EVALUATE fieldwork in Hungary – an update

The EVALUATE team has been undertaking extensive fieldwork activities across Eastern and Central Europe over the past few months. This has involved interviews with over 200 ‘expert’ informants, an extensive analysis of documentary evidence, and a survey with approximately 2500 households in eight urban districts. A policy brief containing some of the initial findings of the research can be found here. In the first of four updates on this process, we report on the context and nature of our work in Hungary.

Energy poverty is a major problem in Hungary. Estimates indicate that a significant fraction of its population – 10 to 30% of households – were subject to this condition as of the end of the 2000s. Data from the Hungarian Central Statistical Office show that since 2009 domestic energy expenditures take up more than 15% of the average household’s income, a percentage well above the EU average. Unsurprisingly, by 2011 almost 80% of Hungarian households were devoting 10% of their annual income or more to pay for domestic energy bills according to EVALUATE unpublished calculations based on Household Budget Survey microdata. These figures are indicative of the pressure exerted by energy expenditures on the budget of Hungarian families. They hint at the possibility of a widespread – perhaps pervasive – problem of domestic energy affordability in this Central and Eastern European nation.

In this context of overall concern about high (and in the past rapidly increasing) domestic energy costs, policy developments are a key feature of the Hungarian case study. Acknowledging the threat posed by utility expenditures to the purchasing power and welfare of households as well as their potential for winning popular support, the ruling party FIDESZ put forward at the end of 2013 a policy explicitly aimed at reducing by decree the price of energy and other household services (see table). For communication and electoral purposes, these series of government decisions was referred to as the rezsiharc or ‘battle of the utility bills’. Their implementation started a few months before the April 2014 elections that resulted in FIDESZ repeating its two-thirds supermajority in the Hungarian Parliament. This policy is being now referred to as rezsicsökkentés (reduction of utility bills) and so far has resulted in a more than 30% reduction in the current prices of the main energy carriers in the course of two years. The political intention of this measure has been critically interpreted as a sign of the socio-political capture of utilities and the regulator, and a number of shortcomings in addressing the vulnerability of Hungary energy poor households has been previously discussed in this blog.

Table 1: Utility and regulated services price cuts decreed by the Hungarian government in 2013-2014. Source: Pásztor, 2014; The Orange Files, 2013

  Utility costs affected Decreed % of reduction in utility costs Date of implementation
First cut Household gas, district heating and electricity 10% January 2013
Second cut Water, sewerage and waste disposal 10% July 2013
Propane gas (LPG) 10% July 2013
Sewerage, gas and chimney-sweeping fees n.a. July 2013
Household gas, district heating and electricity 11.1% November 2013
Third cut Gas 6.5% April 2014
Electricity 5.7% September 2014
District heating 3.3% October 2014
Waste disposal 10 to 15% 2nd half of 2014

In spite of the significant governmental efforts to control the price of energy, there exists no official definition of energy poverty, and there has been a lack of coordinated strategy to deal with it. Government funding for energy efficiency measures has been inconsistent and insufficient, with a 2014 survey finding that only 7% of those implementing energy-related renovations received state support. Anecdotal evidence collected during research interviews conducted for the purposes of EVALUATE in winter 2015 shows that state energy efficiency programmes have not always targeted vulnerable households in the past. Such is the case of a government scheme subsidising with state funds the substitution of domestic boilers, which in the case of Budapest primarily benefitted wealthier Buda districts II and XII. Commenting on this particular case, István Bart, director of the Hungarian Energy Efficiency Institute, has stated that “the average house owner does not have enough savings, nor is enough creditworthy, so support is primarily received by those who already have money”. This example speaks of the regressive nature of poorly designed energy efficiency measures that exacerbate inequality and vulnerability to domestic energy deprivation along previously existing spatial and socio-economic cleavages.

This complex and quickly evolving reality is being continuously assessed by the EVALUATE project. Hungary is a one-of-a-kind case study that offers the possibility to explore the tensions arising from its government’s decision to take over price setting and control mechanisms in the context of a liberalised energy sector largely dependent on Russian natural gas imports. Up to 50 persons from relevant institutions and organisations are being conducted in several rounds of field visits started in September 2014. Actors and stakeholders being approached for this purpose include key government bodies, academic and research institutions, non-governmental organisations, opposition parties, think tanks, energy companies and local councils. The interviews conducted so far confirm the relevance of rezsicsökkentés as a main factor currently influencing energy vulnerability levels in Hungary, with many non-governmental actors being critical of the design, intention, sustainability and suitability of this price-based governmental policy.

A second main task of EVALUATE fieldwork in Budapest is the examination of energy poverty at the city scale in two selected districts where vulnerability is suspected to be higher. As in the rest of EVALUATE case study cities (Gdańsk, Prague and Skopje), one inner city and one suburban district comprising three main building typologies representative of post-socialist cities (historical buildings, family homes and prefabricated multi-apartment blocks) were chosen. In Budapest, additional selection criteria were income and real estate price levels combined input from local experts and a literature review. In each of the two selected districts a 300 household energy poverty-specific survey is currently being delivered in collaboration with the Budapest-based Critical Urban Workshop. The two case study areas are:

  • Apartment blocks in District VIII (photo by Sergio Tirado Herrero)

    Apartment blocks in District VIII (photo by Sergio Tirado Herrero)

    District VIII, a dense inner city quartier mostly comprised of multi-family residential buildings built before World War II (bérlakás), with presence of some large post-war socialist pre-fab residential estates. With a complex social structure, traditionally it has been considered one of the poorest districts although it also contains some high income areas currently subject to gentrification in some parts around Blaha Lujza tér and inside Pest’s Grand Boulevard (Nagykörút). A significant share of its population is Roma. With a population of 76,250 (census 2011) and an area of 6.85 km2, it has a population density of 11,131 inhabitants per km2

  • Apartment blocks in District XIX (photo by Sergio Tirado Herrero)

    Apartment blocks in District XIX (photo by Sergio Tirado Herrero)

    District XIX, a suburban area in South Pest well connected to the city centre. It is almost entirely composed of two main building typologies: single-family houses and prefabricated socialist housing states from the 1980s. Income levels and real estate prices are below most parts of Budapest city centre with the exception of Wekerletelep, a settlement built in the first half of the 20th century following the principles of the garden city. The Kispest pre-fab housing state (lakótelep) is the 6th largest in Budapest (12,100 flats, c. 33,000 inhabitants). With a population of 59,055 (census 2011) and an area of 9.38 km2, the population density of district XIX is 6,296 inhabitants per km2.

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