Social Safety Net, Informal Economy and Housing Poverty - Experiences in Transitional Countries

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Presentation given by József Hegedüs, Metropolitan Research Institute, Budapest, Hungary at a FEANTSA Research Conference on "Understanding Homelessness and Housing Exclusion in the New European Context", Budapest, Hungary, 2010

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  • Introduction FEANTSA Information from FEANTSA’s members Specific look at some countries (not IE and UK)
  • Fungibility is the property of a good or a commodity whose individual units are capable of mutual substitution. Examples of highly fungible commodities are crude oil , wheat , orange juice , precious metals , and currencies . It refers only to the equivalence of each unit of a commodity with other units of the same commodity. Fungibility has nothing to do with the ability to exchange one commodity for another different commodity. It refers only to the ease of exchanging one unit of a commodity with another unit of the same commodity. Welfare regimes are in constant flux, their study requires emphasis on „action” (connections between households’ behavior and public policies), and classification should be based rather on the analyses of this process than on snapshot of the „structure
  • The third position . The .weak. globalization perspective . Maintains that many of the undoubtedly important developments of recent decades signal a significant increase of internationalization within the international political economy that has complex but variable consequences for politics, economics and society, but that has not ushered in a distinctively new era in human
  • IMF tagság 1982-ben
  • In the policy response to the new social problems the interplay of weak state, informal economy and family structure should be taken into consideration Privatization and Price liberalization Democratic political systems (but the danger of demagogy, populism, and nationalism) Weak states: capacity and integrity of the public sector (decentralization, tax systems, public sector reform , problem of capturing
  • Methodology  Hierarchy of Explanations: 1. structuralist (globalization, etc); 2. rational choices (possible options among the constrain t s) 3. „path dependency” (history matters) Mixed and hybrid welfare regimes in transition countries Trends toward a liberal regime because of the fiscal pressure combined with the imp o rtant role of the family (South-Eur o pean model) and the role of the informal sector (South-American model) = post socialist welfare regime
  • Social Safety Net, Informal Economy and Housing Poverty - Experiences in Transitional Countries

    1. 1. Insert your logo here Social Safety Net, Informal Economy and Housing Poverty – Experiences in Transitional Countries Jó zsef Hegedüs Metropolitan Research Institute, Budapest European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN THE ENHR NEW EUROPEAN CONTEXT
    2. 2. Outline of the talk Welfare regime and housing system ˝Weak˝ globalization theory  Structural factors – convergence  National/special factors – divergence Variations of housing regimes in transition countries Beyond the welfare regime theory: making the welfare system – an institutional approach European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    3. 3. Housing and welfare systems The welfare system has an effect on housing and vice versa - fungibility in households’ budget among housing and other costs Social elements in housing policies have become decisive in the last decades (middle-class housing moved out from the subsidized sector) Housing should be in a broad framework of the welfare system without assuming that there is a consistent welfare regime:  Failure of Esping-Andersen welfare regime theory to integrate housing; Argument of Kasza (2002): development of different sectors is not coordinated  Action and structure European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    4. 4. ˝Weak˝ globalization theory – elements of convergence National governments are under pressure of global trends Economic and financial crisis (energy prices, debt crisis, etc.); Demographic processes: ageing and housing; Migration trends Structural/global factors -> convergence European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    5. 5. ˝Weak˝ globalization theory – elements of divergence Global trends are mediated through national politics  Path dependence  Local politics (parties, lobbies, etc.)  Knowledge transfer (international agencies) National factors –> divergences  Examples – housing finance; legal structure; etc. European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    6. 6. Welfare regimes in the soviet system Theory – ideology and the facts  Attempts: ˝Authoritarian welfare state˝(Aidukaite)?  Full employment, free public services, low housing cost, strong housing intervention, free education, health care, etc.  But: poverty, inequality (not just the nomenclature)  Conclusion: welfare is an integrated part of the state dominance of the society (˝dictatorship of needs˝) The pre-transition period (in 1980s): an attempt to integrate the market forces under the hegemony of the communist party European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    7. 7. Social consequences of the transition Recession and recovery Low employment Role of informal economy Demographic trends Income differences, segregation, exclusion Poverty European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    8. 8. Elements in the new welfare regimes Weak governments – strong private interests  Capacity of the public sector  Political democracy – wobbly pillar  Dominance of private interests  Limited role of the donor agencies Informal economy as a constraint on efficient welfare programs (targeting failure) European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    9. 