Urban regeneration policies in Central and Eastern Europe

Budapest case study

Summary of the Final Report

on Budapest, Hungary

ACT Consultants, Paris Fondation

Sonia Fayman, Krisztina Keresztély
MTA-VITA
With the contribution of Ville et Habitat Budapest
Jean-Pierre Troche
Kyra Tomay,
György Enyedi,
Zoltán Kovács,
Lea Köszeghy,
Róbert Kovács
1
 Urban regeneration policies in Central and Eastern Europe - Budapest case study

CONTENTS
URBAN REGENERATION POLICIES IN CENTRAL CHALLENGES AND METHODS OF URBAN RENEWAL IN BUDAPEST 13
AND EASTERN EUROPE 3 Context and challenges 13
The phases of urban renewal 14
INTRODUCTION TO THE BUDAPEST CASE STUDY 4 The instruments of urban renewal 15
Budapest and Leipzig 5 Other actors of urban renewal 15
Typology and effects of urban renewal 16
THE NATIONAL FRAMEWORK 6
URBAN RENEWAL IN THE VIIIth DISTRICT 17
BUDAPEST 8 REV 8 17
Urban structure and morphology 9 Corvin Promenade project (Corvin Setany) 18
Housing in Budapest 9 Magdolna project 19
The administrative structure of Budapest 10
The financial structure of local governments 12 KEY FINDINGS OF THE STUDY 22
Urban policies 12 Withdrawal of the state 22
Privatisation of housing 22
The specific situation of Budapest 22
Urban renewal and giving priority to new construction 23

2

Urban regeneration policies
in Central and Eastern Europe
In 2001, the French national agency for housing, Anah
(Agence Nationale de l’Habitat) and CDC (Caisse des
Dépôts et Consignations) initiated a research programme
on urban regeneration policies, methods and practices in
several European countries. In its first phase, the research
programme focused on Northern and Western Europe.
The current phase of the research programme focuses on
countries of Central and Eastern Europe that have under-
gone fundamental changes in their political, economic
and social systems since the 1990s.
The study of this new phase considers four cities: Leipzig
(Germany, former German Democratic Republic),
Budapest (Hungary), Cracow (Poland) and Riga (Latvia).
The main objective of the research programme is to
understand and analyse public policies, methods and
1 The final report (in French) and its summary (in French and in English) can be downloaded from from the Anah website: http://www.anah.fr/actualite/etudes-eu/page-actu-etud-eu.htm
Summary of the Final Report on Budapest, Hungary
practices of urban regeneration. A particular attention East Germany, between November 2006 and May 2007
has been placed on the following aspects: by ACT Consultants, Paris, with the technical support of
- the specific context of urban development since the Ville et Habitat, Paris, and the Chair for Spatial Planning
1990s to see how the evolution of urban and housing and Spatial Research at the Faculty of Architecture,
policies interact with urban regeneration; Bauhaus-University Weimar1.
- the strategies that are implemented to achieve urban
regeneration;
- the initiating, financing, and managing of urban regen-
eration policies and projects;
- the way in which the different actors are involved and
interact in the operational process.
These issues are addressed to produce the case studies’
framework. The common conceptual framework may
also facilitate comparisons between the different cases.
The first of the four studies was carried out in Leipzig,
3
 Urban regeneration policies in Central and Eastern Europe - Budapest case study
Introduction to the Budapest case study
The second study was conducted in Budapest between
September 2007 and March 2008. The research has
been led by ACT Consultants in cooperation with the
MTA/VITA Foundation with the conceptual support of
Ville et Habitat in Paris. During the Budapest study, an
international workshop was organised, entitled
“Policies and research on urban renewal2 in Eastern and
Central European cities”. The workshop dealt, on the
one hand, with experiences of the Leipzig research and
the adaptability of research methods applied in Leipzig
for the other three cities and, on the other hand, with
general problems related to urban renewal policies in
Eastern and Central European cities. The Budapest sem-
inar was an occasion for Anah, and for all project part-
ners to meet each other and discuss the issues concern-
ing urban renewal in Central European cities.
2 Hereinafter we use the term “renewal” as it is perceived in the Hungarian context, namely a broad concept that covers the reserach’s core activities. A more detailed explanation of different concepts can be found in the
chapter entitled “Challenges and methods of urban renewal in Budapest”.
4
It also allowed experts and politicians dealing with
urban renewal in Budapest to meet the research team
and to have extensive discussions on the differences
and similarities regarding the issue of urban renewal in
the four cities studied.
The Budapest study follows the same structure as the
Leipzig study: it is composed of five chapters. The first
one deals with the general, national framework of
housing and urban renewal policies; the second is
devoted to the general presentation of the city; the
third one discusses the specific policies, strategies,
methods, tools and cases related to urban renewal in
the city; the fourth presents a specific urban regenera-
tion project and the fifth gives a general conclusion
about the study. The Budapest research, similarly to the
Leipzig one, included analysis of documents such as
policy papers, studies, scientific articles, newspapers
articles, websites and a series of interviews. Between
October 2007 and January 2008, 29 interviews were
carried out with experts, politicians, investors, civil asso-
ciations and other actors related to urban renewal. Half
of the interviews dealt with general questions regarding
the situation of Budapest and the issue of urban renew-
al with regards to this situation; the other half focussed
on issues related to the specific regeneration project
analysed in detail in the fourth chapter.
At first, it is important to understand the different con-
ditions and framework of urban renewal in the
Hungarian capital compared to Leipzig, the second
largest city in former East Germany. A preliminary com-
parison of the two cities shown below highlights some
of the core differences.

Budapest and Leipzig
Budapest, Europe’s seventh largest city
• Budapest, the capital of Hungary, concentrates a significant proportion of the popu-
lation (17%, 1.7 million inhabitants) while Debrecen, the second largest city, has
only 204,000 inhabitants.
• Since the 80s, urban population has been decreasing. In the 1990s, the decrease
was intensified by suburbanisation. Since the beginning of the 90s, the city has
lost 12% of its population while the outskirts have gained 16%. The city centre’s
population is decreasing and ageing.
• Although the housing stock suffered losses, World War II did not destroy the fabric
of the city. Intensive housing estate construction took place mostly in the periphery
of the city during the 1960s and 1970s. Most of the estates are in a state of social
and physical decay. No comprehensive urban renewal has taken place in the city
centre, which is made up of housing built in the 20th century. The effects of existing
renewal projects are minimal compared to the scale of the problem. This housing
stock is suffering from the very low level of maintenance and is not highly affected
by urban rehabilitation.
• 8.4% of the housing stock was vacant in 2001.
Housing privatisation in Hungary
Private ownership remained important even under socialist rule, especially in rural
areas. Privatisation of the housing stock was initiated in 1969 and became nearly
obligatory for local municipalities in 1993. Today approximately 92% of the housing
stock is privately owned, with a high percentage of physically run-down housing
especially in urban centres and in housing estates. In Hungary, no restitution of
former ownership took place after the political transition.
Housing, regional and urban policies
With the withdrawal of the state from housing, regional and urban policies, local
governments became key decision makers in these policy areas.
Summary of the Final Report on Budapest, Hungary
Leipzig, East Germany’s second largest city
In 2006, the city had a population of 506,372 and, along with other cities of the former
GDR, was shrinking.
• The city lost nearly 100,000 inhabitants between 1989 and 1998 due to natural
decrease, migration to West Germany and suburbanisation. Since then, some popu-
lation growth took place partly as a result of the incorporation of the outskirts into
the city boundaries. The city’s housing stock and population are ageing.
• Half of the housing stock was destroyed during World War II. Extensive construction
of housing estates took place from the 1970s to the early 1990s.
• One of the major problems of the city is vacancy: 20% of the housing stock was
available in 2000.
Housing privatisation in Germany
Before and during the time of the GDR, the whole housing stock was nationalised.
A special form of ownership was introduced and called “peoples’ ownership”
(Volkseigentum), while private ownership was nearly eliminated. After the transition the
“restitution before compensation” principle was introduced – lasting for more than a
decade. Since the end of the 1990s, municipalities have been obliged to privatise 15%
of their housing stock in addition to the returned properties. Today 55% of housing is
privately owned.
Housing, regional and urban policies
The federal German state is strongly engaged in urban policies. Some important subsidy
programmes support urban renewal in the city (Soziale Stadt). Local programmes are
built on subsidies from various sources (European, federal and regional) on a comple-
mentary basis.
5
 Urban regeneration policies in Central and Eastern Europe - Budapest case study

