Lessons learnt from renovations of multi-family buildings in Hungary

Written by Éva Gerőházi and Hanna Szemző, Metropolitan Research Institute, Budapest

Upon the request of Habitat for Humanity International, Metropolitan Research Institute (MRI) has completed an in-depth research of energy efficiency renovation subsidy schemes in Central European countries (Hungary, Poland, Romania, and Slovakia) and assessed the potential of Bosnia & Herzegovina and Armenia for introduction of similar programs. The study was done within the framework of USAID project Residential Energy Efficiency for Low Income Households (REELIH) in order to strengthen the research potential of the project. This article is a summary of the case study of Hungary.

One of the Central European counties whose experience was analysed in the framework of the REELIH project was Hungary. The national subsidy scheme to support the energy efficient renovation of multi-family buildings was introduced in 2001.

By that time some important preconditions were already present:

In 2001 a whole package of subsidies regarding housing interventions was introduced, among them a subsidy for the energy efficient renovation of multi-family buildings. Condominiums and cooperatives were eligible to obtain 1/3 of their renovation costs from the state in case the local municipality provided another 1/3 and their application was supported both on the local and national levels. Condominiums or cooperatives came up with their own 1/3 of the intervention costs mostly by taking subsidized commercial loans that in most cases incorporated an interest rate subsidy scheme to support the renovation of multi-unit buildings and a Bausparkasse scheme to further decrease the financial burden. With the combination of the interest rate subsidy and the Bausparkasse scheme a nearly interest free loan was provided by the banks directly to the condominiums and cooperatives in a form of joint loan with the main collateral of the regular income stream of the building. This form of joint loans was developed by the mid-2000s and boosted the renovation market.

From 2001 to 2009 the subsidy was announced nearly every year and the scheme underwent slight changes (e.g. increasing technical requirements, the termination of the compulsory participation of the local municipalities, the increasing eligible subsidy amount/flat, requiring more complex interventions, etc). After 2009 six years passed till the next call appeared in spring 2015, and there has been no calls ever since. In the call of 2015 the subsidy rate was maximized at 50% by the state (some local municipalities still provided co-financing in addition), however the rate depended on the energy efficiency rate achieved (the higher the predicted energy saving is the higher the subsidy rate was). Despite very high subsidy rates, evidence shows that a large part of the refurbished buildings have higher operation costs after the intervention as a result of the installments of loans that are not compensated by the energy saving.

There is no exact data on the share of the multi-family housing stock affected by the subsidy, since many buildings were able to take part in the scheme two or three times. However, according to a rough estimate, about 1/3 of the multi-unit stock may have undergone some refurbishment by means of the subsidy.

Looking from the condominium’s point of view, it seems that successful applications really required administrative and (sometimes) financial support of the local municipality, commitment of housing managers, and a home owners community that is able to make decisions.

Besides the visible results of the Hungarian scheme it is important to mention some of its drawbacks, like low control of quality or subsidy dependency, meaning that people preferred to wait for subsidies to come and rarely conducted any interventions without them. Besides that, increased prices and distortions on the supply side limited the number of potential contractors, as their selection was often politically motivated.

Currently, one of the biggest issues in connection with the subsidy scheme regards its continuation. The Hungarian state decided not to provide non-repayable subsidy to private home-owners any more but prefers interest free loans instead which the society and the experts seem to debate strongly.

You can read the full study here

eva-mri Éva Gerőházi (MSc in Economics) has twenty years of experience in research and consultancy in the field of regional and local economic development, housing policy and urban renewal. She has worked in several projects of the European Commission and has been assisting the Budapest Municipality and several Hungarian ministries and local governments in policy and program development. She researched and developed a programme for marginalised neighbourhoods and the use of European funds in these urban areas. She worked as a project manager of USAID financed condominium rehabilitation program in 1997-1999. She is also a co- founder of the Hungarian national subsidy scheme for complex renovation of multi-family buildings.
hanna-mri Dr Hanna Szemző has been working for MRI for 15 years. She has experience in research and consultancy in the fields of energy efficiency policy, urban renewal, city governance and real estate analysis and welfare policy. She has participated in numerous framework programs of the European Union, prepared strategic development concepts for local governments, and participated in the preparation of a study on the demographic future of European cities. Hanna worked on the health impact study of the energy efficient renewal program of the Hungarian housing estates. Lately, she has been working on the possible impact of collective self-organised housing on the European housing market. She has also focused on the possibilities of small business development in the areas of self-build and housing renewal and has been providing consultancy for Habitat for Humanity Europe, Middle East and Africa on the issue of energy efficiency in the framework of the REELIH project.

Cookies settings

We use cookies on our website. Some are necessary for the website to function properly, while others help us improve this website and your user experience. We need your consent to use them.

Customize cookies preferences