Economic and legal conflicts between landlords and tenants in the Hungarian private rental sector

Abstract

After privatisation in the 1990s, the Hungarian public rental sector decreased sharply in size, from 23% to 3% by 2012. Meanwhile, against expectations, the private rental sector (PRS) did not undergo dynamic growth either, its official share now being 4%. The PRS seems to suffer from a number of defects. The tax and subsidy environment makes it unattractive for both potential landlords and tenants. Moreover, the legal environment – under-regulated tenant–landlord relations and an ineffective legal conflict resolution system – increases the risk inherent in private residential tenancy contracts. The absence of professional landlords is indicative of the lack of incentives to enter the private rental market. Yet, private rental lives on, if only for a lack of other options in many cases. Typically, landlords are accidental second homeowners and typical tenants are households that are excluded from other forms of housing provision. After a brief overview of the current state of the sector and its history, this paper will focus on the economic and legal conflicts between landlords and tenants, and will consider critically the constraints on the development of the PRS after the transition.

Keywords:

• Central/East Europe
• affordability
• housing tenure
• private renting
• landlords
• regulation

Acknowledgements

The study is based on the TENLAW (Tenancy Law and Housing Policy in Multi-level Europe) project, funded under the EU Seventh Framework Programme [grant number 290694].

Notes

1. A very important example of which is the EU FP7 funded project ‘Tenancy Law and Procedure in the EU’, including the General Report (Schmid, 2008) as well as a number of comparative papers (Cafaggi, 2008; Joerges, 2008).

2. Income differences among the lowest and highest earning income groups rose sharply after the transition, and kept growing for most of the last two decades (Szívós & Tóth, 2013).

3. Between 2000 and 2004 a mortgage subsidy programme was introduced, which gave incentives for upper-middle-income groups to invest in second housing.

4. From this point on we refer to interviews by their initial and number (e.g. Landlord 1 – L1), see Appendix 1.