The national framework

Following the political transition in Hungary, the second
most important legislative action after the amendment of
the Constitution was the 1990 Act on Local Governments.
This act is considered to have provided the foundations of
democracy in Hungary. The Act also led to the creation of
autonomous local governments, by allocating administra-
tive, political and economic responsibilities at the local level.
Local municipalities obtained the right of independent finan-
cial management, receiving local taxes, stipulating their
building code or allocating building permits. A certain set of
tasks and rights were transferred from the state to local gov-
ernments. Decentralisation affected all local institutions
(schools, basic health and social care services, local utilities
and transport services) and their maintenance, as well as all
municipalities to sell all flats to their tenants if they wished
to purchase them, within financial conditions set by law.
These conditions were quite advantageous to most tenants,
thus a large majority of housing was privatised by 1995.
As a result of the above processes, housing ownership has
been split between private owners, and, to a limited extent,
local governments.
The post-1990 framework of urban and housing policies at
the national level is characterised by the withdrawal of the
state from this area. Condominiums became the basic unit
of housing (1997 Act on condominiums, modified in 2003)
therefore they also play a crucial role in housing mainte-
nance and renewal. Initially, any structural change regarding
condominium houses (i.e., the vast majority of renewal activ-
important (“szocpol” for instance). The number of new
housing constructions decreased compared to the previ-
ous decades as a result of the end of large scale housing
constructions by the state and the lack of profitability for
private housing investments. In the early 1990s, the eco-
nomic environment led to the increase of other types of
investments such as office buildings, new industrial plants
and shopping centres.
The number of housing units
privatised in Budapest and
in total in the country since 1990
450,000
412,525

the responsibility of urban and housing policy. The housing ities) required the unanimous agreement of owners. The rule 400,000
stock was transferred to local governments, and since then, has been changed in 2003 by decreasing the obligatory pro- 300,000
public housing policy has become a local responsibility. portion of agreement to 80% of the owners. As urban plan- 250,000 237,931

Although the principle of housing privatisation had been ning, regulation and the allocation of construction permits 200,000
legally adopted since the end of the 1960s, only a few were allocated to local governments, urban renewal policies 150,000
103,425
transactions took place before 1989, mostly concentrated were in large extent also transferred to the local level. 100,000
54,023 55,286 28,990
50,000
in the capital’s better off neighbourhoods. Housing privati- During the 1990s almost no public policy was introduced 22,156 19,923
2,378 3,648
0
sation became widespread after 1990. The 1993 Housing with regard to housing, apart from certain types of direct
1990 1991-1995 1996-2000 2001-2005 2006
Act (regulating the renting and selling of flats) obliged social subsidies that are still politically and financially

6
 Summary of the Final Report on Budapest, Hungary

Since the second half of the 1990s, private institutions

Construction of dwellings in Hungary
and new financial offers (e.g., mortgage loaning)
appeared in order to facilitate housing construction. Idószak / Budapesten / A többi városban / A községekben / in Összesen /
Since 2000, state policies have been set up as well in Period in Budapest in other cities settlements without city status Total

order to stimulate such investments. In 2001, a state épített lakás

decree was adopted regarding public subsidies for new 1961–1965 50,821 93,082 138,453 282,356
housing and several financial possibilities (e.g., mortgage 1966–1970 58,938 117,502 150,990 327,430
loans) were established supported by public subsidies. 1971–1975 77,334 182,512 178,292 438,138
Between 2000 and 2005, the number of new dwellings
1976–1980 85,588 201,490 165,637 452,715
constructed increased nationally by 52%.
1981–1985 74,407 159,776 135,501 369,684
As a result of these policies, prestige of new housing
1986–1990 44,722 124,398 103,332 272,452
increased when compared with existing stock. In addi-
1991–1995 18,462 54,803 52,296 125,561
tion, due to the general intensification of the real estate
1996–2000 15,147 51,215 51,218 118,580
market, the number of transactions (regarding the whole
housing market) grew dynamically during the first years 2001–2005 39,675 89,585 50,845 180,105

of the new millennium (from an annual 110,000 to 2006 8,239 17,088 8,537 33,864

325,000 between 2000 and 2003). The prestige of new

housing still strongly influences the outlook of urban
renewal in Hungary and in Budapest.
After the first years’ boom in housing loans, lending con-
ditions have changed during the last few years.
As a result of recent years’ economic crisies the number
of loans contracted by households decreased. Also, the
aim of lending is changing, towards smaller purchases
or even general consumer credit. In recent years,
the increase in the population’s indebtedness has been
visible.
Urban renewal has only sporadically appeared as part of
state policies since the turn of the century. Until very
recently, state programmes were limited to the moderni-
sation of housing estates, namely the financing of certain
works that was inevitable for the maintenance of these
buildings (e.g., thermal insulation, moulding, etc.). Urban
Source: Central Statistical Office, Yearbook on housing statistics, 2006.
renewal in a broader sense has been included in state
policies since the accession of Hungary to the European
Union. Renewal of urban neighbourhoods has been
integrated into the national development plan and has
obtained an increased importance in the Regional
Operative Programmes (ROP) for the period 2007-2013.

7
 Urban regeneration policies in Central and Eastern Europe - Budapest case study
Budapest
The city was created in 1873 by the merger of three
towns, Buda, Pest and Óbuda, situated on the two sides
of the Danube. Budapest is divided into 23 municipal
districts, all of them holding the status of autonomous
local councils. The whole agglomeration area comprises
2.4 million inhabitants and is set up with 104 local
municipal councils with Budapest and its districts. This is
the largest metropolitan region in Central and Eastern
Europe, but without any administrative territorial status.
During the 19th century, the city became an important
urban hub and obtained an advantageous position for
industrial development. By the end of the century, the
social spread within the urban space was highly influ-
enced by growing of industrial neighbourhoods:
337,000 industrial workers were living in Budapest.
Industrial production decreased by half during the inter-
war period. During the 1950s, Hungary underwent
forced industrialisation. Heavy industry was set in
Budapest and a few other larger cities, and many people
were attracted by the new industrial areas. After 1990
most of these industries collapsed. A large number of
former workers of state companies became unem-
ployed, and many set up their own private enterprises.
8
However, the situation of the economy in the Budapest
agglomeration is significantly better than in other parts
of the country (high share of foreign investment, better
employment indices, etc.)
The demographic situation of Budapest is worrying: the
decrease of the population can be observed since the
1980s, with a loss of 40,000 inhabitants during the
1980-1990 period. During that decade, population loss
concerned the entire metropolitan region, though its rate
was higher in the city centre than in the outskirts. During
the 1990s, a new phenomenon appeared: an 18%
increase of the population in the suburbs accompanied
by a strong decrease of the population in the city centre.
In Budapest, since the beginning of the 1990s natural
population loss is accompanied by a negative migration
balance. The capital lost altogether 12% of its population
in the referred period. The population loss ratio in
Budapest in the last decades is among the highest com-
pared with other Eastern and Central European cities.
Meanwhile, some suburban settlements consolidated
their position by attracting inhabitants and economic
investments. Demographic decline in the city (the ageing
index is 200) is reinforced by the general European
phenomenon of ageing and the drop in the number of
young people. In terms of ageing, Budapest is within the
mean in international comparison tables: ageing is
stronger here compared with Cracow or Bucharest, but is
on the same level as in Hamburg or Warsaw and is far
weaker than in the city of Leipzig. However, the propor-
tion of children under 14 years of age is less in Budapest
than in any other Eastern and Central European cities,
with the exception of Leipzig.
An increase in public investments has had a positive
effect on the economic performance of Hungary since
2000. Following that, in 2007 the government intro-
duced economic restrictions including cutting back on
several types of social expenditures in order to tackle
budget imbalances arising from the previous years’ vast
state expenditures. The long term results of these inter-
ventions cannot be assessed yet, since they have so far
been unable to combat inflation. However, in the short
run they led to a decrease of the economic performance
of the country.
In the Hungarian economy, export plays a key role in
generating economic growth. From this perspective,
Budapest is in a particularly important position. The

