Condominiums in Hungary
Presentation by András Szekér,
Habitat for Humanity Hungary
Sources
The whole presentation is based on:
Éva Gerőházi, József Hegedüs, Eszter Somogyi: ASSISTING CONDOMINIUM RENOVATION IN POOR
NEIGHBOURHOODS - Background study to support the development of Habitat products to encourage the
renovation and development of low status multi-apartment residential buildings (commissioned by Habitat for
Humanity Hungary, 2011 http://mri.hu/en/wp-
content/uploads/2013/10/HFHH_Condo_research_report_EN_jan_9_2012.pdf)
Also visit Habitat Hungary’s knowledge centre for various poverty housing and housing policy reousrces:
http://www.habitat.hu/en/tudaskozpont
Condominiums in Hungary
All images from internet, no copy right held by Habitat for Huanity Hungary
Condominiums in Hungary
% of condominiums and multi-apartment buildings in total housing stock
36%
condominium or other
MAB
other
63%
% of condo/MAB units in different kinds of condo/MAB buildings
6%
Downtown Block
11%
28%
MABs by legal form High Rise Housing Estate
12% 13% Condominiums in Green
Belt
Other Multi Apartment
Housing Cooperatives
Condominiums 56%
Uncertain
75%
Statistics based on: Lakásviszonyok az ezredfordulón (KSH) http://mek.oszk.hu/06900/06979/06979.pdf
Key Problems of Condominiums
• Only 5% have been built (or completely renovated) between 1990 and 2005
• 50% have serious technical issues (degrading mudding, no thermal insulation,
outdated piping and wiring)
• Thermal insulation and district heating a problem of their own
• 25% have no financial reserves to deal with unexpected technical
problems/major investment needs
• Problems in buidling management, financial management and collection of
fees increase as social status decreases
Statistics based on: Lakásviszonyok az ezredfordulón (KSH) http://mek.oszk.hu/06900/06979/06979.pdf
Condominiums and poverty/policy
Act on Act on Lease of
Condominiums Apartments Act on Foreclosures
Secure Tenure
Affordability
Fuel Poverty
Renovation and
Energy Efficiency
Grants Financial Products Segregation and
Extreme Poverty
Municipal
Apartments Empty Apartments
Genesis of Problems
Rental Apartments as
% of Total Housing
Stock
Municipal Institutional Private
Rental Rental Rental
Apartments Apartments Apartments
Empty apartments as % of total
stock
1990ies housing reform: massive privatisation, many poor owners
Genesis of Problems
Interwar era: rent cap rendered landlords unable to properly
maintain apartments and buildings
1950ies – 1990: lower status tenants got lower status
apartments (those in worst shapes) poorer owners
purchased worst apartments
1950ies – 1990: general neglect of maintenance
1990ies housing reform: massive privatisation, poor owners
General affordability problems
Some cultural problems related to ownership, cooperation, etc.
Legal Background
• Act CXXXIII of 2003 on Condominiums (The first
condominium law was created in 1924)
• Act CXV of 2004 on Housing Cooperatives
• 30/2009 (IX. 3.) Ordinance of the Ministry of Local
Governments on the conditions and detailed procedures of
conducting commercial condominium management and
property management activities
• 23/2013 (VI. 28) decree of the Minister for National
Development on the professional conduct of condominium
and property management, real estate intermediary and
valuation services and the detailed rules of their registration.
Legal Background
• Condominium = quasi legal person (between a natural and a
legal person), it owns nothing, practically a management
form
• Owners own the common parts of the buildings, like roof,
staircase, corridors, basement, elevator, chimneys, and
pipes based on the share of their property
• Condominium can be subject to any contract, sue persons,
etc.
• Each owner has a voting right according to its share in the
total property
• A condominium can be created if there are more than one
owner in a building, and has to be if there are 4 or more
Key terms, players
Condominium: - multi apartment building
- collectively owned by owners of individual apartments
- common structures (roof, piping and wiring outside
apartments, stairways, elevators, etc.) owned, maintained by,
and in responsibility of all owners
Condominium association: - legal person created by all the owners of a
condominium building
General assembly: - meeting of all the owners of a condominium, making
most important decisions
Audit committee: - a committee made up of owners, examining finances of
condominium (only required above 25 apartments)
Building manager: - person taking care of day-to-day operations of building
(collection of fees, paying bills, fixing problems, etc.)
- can be an inhabitant, a committee of inhabitants, a
one-person business or a company
MRI 2011: Low-Status Condominiums
• Sample of low status condominiums examined
• Basis of selection: social indicators of neighbourhood
• Sample representative of bottom 40% of condominiums
• Detailed look at:
• Technical State
• Finances
• Manegement
• Options for maintenance and repairs (technical and financial)
MRI 2011: Technical Problems
Traditional Old type New type Total
housing housing
estate estate
The building functions well in technical terms, equipments and utilities 10,7% 40,4% 34,4% 35,3%
continuously operate, if problems occur, they are quickly solved
The building operates with smaller baulks 44,4% 36,9% 32,8% 36,6%
Only the fixing of most burning problems can be financed, no 44,9% 22,7% 32,2% 27,9%
conservation works are carried out, the state of the building is
constantly deteriorating
Our building is unserviceable, in case of technical errors equipments 0,0% 0,0% 0,7% 0,2%
and devices or out of operation for longer times
Total 100,0% 100,0% 100,0% 100,0%
MRI 2011: Technical Problems
MRI 2011: Affordability Problems
Average Lowest income decile Highest income decile
Household income (EUR/year) 6 250 3 031 11 430
Apartment value (EUR) 24 562 21 093 32 781
Housing costs A – mortgage payments included (EUR/year) 1 937 1 375 2 812
Housing costs B – NO mortgage payments included (EUR/year) 1 625 1 218 2 125
Apartment value/income (year) 4,01 6,99 2,87
Housing costs/income A (%) 32% 45% 25%
Housing costs/income B (%) 27% 41% 19%
MRI 2011: Financial Management
Traditional Old type housing New type Total
estate housing estate
Is there any resident who regularly fails to pay 83% 60% 84% 70%
common charges?