9. Process of welfare regime building ss Fiscal stress lo y s: nc ise icie m f pro , ef m age Co ak Public policy le Structural changes (marketization) Private interest (lobbies) International Agencies Social cost of changes s, ro mise ited ion C omp e of lim o rmat aus s and inf bec rce u reso Individual adaptation,Informal economy State welfare policy help from family European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    10. 10. Slow recovery and huge distance from the EU15Real GDP growth in the region (1989-2008) Recovery from the transition GDP and productivity in selected newrecession (Examples from the region: member states, 2005Slovakia, Bulgaria, Latvia andArmenia) GDP per head GDP per head of population of population (as % of Euro- GDP per hour (USD) zone) worked (USD) Czech Republic 20 184 68% 21,7 Hungary 17 177 58% 22,4 Poland 13 327 45% 18,1 Slovak Republic 15 377 52% 22,9 1 Euro-zone 29 851 100% 41,9 European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    11. 11. Table 1. Demographic trends in the new member states Annual net migration Projected Population rate, Old-age old-age size on Projected 2002- dependency dependency January population 2006 ratio ratio 65+ st 1 , 2005 size, 2030 Change (per 65+/15-64, /15-64, (millions) (millions) (2005/2030) 1000) *** 2005 (%) 2030 (%)EU15 384,8 398,8 1,04 5,20 25,8 41,2Transitional countries(10)* 232,6 208,0 0,89 -0,03 19,7 29,1New memberstates(9)** 92,2 86,0 0,93 0,01 20,4 31,4United States 295,1 363,6 1,23 3,6 18,5 32,0Japan 127,6 117,6 0,92 0,3 30 50,0 European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    12. 12. East European Housing model EEHM had a dual character: state and private spheres under the state hegemony  State control over construction, allocation, and housing cost, however the state redistribution policy was “corrected” by the private sector (family network, quasi market)  Alternative versions (sub-models) - reaction to the „cracks”: Yugoslavia, Hungary. Explanation: soft structuralist approach – combines the „rational choice” type of explanation with the structuralist element (role of path dependence (PD)!) European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    13. 13. Housing reforms in transition countries –forming new welfare and housing regimes „market making” (structural) changes  Privatization of the building industry, banking sector, maintenance companies  Price liberalization (housing related services, rents)  Legal changes (property right, land registration, etc)  Privatization of state owned housing stock  Subsidy programs promoting market transactions „market correction” steps  Benefit programs, housing allowances  New social housing programs (home for the homeless, social rental programs)  Rehabilitation programs retaining old structures  Rent control, property rights of the tenants  Old maintenance companies, state construction  Price control and „across the board” subsidy system European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    14. 14. Transformation of the housing system  Privatization and restitutions  Mortgage market development  New ways of social housing  Managing housing affordability European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    15. 15. Social rental sector after the transition Privatization – do the Czech Republic, Poland and Russia represent another model? From universal to a residual model  Rent arrears  Evictions Rent setting and property rights  Public rents are at a level of 30-50% of private rents  No difference whether it is national or local rent control European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    16. 16. Housing privatization Source: UN-ECE 2002, Hegedüs-Struyk, 2005 European Research Conference, Budapest, 17th September 2010UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    17. 17. Restitution  creation of a private rental sector Restitution – law and its enforcement  Czech Republic, Germany, Slovenia, Poland  Romania Rent regulation and interest of the owner  Case of the Czech Republic  Slovenia, Croatia – fast increase European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    18. 18. Social housing programs Definite need and political commitments (white papers and official programs) Different models, but no path-breaking results – why?  Examples : TBS, Czech social housing program, Hungary 2000-2004, Romania after 2004, Serbia: municipal rental housing  The answer is still missing!!! European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    19. 19. Emerging housing finance systems Different institutional solutions  Poland – commercial banks  Hungary – mortgage banks  Slovenia – state mortgage bank  Contract savings – almost everywhere, though different solutions Was subsidy necessary for the development of the mortgage market? European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    20. 20. Nominal growth of house prices* 1990s-2001* 2002-2006Poland (2000) 9,1 2,3Croatia (1997) 2,7 8,7Czech Republic (2000) 16,7 9,8Slovenia (1996) 6,1 9,9Hungary (1998) 8 11,9Bulgaria (2001) 23,5Lithuania (2000) 4,9 23,8Estonia (1995) 13,8 36,4Source: Égert and Mihaljek, 2007 *Four-quarter percentage changes, in national currency units; period averages European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    21. 21. Balance of residential mortgage loans* 2001 2004 2007 Bulgaria 0,5% 2,6% 9,9% Croatia 5,8% 10,3% n/a Czech n/a 7,6% 15,3% Republic Estonia 5,8% 16,6% 36,3% Hungary 2,3% 9,6% 12,4% Latvia 2,4% 11,5% 33,7% Lithuania 1,4% 7,0% 17,5% Poland 2,8% 5,5% 11,7% Romania n/a 1,4% 3,5% Slovenia 0,4% 1,5% 8,0% Slovakia n/a 6,1% 11,9% Source: European Mortgage Federation Eurostat, National Central * End of the year, expressed as % GDP European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    22. 