capital is strongly involved in economic exchanges, partic-
ularly with Germany, which is in first place. Eighty percent
of these exchanges occur in the tertiary (service) sector
(they are mainly commercial activities). The Budapest
metropolitan region became a logistical centre in the
Eastern and Central European region. The central eco-
nomic position of Budapest in the country is unambigu-
ous in terms of other tertiary sectors as well, e.g., 44% of
the research institutes are located in Budapest. In terms
of economic performance, the Hungarian capital is in an
average position compared to other Eastern and Central
European cities. According to its GDP, it is ranked
between the leading cities (Hamburg, Warsaw and
Prague) and those that lag behind (Bucharest, Riga,
Cracow and Leipzig).
Urban structure
and morphology
The structure of the city has been under permanent
development in the last few years as a result of privatisa-
tion and European integration.
The majority of Budapest’s housing stock dates back to
the 19th century. A belt of residential neighbourhood
raised around the city centre with 3 to 5 storey buildings
and inner courtyards. This belt also gave place to the
construction of prestigious political buildings (Parliament)
and cultural institutions (the Opera and museums). The
first underground line of the European continent was
established in Budapest on the occasion of the
Millennium international exhibition at the end of the
century. Art nouveau buildings are colourful reminders of
this period in and around the city centre.
During the interwar period the intensity of construction
dropped and was basically limited to finalising projects that
had already been planned. It was also the period in which
the first housing estates for workers were built – poor qual-
ity housing that quickly became unhealthy slum areas. Lack
of housing maintenance became apparent for the first
time. Industrial or prefabricated housing appeared in the
1960s and reached its peak during the 1970s.
Following the political transition, the housing and real
estate market opened up and intensive building activity
began in Budapest with strong involvement of investors
from Western, Southern and Northern Europe.
Although the central municipality of Budapest confirmed
its political willingness to fight urban sprawl, no real steps
have been undertaken and suburbanisation continues to
absorb part of the urban development. Free land is still
available within the city’s administrative boundaries,
especially in abandoned industrial areas. The murky legal
situation concerning the ownership of these lands makes
their re-use complicated.
Summary of the Final Report on Budapest, Hungary
Housing in Budapest
As a result of privatisation, condominiums dominate the
housing ownership structure. During the 1990s, all tenants
were allowed to buy the dwellings they occupied and
benefited from very advantageous financial conditions
(see above). Housing cooperatives established before the
political transition were integrated into this system.
During the 1960s the socialist state had created a housing
support system based on German and Scandinavian
models. In theory, access to cheap housing was guaranteed
for all, but low rents resulted in a lack of maintenance and
renewal. By the 1990s, housing stock in Budapest was
generally in poor condition as a result of the lack of main-
tenance during the previous decades.
Since the 1990s, the improvement of the housing stock has
mostly been the result of new constructions and the quali-
ty of habitat in Budapest (where new constructions are
concentrated) has been above the national average.
Out of the total number of dwellings in Budapest (863,330
dwellings in 2007), there are 27,872 “precarious
dwellings” (also called “urgency dwellings”), and 21,891
dwellings without any basic amenities. Out of the 73,380
vacant dwellings, 8,381 are in critical state. Vacancies are
increasing and the proportion of vacant dwellings grew
from 1.7% to 8.4% between 1960 and 2001.
9
 Urban regeneration policies in Central and Eastern Europe - Budapest case study

The housing market is practically limited to private owner-

ship. The rental sector is very limited: it comprises, on the
newly built dwellings and older ones. Within the new
housing stock (6,000 dwellings sold in 2006 and 14,000
The administrative
one hand, the remaining small portion of housing stock expected to be sold in 2007), a change in product types structure of Budapest
that has still not been privatised, and, on the other, the may be observed since the beginning of the 2000s. In the
private rental sector that in most cases is not visible. No first years of the decade, intensive construction took place According to the principle of decentralisation, the 1990 Act
specific legal regulation exists for the private rental sector. in large, empty suburban areas. Nevertheless, demand for on Local Governments and 1991 Act on the Administration
In the private sector, there is a clear distinction between this type of housing has been decreasing as a result of the of Budapest created a two-tiered system of administration
poor quality of these dwellings and their distance from the in the capital. In this system, the central municipality of
city centre. More recently, new constructions have been Budapest and the district municipalities have similar compe-
The “Price per income” index
built closer to the city centre. The current trend is to estab- tences but different obligations. Districts are responsible,
Between 1999 and 2003 the “price per income” index
lish, instead of large estates with merely residential func- among other things, for local services and infrastructure,
(i.e., average/median price of dwellings compared with
tion, complex developments where the residential function housing and local roads. All duties concerning more than
the average/median annual income of households)
is coupled with commercial, cultural, recreational functions one district – or the entire city – are delegated to the
increased from 4.1 to 6.2, as a result of a significant
and other types of services. Budapest Municipality. Cooperation between various
increase of housing prices compared with the increase
At present, 82% of the housing stock is composed of old administrative units of the municipality and between the
in incomes. According to the National Statistics Office of
housing or “second-hand” new housing (i.e., recently central and district levels is weak and the central municipal-
Hungary, in the referred period the average price of
constructed housing appearing on the real-estate market). ity does not play a significant role in terms of coordination
housing increased from €14,800 to €37,200 while
In 2007, 13% of the residents of Budapest were involved between the different districts. This situation results in the
average annual income of households only increased
in the purchase and 9% in the selling of dwellings. lack of coherent urban development and regulation at the
from €3,600 to €6,000. The housing affordability
According to the Housing Monitor, in 2006, 1,893 new city level and difficulties in reaching agreement between
index for Hungary is twice as high as similar indices for
stock purchases were made by foreigners. An additional municipalities. In 1994, the amendment of the 1991 Act
Western European countries. According to the national
two or three thousand flats were sold to foreigners introduced some centralisation of the Budapest
statistics office, in 2003 an average household could
through Hungarian companies. According to the Ministry Municipality, e.g., the right of districts to delegate members
buy a dwelling for a maximum of €22,400 by obtain-
of the Interior, in 2005, 31% of the foreigners who of the general assembly of the Budapest Municipality has
ing a loan with a 9% interest rate, while only 35% of
became owners in Hungary bought a dwelling in the cap- been abolished. Currently, all members of the assembly are
the housing stock was priced over the above-indicated
ital. On the real-estate market, the gap has grown directly elected.
amount.
between the city centre and the suburbs (a ratio of 1 to 4). In the Budapest Mayor’s Office (i.e., the administrative body