Is there any company contributing to the 56% 9% 19% 17%
payment of common charges?
Does the condominium have arrears towards 7% 4% 14% 7%
any utiliy companies?
Does the condominium have any further 27% 10% 12% 12%
revenues apart from those arising from
common charges?
MRI 2011: Why Repairs and
Maintenance Failed
Residents did not have enough money 41 %
Part of the residents did not have enough money and other residents did not want to pay for their part 33 %
No agreement among residents about the scope of renovation project 23 %
Residents opposed to inconvenience caused by project 4%
There was no one to co-ordinate project 10 %
Agreement about project was reached, funding was available, but no contractor could be found 4%
Agreement about project, but application for grant funding was turned down 21 %
Project was begun, but funds were only sufficient for a part of it 3%
Grant application turned down due to formal errors in submission 3%
MRI 2011: Costs of Renovations
Problem Type Expected costs EUR/apartment Other conditions – comments
Poor thermal insulation of walls EE 1 000 – 2 000
No independent regulators for heating EE 180 – 540 Every apartment has to participate in project
Poor insulation of windows EE 1 200 – 2 400
Walls in stairway worn down, flooring defect AE 100 – 300 Repairs and painting of walls can be planned,
flooring cannot. These tasks can also be done
by residents.
Lack of hygienic waste management AE 0-50 What is considered a problem in this area
and what solutions are acceptable is subject
to individual decisions
Inefficient ventilation T, EE 70-140 Technical options vary greatly
Frequent break-downs of elevators T 15-60 Costs vary greatly depending on the number
of apartments and nature of problem
(varying from fixes to replacement)
Financing Options for Renovations
• Payments from owners (limited, not very popular)
• Financial Reserves
• Bausparkasse (condominium association + individual owners), may be
combined with a loan – can reach 0% effective interest rate
• Loans
• EU Grants (very limited, available once or twice a year, total budget per
year is EUR 5-10 million for WHOLE COUNTRY, almost only available for
thermal insulation)
• Grants from local governments (drying/dried up due to crisis)
• Local government/state emergency funds (e.g.: natural gas supply cut off
due to bad piping, disasters, etc.)
• Few private initiatives in very small value (banks, energy companies, etc.
State Subisidies on Financial Products
Initial Subsidy Subsequent Cap
Subsidy
Bausparkasse 30% of Same subsidy EUR 230 for
savings every applies in individuals
year entire period and EUR 350-
1 050 for
buildings
State 70% of 35% of -
subsidized interest rate interest rate
loan in first 5 years in year 6-10
75% of loans to condominiums a mix of the two.
Risk in lending to Condominiums
• Condominiums cannot die, move away or otherwise escape their payment
obligations
• Risk is born by all owners in a condominium, hence ”pulverised” among
many individuals
• Collateral: cession on bank accounts, in some cases 10% safety deposit
• Condominiums posing higher risks are eliminated in risk assessment
stage. Reasons:
• Internal arrears exceed 10%
• Building has any external arrears
Problems in Access to Funding
OK Buildings Problem Buildings
Little cohesion, conflicts, often a
high number of owners who rent
out and apartments owned by
Building community Some cohesion municipalities
Generally heterogeneous, but Generally heterogeneous. More
less low-income households, or low-income households, or
Socio-economic, demographic households burdened with households burdened with
variables mortgages mortgages
Internal arrears (late or no
payment of common charges) Low High (above 10-20%)
External arrears (building May be quite high, may lead to
unable to pay utility companies, reduction in utilities (water,
garbage collection, etc.) None heating, etc.)
Has been accruing for several
Repair fund years
Problems in Access to Funding
Sources for interventions
Own sources (common Mortgages, Bausparkasse, or
charges, one-off payments, Grants (all require some self- combination of both (AER:
repair fund) financing) close to 0%)
Little cohesion, conflicts,
often a high number of
owners who rent out and
Building apartments owned by No agreement and co- No agreement and co-
community municipalities operation No agreement and co-operation operation
Generally heterogeneous. Good payers unwilling to come up
Socio- More low-income with self-financing or inhabitants
economic households, or households No affordability or willingness may simply not be able to afford it
variables burdened with mortgages to pay or be eligible for a loan High risk for good payers
Good payers unwilling to If higher than 10-20%,
Internal increase their own financial building not eligible + High
arrears High (above 10-20%) burden Might be a reason for ineligibility risk for good payers
May be quite high, may lead If sources were available,
External to reduction in utilities these would have to be If any external arrears exist, If any exist, building not
arrears (water, heating, etc.) taklced first building not eligible eligible
An accruing repair fund has to
be proven for the past 4
Repair years; if no fund, building not
fund None Not an option Not an option for self-financing eligible
Condominiums in Hungary
Thank you for your attention!
András Szekér
andras.szeker@habitat.hu
