‘ΑHA’ Affordable Housing for All, Budapest; A Bold Initiative to Combat Housing and Energy Crises

The energy crisis has further compounded Budapest’s housing woes. Rising energy costs have made it harder for residents to afford basic utilities, plunging many into energy poverty. This phenomenon occurs when households are unable to maintain adequate heating, cooling, lighting, and other energy services at a reasonable cost. As energy prices continue to soar, more and more Budapest residents are forced to choose between paying for their energy bills and other essential needs, exacerbating their overall financial stress and housing insecurity.

Recognizing the urgent need to address these intertwined issues, the Municipality of Budapest has launched the Affordable Housing for All (AHA Budapest) project. This initiative, supported by the European Urban Initiative (EUI), aims to revitalize the city’s rental housing market and provide sustainable solutions to the housing and energy crises.

Through an integrated approach the project aims to create a multidisciplinary housing agency with the Municipality that would address housing needs holistically through a multisectoral approach. The housing agency aims to address housing needs comprehensively via a multisectoral approach. It will concentrate on developing innovative solutions to support individuals who are in need of or at risk of housing exclusion. The agency services will span from mobilizing unused public property and converting them to affordable housing options to eviction prevention mechanisms.

Can you describe to us the housing needs and challenges Budapest faces?

Housing is undeniably critical to people's lives, livelihoods, quality of life, autonomy, and security. The impact of housing extends beyond mere shelter; it significantly influences residents' mental health and access to essential services while affecting disposable income. Consequently, equitable access to housing remains a pivotal aspect of human welfare.

If you examine the increase in house prices since 2018 across cities like Warsaw, Prague, Zagreb, Ljubljana, and Vienna, Budapest stands out at the top. Notably worldwide among 150 major cities during this period, Budapest experienced one year with the highest rise in house prices followed by a year with the second highest increase. Meanwhile rents have also surged significantly in Budapest’s private rental sector.

Consequently because both rent and house price increases outpaced wage growth or general income rises this led to the general deterioration of housing affordability. Thus on one hand housing has become unaffordable for an increasingly wide section of society – a problem that extends well beyond low-income groups. On the other hand, there remains an urgency around addressing the needs of those who suffer from, or are threatened by, the most severe housing deprivation: homelessness. 

I have been personally invested in this issue as I have worked together with homeless people in a grassroots community organization before becoming a public servant, and I am still involved in field-work with families threatened with evictions and in outreach with rough sleepers during winter months.

What is the Municipality agenda towards housing exclusion and housing affordability?

In his seminal book on social policy from the interwar period, Rezső Hilscher argued that the starting point of every social policy is housing: where people live. This insight has since been lost, unfortunately. Since 1990, housing policy in Hungary has systematically and consistently neglected the public or social housing sector as well as the affordability and security of the private rental sector.

The municipality, in contrast, has consistently prioritized housing within its strategic documents, focusing on the strengthening of the affordable rental sector. Concerning homelessness, the Municipality’s new strategy starts from the principle that homelessness is, first and foremost, a housing affordability issue, and therefore – instead of focusing almost exclusively on the provision of emergency relief via food banks or shelters – much more attention and resources should be dedicated to prevention as well as to the provision of affordable housing for those who are homeless.

Since the central government’s housing policy is still restricted to the provision of support for homeownership through programs that systematically favor the more well-off segments of society, and most of the relevant legislative powers and resources reside either at the parliament or at the district-level local authorities, the Municipality of Budapest is swimming against the current. The impact of COVID-19 exacerbated challenges by demanding extensive crisis management efforts from local authorities while also affecting budgets due to economic downturns. Additionally, welfare cuts imposed by the central government have further strained local resources. We do believe however that it is worthwhile to attempt to make good use of whatever margin of freedom the Municipality still has.

Despite increased awareness achieved through activism and the interventions of the policy community—particularly highlighting problems within policies—the actual implementation on ground remains insufficient. This is partly due to political reasons; for example, politicians find it easier to discuss the housing affordability crisis than to enact measures like limiting touristic short-term rentals that might upset wealthier constituents who benefit from such properties.

What are the emerging profiles in need of housing?

The discourse on the high ownership rate and its policy consequences often highlights wealth inequalities, inter-generational inequities, and labour mobility. However, a crucial but understated aspect relates to the long-term disregard for, and neglect of the private rental sector's affordability issues and informality. These concerns remain overlooked since they impact a relatively small section of society.

Renters typically fall into two categories: higher-income young adults who rent temporarily for mobility reasons and lower income households unable to own property. The latter group faces extreme insecurity yet remains politically marginalized as they often cannot even vote in local elections because of not having a permanent address where they actually reside.

Furthermore, decreasing housing affordability affects broader segments of society beyond just the poor. For instance, there are several large labor-market segments where even the average wages are below average rents combined with basic subsistence costs; thus many workers struggle financially despite not being considered impoverished by traditional standards.

Consequently; there is an increasing number of people struggling with housing costs despite not being classified as low-income or poor—a growing issue that requires attention both in terms of distributive policies and market regulation.

What do aim to achieve with the AHA project and what do you think are the challenges?

Despite Hungary's historical strengths in housing policy a century ago, current efforts lag behind many other European cities, even in the region. Consequently, finding common ground between pressing local needs and what is perceived as “innovation” at the EU level remains difficult yet essential in securing much-needed funding for the revitalization of municipal housing policy.

While there is an essentially endless demand for affordable housing, actual policies aiming at the extension of the affordable housing sector are extremely scarce. The long-term solution, the development of new public/social housing units requires a lot of upfront investments, and it is also perceived to be a risky enterprise  because the track record of state and central governments reveals frequent delays and significant cost overruns in real estate development projects.

However, this specific investment holds a privileged status among city leaders as a pilot project demonstrating not only the city's policy goals but also the feasibility of such projects even before the more substantial EU structural funds (currently frozen because of rule of law concerns) are finally received. Everyone involved is committed to ensuring timely completion and accuracy. The primary challenge identified pertains to financial sustainability, with concerns about potential budget overruns being prominent.

While acknowledging these concerns may seem banal given their commonality in public procurement projects—which often experience lengthy processes and inflated costs—the apprehensions remain relevant for the successful execution of such initiatives. Despite these challenges, there is reason for optimism regarding the municipality's efforts in housing.

But the project itself is much more multifaceted, and the development of new affordable rental units through the reconversion of an unused non-residential public property is just one of its elements. Key objectives include early detection and timely response to housing problems, alongside the provision of more efficient support than previously available services. Many necessary regulations have already been incorporated into local ordinances to facilitate these changes. Here the key challenge is the extent to which the Municipality will be able to extend the early warning system and associated services beyond its own tenants – which will require the cooperation of other stakeholders, including district municipalities and public utilities. These efforts also feed into one of the Municipality’s strategic goals: of strengthening the prevention of homelessness.

While the results of the recent municipal elections ensured the continuity of the Municipality’s commitment to take a more proactive role in addressing the issue of housing affordability, the overall budgetary constraints are tightening, therefore it is all the more important that the Municipality can rely on the dedicated funding of the EUI to make long overdue advances in the field of housing policy.