10
 Summary of the Final Report on Budapest, Hungary

of the Municipality of Budapest) issues related to urban Szociálpolitikai FŒpolgármester-helyettesi Iroda). During city planning and social affairs and the other for the econo-
renewal are dealt with by the chief architect of Budapest the process of preparing documents, strategic decisions and my and public services – who are also engaged in decisions
who is the head of a unit employing 20 persons. The office proposals for the municipal council, the chief architect con- related to urban renewal. The total number of municipal
of the chief architect is attached to the office of the deputy sults with several other offices (as the Office for Heritage
mayor in charge of the economy, urban development Protection, Office for Urban Development, transport or
and social policies (Városfejlesztési, Gazdálkodási és public services, etc). There are two deputy mayors – one for
The council of the VIIIth
district
The Budapest council The general assembly of the district is composed
The general assembly of the municipality is composed by 67 members. by 28 members. In the assembly, 15 representatives
At present, the composition of the assembly is as follows: from FIDESZ, 6 from MSZP-SZDSZ, 5 from MSZP,
- 30 representatives of the FIDESZ – Hungarian Civic Union (FIDESZ – Magyar Polgári Szövetség / FIDESZ) (right) 1 from SZDSZ and 1 from MDF are present. Three
and the Christian Democratic People’s Party (Keresztény demokrata Néppárt / KDNP) (right) special councillors – specialised in urbanism, sport,
- 3 from the Hungarian Democratic Forum (Magyar Demokrata Fórum / MDF) (middle right) and youth and minorities – are delegated to help the
- 24 from the Hungarian Socialist Party (Magyar Szocialista Párt / MSZP) (left- liberal) operation of the council. The councillor for urban
- 10 from the Alliance of Free Democrats (Szabad Demokraták Szövetsége / SZDSZ) (left-liberal) development also deals with issues of urban renewal.
The municipality is governed by a coalition between MSZP and SZDSZ, the two parties combined hold only one vote more There are 10 committees in the municipal council,
than the opposition in the assembly. all of them composed of elected and nominated
members.
The council has 15 committees, out of which the most important ones in relation Since complex urban renewal programmes take
with urban renewal are as follows: place in the VIIIth district all committees are interest-
ed in urban renewal from different points of view,
- Economic committee; - Committee of large development projects;
especially the Committee on Public Finance
- Committee for equal opportunities and minorities; - Committee of urban development and urban image.
(Költségvetési bizottság) and the Committee on
In addition, two subcommittees are also relevant in terms of urban renewal, as follows: Urbanism and Environment (Városépítészeti és
- Subcommittee of urban management and the environment; - Subcommittee for the coordination of districts. Környezetvédelmi Bizottság).

11
 Urban regeneration policies in Central and Eastern Europe - Budapest case study
employees whose work relates to the issue of urban renew-
al is between 175 and 185, 15% of the total employees of
the Budapest Municipality.
The financial structure
of local governments
Local finances in Budapest reflect the two-tier system of
public administration. The districts prepare their own
budgets – in a similar structure to that of the budget of
the Budapest Municipality. Nevertheless some discrep-
ancies between the two types of budgets reflect the dif-
ferences between the two administrative levels.
On the income side, the proportion of own income is
more important in the central municipality’s budget
than in those ofthe districts, 67% against 58%. This
may be explained by the fact that credits can be taken
up to 70% of the own income of municipalities. The sit-
uation of districts is also less favourable than that of the
capital as far as “running costs” are concerned.
Expenditures covering the salaries of personnel are 1.6
times higher than material costs in the districts, while
the same correlation is only 1.4 in the case of the
Budapest municipality. This shows the weaker financial
situation of the districts. Between 2000 and 2004, the
budget of the Budapest Municipality increased by 34%,
3 As the official language of the report is French.
12
while those of the district budgets only rose by 14%.
The running costs of the Budapest Municipality
decreased by 16%, while investment expenditures dou-
bled. In the districts the opposite situation can be
observed: running expenditures increased by 12%,
while investment expenditure decreased by 18%.
Revenues from local taxes (composed mainly of the pro-
fessional tax) increased from 17 to 18% in Budapest.
Income of municipal institutions (public bodies whose
budget is part of the municipal envelope) and utilities
increased at the same rate, while in the case of districts
this increase was less significant (7%).
The share of municipal budgets allocated to urban
renewal is difficult to estimate. These difficulties arise in
part from the lack of available statistics but also from
differences between the Hungarian and French termi-
nologies.3 The available sources suggest that in districts
where systematic programmes take place with regard to
renewal (i.e. the VIIIth and the IXth district), the expen-
ditures for employees working in the field of real estate
development, and in general, the expenditures related
to real estate affairs are higher than the average of
other districts.
Urban policies
The Budapest Municipality and the districts have been
developing a large number of strategic documents on
urban development, and all of them elaborated their
urban development strategies and regulations.
Nevertheless, the overlapping of competences and the
competition between and within municipalities, espe-
cially in light of their endeavour to obtain EU financing
hinders all kinds of cooperative planning in the capital.
In addition to problems of cooperation within the city
boundaries, there are major shortfalls in terms of co-
ordination between Budapest and the suburbs. In the
latter case, the lack of administrative ties between set-
tlements hinders all possibilities of implementing com-
mon plans and strategies for urban development and
regeneration.
There is also a characteristic problem of political transi-
tion: once central planning disappears, documents
defining the strategic framework of the urban develop-
ment do not have operative results (strategic plans not
having legal force are often neglected).

