Are you also affected by the housing crisis? What are the possible solutions?

It is little talked about, but the housing crisis is a real problem. It’s not just a problem in Hungary, but also a global problem due to overpopulation. From around 3 billion people in 1920 to more than 8 billion in 2024, the number could rise to 12 billion by 2050!
Meeting the quantitative housing needs would be a simple solution, although building billions of new homes in such a short time, providing the materials and financing to build them would require a great deal of preparation.
The quantitative solution could be achieved by building huge high-rise blocks, but there are countless other considerations. The changing size of families, mobility, employment and care are important aspects of development, so that young married couples, when they are still childless, can spend on a house or flat that will comfortably accommodate them and their expected children. A further problem is if a better job offer or a better quality of life makes it more ideal to move!
There are many other considerations, food, shopping, jobs, school, entertainment, all of which need to be taken into account or created. There is also the dilemma that some people believe in property, everyone should build, have their home built or buy their home, owning property can provide stability, security of tenure. In our country, this is a typical demand, a vision among young people to own their own home. The reality, however, is that it is not possible to create a suitable home before children are born, the main obstacle being the inability to finance it. In most cases, the subsidies and loans needed to buy a home are almost insurmountable, but in any case a burden that causes stress. Since it is not a working capital loan that would generate money, but money that will have to be spent continuously after the building is completed, there will be even more expenditure, while at current prices even making a living is a major headache!
There is of course no single solution! The alternative is a rented apartment, because with a few months’ rent, you can move into a new apartment. Since this market is not regulated, buildings are not built according to plan and need. The investor, the property developer, is primarily concerned with maximising profit. Therefore, the technology chosen, the building products, the environment, including climate protection, are usually minimal, but often just meet the requirements! The apartments are not operated, not rented out, but offered for sale. Buyers are small investors who purchase 1-3 or more apartments specifically for rental purposes. Those who rent here receive no subsidies, prices are determined by market conditions and may even be higher than in Austria or other neighbouring countries. Therefore, in order to keep a roof over their heads, the people who live here spend more than half of their income on renting and running their homes, while living in a drawer-like, environmentally damaging concrete block. The solution is to create a rental housing law, which has been shelved for 30 years, which would impose obligations on the investor, the operator and the tenant! It is not the purpose of this article to describe the options for regulating the construction, operation, use and financing of modern rental housing, but we aim to do so in a separate article later!
We would like to elaborate on a proposed solution that is already spreading rapidly in Europe and is taking root in Hungary, and is very close to sprouting. This is the form of communal housing, originally known as cohousing! True, it does not solve the housing problems of the masses, of tenants forced into tower blocks, but it can provide living space for a significant number of people in a quality, community-based way, increasing the capacity for social coexistence and tolerance.

“A form of housing where tenants develop their housing conditions and living environment through community collaboration, based on common goals and interests. Residents voluntarily and consciously engage in community with each other, sharing spaces, facilities, tasks and activities to the extent they determine.”

One, and perhaps the most ambitious in terms of implementation, is the Bee-Home housing programme.
There are different ways of living together in a community. Even in ordinary apartment buildings, there are common spaces such as stairwells, common storage rooms, corridors, lifts and courtyards. In communal living communities, there are many more common spaces. It is not limited to the bare minimum, but the aim is to create common spaces that can be used to the maximum!
More common spaces than the minimum necessary – for example, shared living rooms, community rooms, playrooms, saunas, even kitchens, spaces of the size and function that the community defines and accepts. Here, the residents do not have apartments with all the functions, only their own areas, but they all share them, so they are called housing communities. Such a community condominium is almost impossible to build from existing ones, and can only be used for new developments. Let us not forget that communal spaces do not just happen, they also need to be financed! As they will be used by several owners, the actual cost per resident will be a fraction of the actual cost. If there is a suitable unoccupied or largely unoccupied property, there is a good chance that it could be developed into a community home.

More exciting and purpose-driven is the creation of community housing parks under the Bee Home programme.