22. The share of FX loans in the totalhouseholds’ loans in 2003, 2008 European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    23. 23. Welfare systems: managinghardship in housing affordability  Economic and social changes after the regime changes  Unemployment  Income differences  Housing cost  Conclusion: risk to be in arrears or to be defaulted increased European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    24. 24. Composition of housing expenditure, 2005 Source: Elbers Alle , PRC Bouwcentrum International European Research Conference, Budapest, 17th September 2010UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    25. 25. Utility arrears in 2003, Hungary Ratio of Amount of Number of Average Type of indebted debt households debt per service households (total, in in arrears consumer as of total mln) Hungary Electricity 335,68 7.1% €15.9 €47.5 Gas 67,662 2.2% €7.1 €104.8 District heating 192,46 29.8% €18.8 €97.6 Total 595,8 7.1% €41.8 €70.2 European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    26. 26. Constraints on housing allowance and income benefit programs Economic constraints  What is the minimum income  Logic of the system: analogy to the deficit grant in local government finance Institutional elements  Issues of decentralization and role of local government  Role of service providers Policy issues  Entitlement programs or means-tested programs  „Innovation˝ in the programs European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    27. 27. Housing allowance, 2000-2007 European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR Source:CSO,2008 THE NEW EUROPEAN CONTEXT
    28. 28. Households’ adjustment behaviour  Households’ budget adjustment  Income benefit programs – limited effect  Family help  Informal economy  Arrears and downward mobility (social segregation)  Conclusion: households under pressure form a strategy with limited room for maneuvering European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    29. 29. Role of family support, 2006Relations correspond to the values of traditional societies:older generation tends to help the younger more than vice versa Age, life cycle groups and family help (percentages of households), 2006 0% 10% 20% 30% 40% 50% 60% 70% 60% -34, w ithout child 53% 50% 40% -39, w ith child 58% 30% 40-59, w ith 20% child 42% 10% 40-69, w ithout child 25% 0% 25-29 30-34 35-39 40-44 45-49 50-54 55-59 65-69 70-74 -24 60-64 75- 55-, retired, w ithout child 34% family support given family support taken family support given family support taken European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    30. 30. Understanding the changing welfare system Macroeconomic changes (globalization) Institutional and policy elements Households reaction – conflicts Adjustments on both sides – this leads to new welfare structuresILLUSTRATION (FROM HUNGARY) Gas price increase, crimes against vulnerable groups, problem of mortgage defaults European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN THE NEW EUROPEAN CONTEXT ENHR
    31. 31. Gas price subsidy – illustration ofmoves toward the new welfare regime  History:  Gas price increase after 2000  politics: keep the price low (huge price subsidy across the board) general price subsidy  2003-2006 – price increased and a non-means tested subsidy proportional to consumption was introduced  2007- means tested subsidy (gradual phasing out -- „squeeze”)  Conclusions:  Budget cost: 7-10 times higher cost than the housing allowance  Administration (fragmented: ministry, treasury independent from the housing allowance)  Informal sector – ˝cheating˝ (30% self reporting was incorrect) European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    32. 32. Crime against vulnerable people The inefficiency of the safety net program (housing allowances and the management of crisis situation) gives room for intervention  Usury loans, new form of slavery („csicska”), housing mafia  Vulnerable households: have no power to resist Conclusion: analogy to homelessness European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    33. 33. Mortgage arrears and defaults Mortgage development in Hungary  Subsidy program 2000-2004 – huge inequity  Cut the subsidy and the introduction of FX loans  2008 crisis – 100 thousand household have defaulted (more than 90 days) Government policy reaction to the crisis:  no eviction (role of party politics – but no real help yet) – its future cost would be very high  The possibility to build a new social housing system European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    34. 34. Borrowing, Hungary, 1996- 2008Mortgage ratesubsidy program:2000-2004 Reaction to subsidy cut in 2004 1.Moves to FX loans 2.Moves to consumption loans European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    35. 35. Conclusion: Welfare regime is in the making (action and structure) The role of research is to understand the institutional power structure which influences the shaping of the welfare system It has to move away from the structural approach and be open to understand the strategies on both sides Policy recommendations:  Room for alternative innovative programs based on the evaluation of the conflicts  Need for standardization European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT
    36. 36.  Thank you for your attention. hegedus@mri.hu European Research Conference, Budapest, 17th September 2010 UNDERSTANDING HOMELESSNESS AND HOUSING EXCLUSION IN ENHR THE NEW EUROPEAN CONTEXT

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