Challenges and Methods of Urban Renewal in Budapest
In Hungary, urban renewal (“városrehabilitáció” in the
Hungarian terminology) is a complex concept mostly used for
physical renewal. The social, cultural or other non-material
aspects of these programmes are not fully conceptualised. Social
renewal (“szociális városrehabiltáció”) has only recently been
introduced as a term for programmes concentrating on the
social and cultural renewal of certain neighbourhoods (besides
physical programme components). The term “városrehabilitá-
ció” makes few distinctions between the different types of
renewal programmes. The same word is used for very different
forms of programmes: entirely private real estate investments in
former industrial plants (as it is the case in the XIIIth district of
Budapest), the demolition of buildings in historical districts and
the construction of new ones, and more comprehensive pro-
grammes aiming at the renewal of a whole neighbourhood
(IXth district). In addition, the meaning of “renewal” and “gen-
trification” is sometimes confused. The latter is considered as a
positive phenomenon reflecting the “modernisation” of
deprived urban areas while its negative connotation (i.e., remov-
ing of low status households, the danger of the rise of new slum
areas) has only been taken into consideration in the last years4.
Context and challenges
Budapest is affected by a general structural disintegration.
Fragmented local administration hinders the application of a
4 In Hungarian, the word “városrehabilitáció” seems to be closer to the English term “regeneration”, referring to the transformation of neighbourhoods often coupled with delocalisation and demolishing, than to the French expression
“renouvellement urbain”, that refers to more integrated renewal taking into consideration the social, cultural or historical values as well.
strategic approach to urban development and renewal.
Privatisation of housing, following the transfer of public hous-
ing to local municipalities is the source of an extremely frag-
mented ownership structure. Condominiums are at the core of
the process of rehabilitation but they lack the required tools
(financial capacity) to complete rehabilitation work. Political
and economic transition in the 1990s resulted in new forms of
segregation. Withdrawal of the state from housing, social and
urban policies contributed to social fragmentation, while the
Budapest Municipality is currently making efforts to elaborate
a framework to help co-ordinate urban development. As in
many other post-socialist countries, civil society is still weak.
Social, spatial and political fragmentation is coupled with liber-
al policies, strongly relying on market forces. Urban renewal has
to face with challenges deriving from the legacy of the past
two decades. Suburbanisation still continues to persist
although at a slower pace than during the 1990s.
Gentrification of inner historical districts has been accelerating
in the last few years, as a result of spontaneous movements of
mostly young people towards these urban areas. It is also the
consequence of renewal programmes attracting a wealthier
population. Physical decline of a vast majority of central urban
areas still persists as a result of the lack of renewal policies
under socialism and during the first decade of transition.
Central historical districts continue to show significant popula-
tion loss coupled with (and partly resulting from) an ageing and
gradually disempowered society. Social mix in regenerated
Summary of the Final Report on Budapest, Hungary
areas is still not integrated as a method of renewal policies.
Urban renewal does not rank highly in the political decision
making agenda and in fund allocation. In the district municipal-
ities a high percentage of budget expenditures is mobilised to
cover the running costs, and a relatively low proportion remains
for investments and renewal. For the Budapest Municipality,
investment expenditures occupy a more significant place but
they are strongly concentrated on the development of metro
line 4 and other large-scale infrastructure developments.
The phases of
urban renewal
Urban renewal of central districts appeared as a political
aim only in the 1980s. Some plots had been designated
and rehabilitated in the VIIth district and a more complex
rehabilitation plan was prepared for the IXth district (middle
Ferencváros). These were the first examples for urban renew-
al that, instead of demolishing rundown buildings and replac-
ing them with the construction of prefabricated ones, wished
to concentrate on the renewal of existing housing.
Following the political transition, urban renewal almost
entirely disappeared once again from urban policies.
Privatisation of housing made the process extremely difficult,
as it deprived municipalities of a key tool in terms of renewal,
namely the property of buildings. Only one rehabilitation
13
 Urban regeneration policies in Central and Eastern Europe - Budapest case study
programme was launched during the first years of the 1990s,
that of middle Ferencváros. Based on plans prepared prior to
1990, the neighbourhood had already been designated as an
area for urban rehabilitation that provided grounds for the
local government to obtain exemption from the obligation of
privatisation of dwellings. By keeping all the housing in pub-
lic property, the municipality could launch the project by cre-
ating a public-private development company following the
French example of SEM (Société d’économie mixte), and
using all types of support obtainable for urban renewal from
the Municipality of Budapest and from other resources,
namely the French Caisse des Dépôts et Consignations.
1996-2002: the appearance of
strategic thinking on urban renewal
The first strategic document entitled the Urban Rehabilitation
Programme of Budapest (Budapest Városrehabilitációs
Programja) was prepared and adopted by the Budapest
Municipality in 1997. The objective of the programme is “to
help neighbourhoods to maintain and improve their urban
values in order to develop their economic potentials and to
fulfil their urban functions within the city”. In the same year,
the Fund for urban renewal of the Budapest Municipality was
extended, in order to finance the programmes in the frame-
work of the above-mentioned strategy. In this first period,
urban renewal was limited on the physical renovation of
buildings and neighbourhoods. The majority of resources
14
were allocated to the IXth district, and to a lesser extent to
other inner city areas, in the Vth, VIth and VIIIth districts.
At the beginning of 2003, the Budapest Municipality adopt-
ed its Urban Development Strategy (Budapest Városfejlesztési
Koncepciója). The strategy incorporated the principles of the
programme on urban renewal, and it was the first official
strategic document in Budapest to clearly integrate the idea
of sustainable urban and social development.
Since 2003: a more diverse
approach of urban renewal
Preparing for European integration and the changing condi-
tions of urban policies led to the formulation of new principles
in urban renewal. New ways of thinking have emerged. On a
global level the necessity of social sustainability of urban devel-
opment is emphasised, in parallel to what emerges as the idea
of “social urban renewal”. This new approach was presented
in a programme document designating three neighbourhoods
subject to social urban renewal pilot projects. Two of these
projects were immediately launched: in Bihari street, Xth dis-
trict, and in the Magdolna quarter, VIIIth district. Here the
renewal was later developed under the form of a long-run
pilot project. In the third area, “Dzsumbuj”, located in the
peripheries of the IXth district, the aim of the project was
altered – the extremely run-down, socially stigmatised buildings
are going to be demolished.
Contrary to a concept of urban renewal limited to the physical
revitalisation of urban areas, social urban renewal is focussing
on the integration of deprived neighbourhoods through
diverse social, economic and cultural programmes, and on the
gradual improvement of their physical environment with the
involvement and participation of its inhabitants. Social urban
renewal became integrated into the mid-term development
strategy of Budapest, the Podmaniczky programme that was
adopted in 2005. Apart from social urban renewal, other types
of programmes were also developed. Regeneration of public
spaces, squares and streets together with the establishment of
new cultural and tourism functions became a method applied
for the revitalisation of more extended neighbourhoods. Since
2007, in light of the new period of EU programming (2007-
13), urban renewal has been recognised as a major issue in
urban projects. In Budapest, the Magdolna quarter has been
identified as a pilot project for social renewal, and all munici-
palities (districts and the Budapest Municipality) are now
obliged to prepare their integrated urban development strate-
gies in order to access resources in the framework of the
Regional operative programmes (ROP).
The instruments
of urban renewal
Municipalities have their own construction regulations. The
Budapest Municipality determines the general framework, for

instance the maximum surface that can be built in various
areas, while district municipalities are free to have their specif-
ic regulations as long as they abide by the previously prescribed
framework. District municipalities are also mandated to man-
age the real estate stock that is in their property. Following the
dissolution of state housing companies, municipal property
management companies were established in each district, fol-
lowing different institutional structures. In some districts, they
are incorporated into the local government; in others, public
companies based on private law were created for that purpose.
Public-private partnership has been a core element of urban
renewal programmes since the beginning of the 1990s. The
forms of these partnerships are diverse: establishment of a pri-
vate-public company (IXth district); selling of the land to a pri-
vate company (VIIIth district), cooperation with a private
investor who advances the investment (usually used for presti-
gious large scale projects, such as the construction of the
Palace of Arts). Apart from private investment, the Budapest
Municipality manages the main financial instrument for urban
renewal. The Rehabilitation Fund was created in 1994 and its
use was extended in 1997 (see above). The fund has two main
sources of revenue. Half of its financial resources come from
the budget of the central municipality, and another half from
municipal revenues obtained from housing privatisation.
Theoretically all districts are obliged to disburse 50% of their
privatisation revenues into the fund. In practice only a few dis-
tricts fulfilled this obligation and the fund only financed a lim-
ited number of projects (with an overrepresentation of the IXth
district). In addition to subsidies for municipal renewal projects,
the fund also gave direct financing for the renovation of con-
dominiums. With the completion of privatisation of the hous-
ing stock by 2000 the financial resources of the fund have
decreased, the fund is permanently losing its key role.
Apart from the municipal fund, all districts have the right to
settle their own funds contributing to the financing of urban
renewal programmes. These contributions are of various mag-
nitudes and are distributed in different structures in the various
districts. Financial contribution of the central government vis-
à-vis urban renewal remained limited compared to that of
municipalities.
Other actors
of urban renewal
An increasing number of private investors are interested in
urban renewal programmes in Budapest. Most of these pro-
grammes are limited to new construction or to thorough ren-
ovation of buildings of “specific interest” (e.g., prestigious
buildings, former industrial buildings where fashionable devel-
opments, such as construction of loft dwellings can take
place). International companies carry out most of Budapest’s
large real estate developments partly or completely. Some
important Hungarian investors are also engaged in urban
Summary of the Final Report on Budapest, Hungary
renewal programmes, such as the Futureal Real Estate
Development, Ltd. in the VIIIth district.
The majority of construction firms are small- or medium-sized
Hungarian enterprises, usually the successors of former large
state construction companies. Some of the large investors that
are engaged in urban renewal are also dealing with construc-
tion, as Autoker Holding Closed Company for instance, man-
aging major investments in the XIIIth and the VIIth districts.
Hungarian developers are represented by their own associa-
tion, the National Association of Housing Developers (Magyar
LakásépítŒk Országos Szövetsége / MALOSZ).
The number of professional and civil associations is increasing in
Budapest – although their capacities to represent their interests
in front of political and economic decisions are still quite weak.
Condominiums and housing cooperatives have their own asso-
ciation called Professional Association of Housing Cooperatives
and Condominiums) (Lakásszövetkezetek és Társasházak
Érdekképviseleti Szakmai Szövetsége / LETESZ); while the asso-
ciation Association of Tenants and Residents (LakásbérlŒk és
Lakók Egyesülete / LABE) aims at defending the interests of ten-
ants and owners. In recent years, more and more associations
appear interested in preserving cultural, architectural and (less
often) social values. Some of them even apply for international
support. For example, OVÁS! (VETO!), established for the pro-
tection of the old Jewish quarter in the VIIth district, recently
asked for professional assistance from UNESCO to stop the
repeated razing of the neighbourhood’s historical buildings.
15
 Urban regeneration policies in Central and Eastern Europe - Budapest case study
Typology and effects
of urban renewal
As in other Eastern European cities, urban renewal in Budapest is
mainly limited to physical rehabilitation or reconstruction. The
projects vary in terms of aims and methods. Their typology thus
mainly represents different forms of physical renewal programmes.
• The only project that began in the early 1990s was launched
in the IXth district, in an area where all dwellings remained in
public ownership (see above). Here the local municipality could
develop – and later sell – these buildings in cooperation with a
mixed economy public-private company created on the model
of the French Société d’économie mixte (SEM).
• Corvin Promenade is a complex real estate development pro-
gramme with public and private investments. It takes place on
a vast area where houses are being demolished in a run-down
neighbourhood of the VIIIth district. The project is managed by
a public company, owned by the district and the Budapest
Municipality. The company is in charge of studies, of launching
the programme, of negotiating and drawing the terms of ref-
erence of the contract with the private developer and helping
to rehouse inhabitants who are subject to relocation.
• The construction of new condominiums in the XIIIth
district is, as a matter of fact, a real estate investment on a for-
mer industrial area of the city that strongly contributes to the
upgrading of the whole district.
16
• Demolitions and new constructions in the VIth and VIIth dis-
tricts, that are often coupled with local corruption lead to an
anarchical urban development of historical neighbourhoods
located next to the city center.
• Upgrading of public spaces (squares and streets) takes place
in different areas of the city as a form of urban renewal that
contributes to regeneration by increasing the attractiveness of
the respective neighbourhood.
• Renovation of industrial buildings and areas for new uses
(housing, office developments, etc.) is an existing form of
urban renewal in Budapest but it is not analysed in the context
of this study, since there are no such programmes in the neigh-
bourhood selected for the case study (for example, such devel-
opments take place in the IXth, XIth and XIIIth districts).
• Social rehabilitation follows the concept of integrated renew-
al of urban areas, which can be seen in many Northern and
Western European cities (see above).
These projects are located in the VIIIth, IXth and Xth district.
Though the number of urban renewal projects is on the
increase in Budapest, it is still difficult to depict their overall
effects on the socio-spatial structure of the city. Due to a lack
of cooperation between municipalities as well as a lack of a
coordinated assessment of the effects of renewal actions, it
is impossible to measure the impact of urban renewal
processes on the market situation, the economic position or
the social composition of the concerned neighbourhoods.
The only case where social transformation and a change in
the position of the area are already traceable is that of the
rehabilitated neighbourhood of the IXth district, middle
Ferencváros. However, one should remember that the urban
renewal programme began earlier here than in other parts of
the city, as far back as in the beginning of the 1990s.
Nevertheless, on the level of neighbourhoods or within dis-
tricts, some structural effects of renewal can be observed and
some others foreseen on the basis of trends in the housing
market and existing public policies. The urban renewal proj-
ects generally lead to the change of the urban landscape, the
increase of the density of construction and of the height of
buildings as a result of the highly profit oriented character of
these programmes. Increase of property prices is of course
the other important effect of these urban renewal projects –
but still mainly limited to new constructions.
The social effects of urban renewal are scarcely studied in
Budapest. Statistical data are difficult to obtain for small ter-
ritorial units (in addition, the last relevant data with regards
to such an assessment is the 2001 census) and political
actors do not call for detailed studies before launching their
projects. Gentrification and the change of local population,
which are considered as the main objectives of most of the
urban renewal projects in Budapest are often perceptible
although so far not completely achieved. The effects of the
changing of property prices and the demolishing of build-
ings are also visible in terms of the increase of homeless and
disempowered people.

