The Housing and Real Estate Market Advisory Board (LITT), established in 2019 at the initiative of the National Bank of Hungary (MNB), published its forecasts and recommendations on the residential and commercial real estate market in January 2020. Their study identifies four key objectives for the direction of development.
The first is to increase the number of newly built dwellings, the second is to ensure affordable housing for all through the development of a business rental sector, the third is to reduce the administrative burden on the commercial property market and to stimulate more effectively the construction industry and the domestic production of building materials. In this blog article, we look at ideas for the re-regulation of tenancies for housing.
LITT also pointed out that the market price of Hungarian apartments has risen significantly in recent years, partly due to Hungarian and foreign buyers buying these properties for investment rather than for housing. In contrast, the number of new dwellings has not increased sufficiently. The rise in residential property prices has also brought with it a rise in rents, making it significantly more difficult for many individuals who do not own their own property to secure their housing. Therefore, LITT considers it very important to increase the number of rental homes in the country and to promote the regularisation and promotion of tenancy.
This could be done by providing a reduced VAT rate for long-term rentals, which could boost business renting. The possibility of tax relief for tenants below a certain income or for employers who support letting was also highlighted. A sensitive issue in tenancies is the system of security deposit transfers, which could be ensured by setting up a "Good Tenant List" or by establishing a public guarantee scheme.
In our view, the security of tenancies can be strengthened not only by re-regulating the financial aspect and introducing discounts, but also by ensuring that properties are in an acceptable technical condition for human habitation in all respects and that they are monitored. Examples from abroad show in many places that state regulation and control are present at a much higher level in the rental market, forcing landlords to act properly towards tenants when concluding contracts and checking the technological suitability of properties.
It would be useful and provide greater security for tenants if they could obtain an independent person's certificate on the technical adequacy of the property and the reliable and safe functioning of the utilities and systems in the property before the tenancy starts, similar to the energy performance certificate check.
It would also be worthwhile to re-examine the legal regulation of tenancies and to adapt the provisions on typical problems that can be identified in current practice in the course of disputes in a way that is acceptable to the parties.
A new approach to the regulation of tenancies, from a legal, technical and financial point of view, could provide a more secure solution for housing for a large section of society.
Dr. György Zalavári LL.M.
Ecovis Zalavári Legal Hungary
Lawyer | Mediator | Corporate Law and Data Protection Specialist
gyorgy.zalavari@ecovis.hu