We consider brownfield sites and land that has been taken out of cultivation or never used for cultivation to be highly suitable for the creation of such community housing. Land prices for building land usually skyrocket. The development of land, utilities and roads require substantial funds, most of which could be used for community housing.
The idea behind the development of community housing estates is to enable newlyweds, elderly couples and single people to find a cheaper housing solution than the market price.
The design of a community housing estate must, of course, also take into account the characteristics of the area, the number of people expected to live there and the occupancy rate. Several areas can be developed on the same land plot. For example: where the starter homes are located, one-room modular units or tiny houses will form the living space, and e.g. in the middle, other functions and community rooms will be developed. The infrastructure design, the usable square meters per capita, is much cheaper!
It was already common in the past for municipalities wishing to increase the population to sell plots for 0 or 1 EUR.
In cohousing, or communal housing, the majority of the buildings are in clusters, so that 10-15 or more dwellings require a road and a backbone for utilities. One apartment has the minimum but necessary bedroom and bathroom (depending on the community, this may also be shared), while the other necessary rooms are shared. Their use and operation may be governed by the rules and regulations established by the community.
Several clusters or blocks may be established on the site, each consisting of housing units of different size and amenities, and where appropriate, quality. Thus, where children are born or the financial situation improves, the couple can move into a larger unit. As we are thinking primarily in terms of modular units, the modules can be further extended and expanded with additional units.
Depending on the site conditions and the community’s agreement, playgrounds, entertainment units, swimming pools, or just a pool, shop, or even a kitchen garden can be installed.
The financing of community housing can be a complex solution, where the municipality supports the people who move there by renting or transferring the property. Of course, it could also act as an investor, so the rent would be paid to the municipality. The construction of housing could be based on several examples from abroad, even involving non-profit organisations. State support could be used to encourage and help the investor rather than the CSOK, but it could also support the socially deprived, those with children, by covering part of the monthly rent and utility bills. In this way, the municipality or the investor can receive the rent or part of it from the state, thus ensuring proper functioning. The State can also provide the investor with funds, either through the use of the PAYE tax or part of the TAO tax donation. Based on our calculations, this method can result in lower overall annual expenditure than CSOK financing.
Of course, the expenditure on the community park or rental housing built by the investor should be regulated. Based on examples from abroad, it is possible to define the maximum fee, how much of the income should be set aside for operation and renovation, the obligations of the tenant, the procedures in case of non-payment, but also the control of the way of use or even the cleaning services.
Prospective tenants must take part in a compulsory pre-savings stage, after which they are assessed for their suitability for community housing. Work done for the community can be deducted from the rent, or part of it can be used to cover community expenses.
We have not yet mentioned the construction of the apartments. Only building products that have a National Technical Assessment and Performance Durability Certificate, or their EU equivalents, ETA and CE, can be used to build anything in such a housing complex. Finished buildings must achieve at least a near zero energy level, CO2 emissions must be A++, but CO2 sequestration must also be specified. A life cycle analysis should be carried out for the dwellings. In terms of materials, they should provide a healthy, anti-allergenic medium, which can be achieved by using different types of wood (KVH, BSH, LLV, CLT, etc.), external plaster, internal wood fibre or hemp insulation, or rendering in earthen plasters. The support may also depend on the carbon footprint, CO2 emissions, etc.
A solution of sorts to the housing crisis is not only addressed by the Bee Home team, but also e.g. in a related article on economx.hu, which lists international good examples:

  • Land use and construction

Building plots are generally allocated in areas which are underused but well located in terms of infrastructure. They are made available through a fast-track approval process to allow for the construction of homes that are economical in scale and energy efficient.
In France, for example, the ownership of the land is separated from the structure, so that rental housing can operate on more favourable terms, as the costs of buying the land are not passed on to the tenants. Non-profit organisations own and exploit the land on which developers can build affordable market rental housing. This allows the developer to set lower rents for the same profit content.
In Ireland, Luxembourg and Switzerland, the state transfers or leases its land for affordable housing at below market prices.
In Germany, state subsidies can be claimed for energy-efficient buildings, while Sweden uses its central budget to help local authorities running several market rental schemes at the same time.

  • Funding

Financing for market rental housing schemes is supported by state subsidies, state guarantees, preferential bank loans or bond issues, but institutional investors are also present in the sector.
In Denmark, for example, ten per cent of the cost of building for this purpose is financed by interest-free public loans, 88 per cent by a state-guaranteed bank loan and the remaining two per cent by deposits from prospective tenants. In addition, the State will purchase guaranteed corporate bonds issued for affordable housing.
In the Netherlands, in addition to soft loans backed by a state guarantee, projects are financed by bond issues and pension fund investments, while in Italy affordable housing assets are also included in the portfolio of investment funds.
And in Austria, a certain proportion of personal income tax (0.5 per cent for employees and 0.5 per cent for employers) is spent on housing subsidies.