Urban Renewal in the VIIIth District (Józsefváros)
The VIIIth district of Budapest, Józsefváros is located in the
South-Eastern part of Budapest, in the intermediate area
between the city centre and the peripheries. It surface is of
685 hectares. Its origins date back to the 18th century,
while most of the housing stock was constructed in the sec-
ond part of the 19th century. In its inner part, inside the
Grand Boulevard a number of national and municipal-level
institutions were built, together with palaces of the aristoc-
racy. Outside the Grand Boulevard, Józsefváros was tradi-
SEM IX
The company is owned by the municipality of the district and Városfejlesztés
(Urban development) Zrt. (also the majority owner of the district).
Financing provided in public-private cooperation
Capital: HUF51 million (€200,000)
4 employees
The operation of SEMIX is strongly controlled by the district municipality;
Városfejlesztés Zrt. acts as an operational agency to prepare development plans.
The main activities of the SEMIX are as follows:
➔ Taking charge of buildings prior to rehabilitation, management of the renovation
of buildings, selling and renting of rehabilitated dwellings;
➔ Rehabilitation of condominiums with municipal subsidies.
tionally the area of workers, owners of small industries and
retail. Further from the centre, area-consuming functions
and relatively higher-status residential enclaves were locat-
ed. Its population reached its peak between the two world
wars, with 100,000 inhabitants. By that time, Józsefváros,
especially the centre part became one of the most congest-
ed and least prestigious parts of the capital. After WWII, the
area became subject to physical and social decay, due to
artificially low rents, poor maintenance, lack of renewal, the
REV 8
The company is owned by the two municipalities:
the municipality of the district and the Municipality of Budapest.
Public financing only for projects
25 employees
All actions of REV8 are managed and coordinated by the director.
under the supervision of the local mayor
REV8 has a role in strategy making and the development of projects.
➔ In the Corvin Promenade project, REV 8 assisted the municipality in the
selection of developers and in the negotiations with the selected developer.
REV8 undertakes to resettle the inhabitants of demolished buildings.
➔ In the Magdolna project REV 8 is a direct operator.
Summary of the Final Report on Budapest, Hungary
ageing of population as well as the arrival of low-status and
partly Roma families in the 1960s and 1970s. In the 1970s
policies aiming at urban reconstruction resulted in the dem-
olition of part of the housing stock of middle Józsefváros
and the construction of a housing estate, which proved to
be an unsuccessful attempt to stop negative processes. The
so-called Szigony housing estate became a socially prob-
lematic area of the district, while (never fulfilled) plans to
extend the geographical scope of renewal prevented other
parts of the housing stock to be renewed. Urban renewal
has been on the political agenda in the district since 1996.
For the purpose of the management of urban renewal, the
local municipality has created a specific company, REV 8.
REV 8
REV 8 was founded in 1997 as a public company,
owned 61% by the municipality of the VIIIth district and
39% by the Municipality of Budapest. Its mission is to
work out proposals for urban development and urban
renewal strategies and to manage projects. The compa-
ny is an operator-mediator that plays a variety of roles
according to the respective projects they are involved in.
17
 Urban regeneration policies in Central and Eastern Europe - Budapest case study
It acts as a mediator between the municipality and the
investor in one of the ongoing projects (Corvin prome-
nade), and as a direct operator in the other (Magdolna-
negyed).
In the beginning the company consisted of one director
and one employee. A decade later it has 25 employees.
A few of them are employed on a project basis, others
work in thematic areas as specific experts or social
workers. REV8 is financed on a project basis by the dis-
trict municipality. REV8 was also active in the renewal
of the most prestigious part of the district (inner
Józsefváros). Once the area’s increased attractiveness
became perceptible to private investors, the company’s
attention turned to more deprived areas of the district.
Since urban renewal after the transition began in the
IXth district in Budapest, it is interesting to compare
the relevant operational bodies of the IXth district and
Name of the project Number of dwellings
Cordia Premier 180
Cordia Art Residence 55
Fontana 240
City Garden 340
Total 815
5 Source: Interview with Mr. Földi, Futureal Ltd.
18
the VIIIth district, namely SEMIX (IXth district) and REV8
(VIIIth district).
Two projects have been chosen as case studies of urban
renewal in Budapest: the Corvin Promenade project and
the Magdolna social rehabilitation project.
Corvin Promenade project
(Corvin Setany)
The area is situated next to the IXth district, at the intersec-
tion of the inner and middle parts of the VIIIth district. The
idea to transform the neighbourhood emerged for the first
time during the 1980s. REV8 began to work on the project
in the 1990s, but it was only in the 2000s that the project
actually began to materialise. Work began in 2006 and is
expected to last until 2012.
Price in HUF / m2 Selected architecte
330,000 Bálint és Társa Építészek Irodája Kft (Bálint and Co.
Architects Ltd.) leading archtect: Imre Bálint
Nr Gergo Fernezely and Péter Basa
390 to 400,000 M-Teampannon Építész és Mérnöki Iroda Kft.,
(M-teampannon Architect and Engineering Ltd.)
leading architect: Katalin Juhari
Nr CET and GyŒrgy Pàlffy
Source : www.corvinsetany.hu
The project ‘Corvin Promenade’ was launched in 2004
when Futureal Ltd. purchased the ownership of the former
members of the consortium Corvin Plc. The latter – formerly
selected on a tender to carry out the renewal of the area –
proved to be incapable to fulfil this task. It took one year for
the new company to review the strategy of the pro-
gramme. They requested the assistance of various experts
from Hungary and abroad: architects, urban developers,
specialists in tourism and communication and real estate
experts. Futureal Ltd. has two divisions: Cordia Ltd deals
with the housing sector while Development Company Ltd.
deals with other real estate sectors, offices and shopping
centres. Combined, the groups have 100 employees, 80 in
Hungary and 20 in Romania. All the Hungarian employees
(in Budapest) from the holding’s two divisions are involved
in the Corvin project.
Building demolition in the project area is the responsibility
of the local government and plots are sold to the develop-
er following demolition.
Futureal Ltd. is in charge of the preparation of the plots
(provision of utilities) and the programming of the develop-
ment of local services (schools and health care) according to
the number of dwellings to be constructed. The municipal-
ity required the developer to hire unemployed people and
to contract with local SMEs for demolition works and the
reconstruction of roads. The company is also in charge of
the development and maintenance of public spaces.

