
banking practice
January 2012 -continuing
November 2014 –
expected end of 2015
Forced Conversion
January 2015
Personal Bankruptcy Law
September 2015
Main characteristics
Cost and number of beneficiaries
The program supported high-income families, banks were not 350-400 billion was paid by the banks, the
consulted, it had a huge regressive effect socially.
government gave tax exemption for banks up to
30% of the cost (less tax revenue), 160 thousand hh
used this option
The moratorium was too long and weakened the position of Contributed to the increase of the share of NPL
the banks, but the quota system got the support of the banks, loans. The quota applied to properties worth below
In May 2014, the new parliament introduced a moratorium 30 million HUF with a rate of 3% in 2012; these
again for an undefined period, until a final solution for the standards gradually rose to 5% by 2014 (that is
defaulted FX mortgage borrowers is agreed upon.
maximum 3% and 5 % of properties with nonperforming loans can be foreclosed).
This program was quite acceptable for the banks, their losses Costs were shared between the borrower, state and
were manageable.
banks, 178 thousand participated, 40 % of the
eligible debtors
Typical orthodox program based on voluntary participation
61 billion, 25 000 households, but to be increased to
35 000
Based on the decision of the Curia, and unilateral Parliament Banks must pay an estimated cost of 900-1000
decree, banks are not consulted
billion HUF, it is expected to decrease the cost of
the creditors by 20-25 %.
The conversion on market exchange rate is favorable for the ?
banks but their loss can be increased because o the
maximized interest rates.
Social effect
Regressive
A debt settlement procedures for private individuals both It is estimated to help for 25 000 hh
outside and within the scope of a court procedure
Progressive,
but too late
Progressive,
but long term
harmful
Neutral
Progressive
Regressive
?
Failure of the social housing construction
program in Ocsa (2011)
Problems:
• Distance from workplaces
• Segregated area
• Very expensive (Infrastructure)
• Difficulties to find tenants
The winning plan: Archidea K+K
Területrendezési és Építészeti Bt.
Results of the early FX repayment program
(September 2011 -Februar 2012)
• 23 % of the FX stock was repaid (at 180 HUF/CHF
when the market price was arounf 245 HUF/CHF)
• Gain/loss was 28 % of the prepaid sum (app.400
bn HUF) – 70 % paid by banks, 30 % paid by
government
• Sources of 881 bn HUF repaid: 23 % new loan, 47
% savings etc. and around 30 % unknown (!?)
• Conflicts between the banks and the government
• Civil bank: Webbank
Metropolitan Research Institute
34
National Asset Managment
Company
Source: Erzsébet Könczöl, Deputy Managing Director
(NAMC):A success story with a strategic dilemma 35
TENLAW Conference Budapest, 2015.09.18
• Bank receives the purchasing
price of the real estate as it
defined in the NET Act
• The bank waives its claims
above the purchasing price
• Previous owner becomes a
tenant
• but all his bank claims will
be deleted.
• Eligibility to the program is
strongly related to social
situation
• The property becomes
state owned
• The NET Company is
managing the tenant
relations and real estate
operations
• Financed from state
budget.
Owner of
the real
estate
Bank
Hungarian
State / NET
Company
Other
creditors
• Housing community, tax
authority, local government,
etc.
• They keep their claims but lose
their registered mortgage right
Issues of Asset Management Agency
• Property managment –inefficient (Maintanance is
contracted out to Hungarian Railway Maintannace
Company)
• 25 % do not pay the rent – services of the
Malthese and Reformist Church
The danger of NPL
Total financial intermediary
system
2014 Q4
Mortgage
loans
Nonmortgage
loans
Total
Main reasons for arrears:
• 10-15% free rider, who could pay but thinks other
expenditures are more important
Non-performing loans
• 5-8% change in the life conditions (health, divorce,
death etc.)
Number of
Volume
Share
• 30% the increase of the mortgage payment is not
contracts
(HUF Bn)
(%)
affordable (they stop paying the affordable part as
(thousands)
well.)
• 50% decrease of income (unemployment, lower
1,456
24%
182
wages, lost of informal income, etc.)
(Source: interviews)
830
36%
1,889
2,286
28%
2,071
Source: HNB, 2015
The nature of the problem
• Two types of household hardship:
– Adaptation problem to the changed market condition
– Systematic income gap to finance housing
consumption
• Orthodox rescue program
– Helping the adaptation (sharing risks) – low subsidy
– Offering alternative housing solutions (lower level of
housing consumption, rental option)
• But, Hungarian policy ……
(why?)
Deepening gap between social classes
% of hh
who can
Equivalen
pay for
per capita
% of
% of
% of hh windfall Househol income
Estimated % of rural
substanda overcrowd with costVáratl d incom (FUF/mont
value of the settlement % of hh Share of
rd home ed units arrears an kiadás Ft/month
h)
Size of hh home
s
with loan the group
Social status
upper
3%
15%
6%
49% 347,467 210,615
2.68 15,991,725
19%
23%
middle - white collar
4%
22%
8%
34% 295,838 175,756
2.75 12,893,165
18%
24%
middle- blue collar
9%
24%
22%
17% 218,461 127,524
2.76 9,553,169
36%
24%
middle - pensioners
6%
5%
6%
27% 192,449 147,636
1.71 10,682,515
28%
6%
lower class
32%
32%
51%
85,307
2.87 7,392,610
44%
17%
Total
11%
20%
19%
24% 233,196 145,095
2.56 10,955,742
30%
18%
Household Survey, 2015
5% 144,311
14%
20%
27%
20%
19%
100%
Conclusion
•
•
•
15
Regressive income distribution –rational: supporting household spending
Postponed (late) policy measures
– Promises without real solution for low-income people -> its effect on the behavior
•
National Property Management Agency (2012)
•
Private bankruptcy (2015)
•
“Ocsa” project (2011)
– No cooperation among the stakeholders (information asymmetry) – blame game
(political/uncertainty)
•
Court cases (from 2010 onward)
•
Extra taxes on banks (no real negotiations)
•
Power games
Consequences
– The future of the housing finance system: lack of trust
– In a stable macroeconomic environment the different players of the mortgage market
share a common narrative of the borrowing, but at the time of the crisis the unified
and agreed narrative is dissolved – “anti-bank attitude” : hate speech
– The importance of the private market increase, but it could have a potential effect on
the private rental market as well
Thank you for your attention
József Hegedüs
managing director
+3630 869 1674
[email protected]