  • Incentives for developers, investors and landlords

In addition to direct government regulation, tax incentives (VAT reductions, TAO deductibility) help property developers in most countries.
In France, tax incentives are available to landlords who set affordable rents. Reduced VAT is payable on properties where at least 25 percent of the dwellings are affordable rented housing.
In Luxembourg, the state levies a tax on unused, undeveloped land to encourage its use.
Denmark requires that at least 25 percent of newly built residential housing should be in the affordable category.

  • Who can rent affordable housing?

The practice on this issue is quite varied. Nationality, immigration status, social status or even income are all factors that determine who can move into low-rent housing.
In Vienna, you are entitled after five years of residence in Vienna, but only if your earnings do not exceed a certain income limit. However, the limit is so high that around seventy percent of the population can afford affordable housing.
In Italy, eligibility is determined on an individual basis, while in the Netherlands, the criteria are also an annual income below the income eligibility threshold and not paying more than a certain rent threshold, so higher category (more spacious) housing is excluded.

  • Rental conditions

Affordable rented housing is usually rented on long-term, regulated, below-market-rate contracts, and there is limited scope for rent increases, often only at the rate of annual inflation.
Many countries centrally regulate the duration of rental contracts or temporarily freeze rent increases.
In Vienna, for example, you have to sign a lease for at least 3 years, in Belgium you can sign a lease for 3, 6 or 9 years, and the rent is fixed, not subject to inflation. Spain has a 5-year lease, with frozen rents, and in Germany cities can decide to freeze rents. In the UK, the maximum rent for affordable rental housing is 80 percent of the average market rent.

  • Tenant incentives

The incentives to rent affordable housing are that it is of a high quality, can be rented with employer or government subsidy and, in many cases, can be purchased on a longer-term basis.
In Spain, a medium-term (5-year) rental includes a proportion of the rent and other one-off payments towards the purchase price of the property. At the end of the lease, the remaining balance can be financed with a soft mortgage.
In the Netherlands, a centrally determined criteria (rent, age, annual income and financial situation) can be used to claim state aid for the purchase of a dwelling, in Belgium the maximum amount of state aid that can be claimed is 33% of the rent, and in Italy, below a certain age (35 years) and income (€55,000), state aid can be claimed for the rent and an income tax credit is also available.

  • Challenges

Affordable rental housing schemes across Europe raise a number of questions that need to be clarified in advance. For example, it is important to determine in advance whether the state intends to set eligibility criteria for the rental housing scheme in legislation.
Some countries make eligibility for affordable housing conditional on income or social status (e.g. preference for students or single parents). It is also essential that building quality standards are developed and aligned with sustainability objectives. And apartment buildings need to be scattered and integrated into the urban fabric,” says Gábor Kohári, senior manager of Deloitte Hungary’s real estate advisory business.
The necessary plots should be found not by privatising public land, but by offering discounts and state subsidies to developers, so that the rental housing programme can be competitive at lower rents.
Overall, the rules for the rental housing scheme should be designed in such a way that the interests of the state, investors, developers, local authorities and future tenants are not at odds and that everyone has an incentive to participate in the scheme.

  • Risks

In addition to regulation, there are a number of risks that should be addressed by public instruments. If access to the scheme is subject to certain conditions, it is important to verify the veracity and accuracy of the data provided by the tenant (income, assets, social situation). This requires the synchronisation of public systems (e.g. tax registers, land registers).
Streamline the administration of construction works (e.g. building permits, sub-registration) to allow contractors to reduce construction costs.
Sufficient incentives should be provided for private investors and developers to participate in developments under the rental housing programme. Social tensions arising from eligibility criteria and selection should be prevented. This can be achieved by developing transparent criteria and by introducing a so-called “social mix”. A common example of the latter in foreign practice is the obligation to include a certain percentage of newly built housing in the affordable housing programme, thus ensuring the integration of rental housing into blocks developed on market terms.
Regulation should help ensure that landlords are not influenced by the risk of non-payment when choosing tenants, but select applicants (e.g. young people starting their careers, students) for whom lower than market rents are a real help.
As a result of urbanisation, cities are facing a number of housing and thus social problems. These have been addressed in a variety of cross-cutting ways across Europe. The conclusions drawn from these can also help to develop appropriate housing policies in Hungary,” the expert adds.

 

József Kárpáti
Bee Home Ambassador
ÉVOSZ-MAKÉSZ Environmentally aware Building Advisor
Készház Menedzser Kft.