The operation is divided into separate plots, all of them
being subject of an independent project undertaken by
companies that are selected through tenders5. The select-
ed enterprises are as follows:
• Pillér 2000 Ltd. is a Hungarian enterprise dealing with
structural construction, architectural engineering and build-
ing engineering. It was founded in 1995 from a former
socialist company.
• Magyar Stabil Épító Ltd, is a construction company with
a capital of HUF6 million (€24,000). It was founded in
Budapest in 2002.
• Swietelsky Ltd. is an Austrian company with
5,300 employees and with subsidiaries in several countries
including Hungary. The company is mostly active in public
works (roads, railways, bridges, building construction, civil
engineering). Its turnover was €764 million in 2004-5. The
company is also in charge of the construction of the
Rákóczi station of metro line 4 on Rákóczi Square (VIIIth
district) and a shopping complex and office building on
Blaha square (VIIIth district).
• STRABAG SE with 500 premises in eastern and central
Europe. It has 60,000 employees and a turnover of €11 bil-
lion.
• Local SMEs in charge of demolition and excavation works.
For demolition projects managed by the municipality, local
companies are contracted as subcontractors.
Selling of the dwellings already began in the planning phase.
A part of the Atrium (in the commercial block of the project)
has already been sold to a French investor. Dwellings in the
buildings of ‘Cordia Premier’ and ‘Cordia Art Residence’
have already been sold; in ‘Fontana’ 95% and in ‘City gar-
den’ 80% of the flats have been already bought.
Real estate prices have already tripled in the project area
according to the director of Cordia Ltd. During the past
two years the average price per sqm increased from
HUF330,000 (€1,320) to HUF400,000 (€1,600).
The opinions of inhabitants in the project area and those
living in neighbouring areas, concerning the social
impacts of the project vary. The response to the project
within the professional milieu is also diverse. The social
impact of renewal in the IXth district – namely the con-
centration of low status households leaving physically
and socially deteriorated areas – are often cited by urban
experts as a negative example. The response of REV8 is
that in the IXth district poor people and especially Roma
have been delocalised with practically no regard to their
future living conditions compared with the Corvin proj-
ect, where people are relocated in the vicinities of their
former neighbourhood in better quality dwellings.
Private sector plays a central role in the Corvin project. It also
reflects the weakness of legal and technical instruments that
would be necessary to assure the prevailing of more compre-
hensive public objectives (e.g., social sustainability) in case of
projects undertaken predominantly by private investment.
Summary of the Final Report on Budapest, Hungary
Magdolna project
The Magdolna quarter is a particularly deprived neighbour-
hood in the VIIIth district to the North of the Corvin project
area. The project was inspired by the Birmingham urban
renewal programme and the Soziale Stadt programme in
Germany. It has been chosen as one of the three pilot proj-
ects of social urban renewal in Budapest. The first phase of
the project took place between 2005 and 2008 and the
second one will last from 2008 to 2010.
Its objective is to empower the local population with social
and economic actions (programme components regarding
education, community building and employment) and to
achieve the renewal of the housing stock with the involve-
ment of their inhabitants. In contrast to most renewal pro-
grammes in Budapest, the social renewal aims at keeping
residents in the area.
Magdolna project is an integrated renewal programme that
could not rely on any previous experiences in Hungary. In
fact, it is difficult to manage a programme based on partic-
ipation in a neighbourhood where inhabitants had never
ever been asked before to express their opinion. This
requires fine methods that will need further development in
the second phase of the project.
19
 Urban regeneration policies in Central and Eastern Europe - Budapest case study

The two projects, Corvin and Magdolna are taking place in some be seen: what kind of dwelling will they obtain? Will their living bourhood by maintaining its physical elements and keeping
of the most deprived neighbourhoods of Budapest. In one conditions improve or not? How will they cope with the issue of most of its inhabitants. It is an ambitious objective. The results of
case,demolishing of housing and relocating of inhabitants allevi- relocation? How will they adapt to their new housing condi- the programme, and its second phase being launched in the
ated the poverty. The future of relocated households remains to tions? The second project aims at the transformation of a neigh- coming months, are not discernible yet.

The Corvin Promenade project

The context • An Atrium that will contain offices, a shopping centre and entertainment services;
22 hectares in a deprived area of the VIIIth district • A science park;
12,500 inhabitants in 2003 • A pedestrian street (‘promenade’) alongside the new constructions.
A relatively high proportion of public housing stock (about 40%) and many small Project budget
dwellings having no basic amenities. • On behalf of the municipality of the VIIIth district: HUF17 billion (€68 million);
The project • On behalf of the Budapest Municipality: HUF3 billion (€12 M);
Out of the 2,500 public and private dwellings,1,100 to be demolished • On behalf of the developer Futureal Ltd: HUF9 billion (€36 M) as the price of the
and 1,400 to be renovated. land and HUF1 billion (€4 M) as the price of the construction of the promenade.
500 households will be relocated: 230 tenants of municipal flats and 370 owners. Expected multiplier effects
REV 8 is in charge of resettlement. HUF125 billion (€500 M) private investment is expected to be attracted
Resettlement occurs in two ways to the area.
• For tenants of municipal flats: another municipal flat or compensation The socio-cultural dimension of the project is managed
• For owners: compensation by two associations
Components of the project Grund8 and West Balkan, which are going to move into a block of three
• 815 new dwellings to be constructed in four phases, and sold at a price of €1,300 rehabilitated buildings. A café and a local museum will be opened to complete
to €1,600/m2, corresponding to the highest prices registered in the district – a high the already established children’s park. Several activities, concerts, exhibitions
price with respect to the Budapest housing market; and theme-based evenings will be organised.

