Building Social Housing Can Create a Real Alternative

The real question is whether it will be possible to create a sustainable rental housing sector with rental housing construction.

Building apartments is a one-time investment, while creating a rental housing system is a decades-long housing policy task, according to a new research study by the GKI Economic Research Institute.

In Hungary, the proportion of people living in their own homes is extremely high by European standards, while the social rental housing sector has shrunk to a fraction in decades. The upcoming Wekerle Sándor Housing Construction Program could bring about an important change in domestic housing policy: in addition to encouraging home ownership, a form of housing could be supported that could be a real alternative to home ownership. However, some international experiences warn that a functioning and long-term sustainable rental housing system must be created.

In Hungary, for decades, people have primarily thought of housing as the acquisition of own property. There are historical reasons for this, but the approach was also strengthened by state housing policy. Since the change of regime, the housing support systems of successive governments have primarily focused on the acquisition of property, while the municipal rental housing stock has fallen to a fraction of the level at the time of the regime change. Housing privatization undoubtedly brought significant social and economic benefits at the time: many families acquired their own property on extremely favorable terms, and local governments were freed from the significant burden of maintaining housing. However, the process also has a downside: the institutional rental housing sector, which could offer an affordable alternative to owning one’s own home, has practically disappeared.

According to Eurostat data, 90% of homes in Hungary are owned by their owners. The situation is similar in most countries that have undergone a system change: the proportion of owners is also high in most of the surrounding countries and the Baltic states. However, a completely different picture emerges in Western Europe. In Austria, for example, only a good half of the population lives in their own homes, while in Germany, renters are the majority. Housing habits are largely determined by the alternatives available. If a country has a sufficient amount of predictable and affordable rental housing, renting does not necessarily mean vulnerability or a temporary state. Rental housing can be just as stable as owner-occupied property.

In Austria, rental housing is a natural part of the housing system, and a significant social and non-profit rental housing sector has developed. 45% of apartments are rented out. The proportion of social rental housing within the total housing stock is around 15%, i.e. orders of magnitude higher than in Hungary. One important lesson from the system is that rental housing construction is not simply a construction industry issue. It is not enough to build apartments – these must also be owned, operated and maintained. Tenants must also be provided with predictable tenancy rights and affordable housing – a long-term institutional construction.

As for the situation in the V4 countries, the one in Slovakia is close to that of Hungary. Only 6% of apartments are rented, and the proportion of social rented apartments is 2%. There is also a significant housing shortage in Poland, while the supply of subsidized and social housing cannot fully meet needs. However, housing in Poland is somewhat more diversified than in Hungary: here 14% of apartments are rented, and the proportion of the social sector is almost 7%. In the Czech Republic, about a quarter of the population rents apartments, and the proportion of social rented apartments does not reach 4%.

Acquiring one’s own home is a long-term financial decision. Rental housing, on the other hand, can provide mobility, which is otherwise quite low in Hungary, the GKI study says. This can be especially important in an economy where jobs and homes are not always located where people live.

The upcoming Wekerle Sándor Housing Construction Program may represent an important change in this respect. After a long time, the expansion of housing supply, and within it the construction of rental housing, may once again play an important role in domestic housing policy. Based on international experience, this is fundamentally a positive direction. One of the problems of the Hungarian housing market is precisely that there are few real alternatives to homeownership. Expanding the supply can reduce housing tensions, increase housing mobility and offer a solution for social groups that are excluded from home purchase subsidies.

At the same time, international examples also warn that the success of the rental housing construction program should not be judged on the basis of the sheer number of completed apartments. It will be at least as important to whom these apartments will be delivered to, at what rent, who the owner and operator will be, and how the long-term financing of the system can be ensured. Hungary does not necessarily have to copy an Austrian or German housing system, the GKI study points out. The goal may be to finally have real alternatives available besides one’s own home.