20

Magdolna project: the first project of social urban renewal in Budapest Population
Population
13,262 inhabitants in 2003, in especially underprivileged conditions. The area
comprises almost 15% of the district’s population but 47% of the social subsidies
are concentrated here. Twenty to thirty percent of the households are Roma.
The built stock is comprised of 3-4 storey houses, some of them built in
the Art Nouveau style, while others are one-storey houses with small internal
courtyards.
5,564 dwellings with 42% of municipal housing, with a low level of comfort and
buildings that are in poor condition.
The project
REV8 is the developer working for the municipality, in direct contact with the
inhabitants of the buildings affected by the project. The project has seven
components:
• Rehabilitation of housing: inhabitants empty and clean the cellars and partici-
pate in adding plants to the courtyards. REV8 assures the improvement works
(replacing of doors and windows, installing intercoms) for a price between
HUF50 and 100 million (€200,000 and €400,000) per building, depending on
the number of flats. In the second phase of the project 19 buildings will be
involved, 12 of them are municipal properties, and 7 are condominiums.
• Redevelopment of public spaces: renewal of the neighbourhood’s central
square, Mátyás square (in the framework of an INTERREG project) and of the
surrounding streets.
Summary of the Final Report on Budapest, Hungary
• Establishment of a communal centre in an empty factory building: complete
restructuring of the building next to Mátyás square. The objective of the centre
is to host cultural, educational and recreational activities.
• Education: reconstruction of a school attended mainly by Roma children; intro-
duction of new programmes in order to facilitate and improve students’ reading,
speaking and writing capabilities.
• Prevention of juvenile delinquency: actions for children and teenagers,
training for social workers and cooperation with the police.
• Employment and economic activities: the aim is to help Roma residents set up
companies; premises for the use of such enterprises are made available by the
local municipality in exchange for their rehabilitation.
• Community, medico-social and socio-cultural development: provision of support
to inhabitants and associations in order to empower them to reach their goals.
• Project’s budget:
- First phase (2005-2007): HUF821M (€3.3 M) out of which HUF690M (€2.76M)
was financed by the Budapest Municipality and HUF130M (€520,000) by the
district municipality, an additional HUF18 M (€72,000) from EU sources and
HUF10M (€40,000) from the National Committee for the Prevention of
Delinquency.
- Second part (2008-2010): HUF2.2 billion expected (€8.8M) for a pilot programme
for ‘integrated social rehabilitation’ in the framework of the Regional Operative
Programme of the Central Hungarian Region.
21
 Urban regeneration policies in Central and Eastern Europe - Budapest case study
Key findings of the study
Withdrawal of the state
Privatisation and transfer of the state’s competences to local
governments (carried out in part in order to decrease the
state’s burdens) have had many consequences (abandon-
ment of public policies, increased position of the private sec-
tor, fragmentation of public management and low co-ordi-
nation). Certain important components of decentralisation
however did not appear in the new system . For instance the
intermediate levels of territorial administration are weak:
counties have been weakened in favour of local govern-
ments, while the situation of regions is still uncertain. Local
governments became major stakeholders in spatial develop-
ment by obtaining widespread authorities and competences
often without insufficient financial potentials.
The state has withdrawn from local management, from
the co-ordination of local interests and of planning. From
a central authority, it became one of the stakeholders of
urban and regional development. For more than a decade,
all direct intervention of the state in housing policies was
missing. Public housing stock had been transferred to local
governments. Since 2000, the state has returned to the
policy area with a new housing policy concentrating on
supporting the purchase of new housing on a personal
basis (e.g., direct support for purchasers, supported loans,
22
etc.) The improvement of the existing housing stock still
occupies a very modest position in central housing policies.
Privatisation of housing
Housing stock transferred to local governments has been
massively privatised, in line with the 1993 Act on Housing.
Most of the dwellings were sold to the tenants who occu-
pied them. According to the 1993 Act, half of the privati-
sation revenues of the districts had to be transferred to the
Rehabilitation Fund of the Budapest Municipality. The
majority of districts did not fulfil this obligation, which is
one of the reasons of the actual depletion of the fund.
Privatisation was advantageous for a great number of ten-
ants who became owners of their dwellings for a very low
price. But the process had very negative effects as well. The
purchased dwellings had not been properly maintained in
the previous decades and many new owners did not have
the means to remedy this problem. In the preceding years,
municipalities contributed to the further drop in the
public rental sector since the number of abrogated public
dwellings (e.g., due to demolitions to clear plots for new
private constructions) exceeded the number of newly
established public dwellings (e.g., in the VIIIth district).
The specific situation
of Budapest
Budapest is in a specific situation in the country resulting from
its size, its special administration and its very central role. The
city nevertheless suffers from the decrease of its population
resulting from natural loss, outmigration (mainly to the suburbs)
and ageing, while its neighbouring settlements are still grow-
ing, mainly as a result of suburbanisation.
Budapest has a unique administrative system, where the
Municipality of Budapest and its districts are independent local
governments. The major problem of the system is related to the
lack of co-ordination between the strategies of the districts, as
well as lack of co-ordination between the district level and the
central municipality. In this context no coherent urban policy
can be adopted as all actors are behaving according to their
own specific interests, while they do not have strong obliga-
tions in terms of co-operation.
The transition period, following the 1989 transformations
including the reorganisation of public administration is about
to end. It can also be considered as a learning period, when all
urban entities could define and develop their own instruments
and way of intervention with regard to urban development
and renewal. A number of questions can also be raised con-
cerning the inter-municipal exchange and co-operation.
Decentralisation is compliant with current European policy prin-
ciples, but one might admit that decentralisation in Hungary

was pushed to the extremes. Restructuring of territorial admin-
istration seems to be inevitable in the future: it could be an
objective to be realised with the help of European policies.
Urban renewal
and giving priority
to new construction
The term urban renewal in Hungarian is mostly used as a term
for the physical regeneration of neighbourhoods6. The major-
ity of urban renewal programmes are based on the construc-
tion of new buildings on empty plots in the historical centre or
on abandoned brown fields. New constructions are often pre-
ceded by demolition, without any previous strategy concern-
ing the overall area.
Since 2000, several new strategic documents have been
adopted that indicates the growing attention of local authori-
ties for urban renewal. In these documents urban renewal
appears as one of the main challenges of urban, economic and
social development of Budapest that constitutes a main com-
ponent of its competitiveness on a European and more specif-
ically, an Eastern and Central European level. Nevertheless
these principles are still not converted into concrete measures
based on the coordination between the districts and the
central municipality. For the moment the resources of public
bodies applicable for urban renewal are scarce, therefore the
6 In French the expression “renouvellement urbain” covers a more complex process of urban renewal.
role of public-private partnerships remains a central issue. The
role of the operators – i.e., organisations acting as intermedi-
aries between the municipalities and the private stakeholders –
is still not defined despite a wide range of experiences regarding
public-private cooperation. In certain districts important projects
took place in the past fifteen years, some of them already have
visible effects in the urban and social structures of the affected
neighbourhoods. The case of the IXth district had often been
evoked as the major, if not unique reference for these pro-
grammes. This programme includes the gradual rehabilitation
of the area based on the intervention of a company created by
the municipality and other, partly private stakeholders, follow-
ing the example of the French “société d’économie mixte”. It
attracted a growing number of private investments and
achieved the gentrification of the area. The former local inhabi-
tants have been displaced. The urban renewal programme in
the IXth district is now followed by two different urban renewal
programmes in the VIIIth district: Corvin Promenade and
Magdolna.
The first one consists of the demolition of an entire area, and
selling the land by the municipality to a private developer to
construct an entirely new neighbourhood including housing,
offices, commercial space and a scientific park. Inhabitants of
the demolished dwellings – partly tenants and partly owners –
are either financially compensated or relocated to other
municipal flats (some in newly built houses).
The second project is situated in the vicinity of the first one, and
consists of an integrated project of social renewal, the first one
Summary of the Final Report on Budapest, Hungary
of this kind in Budapest.The Corvin Promenade project has
clearly defined objectives: restructuring the social composition
of the quarter, increasing of local income and transforming the
neighbourhood’s image. In the case of the Magdolna project,
the objective is to maintain local inhabitants in the neighbour-
hood, to make them participate on a voluntary basis in the
physical renewal of their buildings and to offer them some
improvements regarding the shared utilities in their buildings.
In the VIIIth district the same operator manages the two proj-
ects. The latter has two different ways of intervention accord-
ing to the cases. In the first case its role has been the promo-
tion of the project in order to attract private investors and then
to serve as an intermediary between the developer and the
municipality. In the second case it acts as a direct operative
agency of the municipality putting into practice public social
and urban policies. This latter case is nevertheless determined
by some important constraints. The area has weak potentials
to attract private investments and the possibilities for public
intervention are also limited. It will be interesting to observe in
the future how these two different projects will operate and
interact next to each other. The two projects are being devel-
oped in two very different patterns concerning the role of the
private sector. The first project is clearly based on private
investment, the second is exclusively based on direct public
intervention. Between the “totally private” and the “exclu-
sively public” model the future will tell us whether a more
mixed or balanced model of private-public cooperation will
emerge through new urban renewal projects.
23
 January 2009 -
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