Main factors influencing the post-socialist urban development in

post-socialist urban development in Budapest

II.3.1. Administration and planning

Administration and planning in Budapest is complex.

Collaborative working is difficult for many post-socialist countries and Hungary is no exception. Act 65/1990 was passed on August

3 1990 and the system of councils was replaced by democratically elected local governments. According to the Act, Budapest has a two-tier public administration. The city is divided into 23 districts (before 1992 22) which have their own resources and are governed by an independent elected body. Powers and responsibilities are divided between the Municipality of Budapest and the 23 districts.

The Municipality of Budapest is responsible for public services, such as transport, and it provides cultural, educational, health and social services that cover more than one district. It makes it difficult for planning in Budapest to be co-ordinated. A Regulation Framework on Urban Planning for the whole capital was prepared in the early 1990s by the Municipality, and the district development plans were supposed to be consistent with this framework.

However, the arrangement did not prove to be very successful from the outset, as the two governments could easily block each other’s development plans, e.g. the Municipality of Budapest through its zoning authority and the district governments through their right to issue building permits. The 1994 modification of the Act on Local Governments gave the Municipality more power in strategic planning issues that were relevant for the whole of the capital city (Tosics, I. 2006), but conflicts were still common. Overall city planning and management is fragmented and the districts tend to focus on their own autonomous interests.

II.3.2. Economic restructuring

Soon after the change of political system the old structure of the Hungarian economy collapsed and it underwent profound changes.

Large state companies were privatised and/or disintegrated. The decline of industry was marked in Budapest lowering the share of industrial workers from 36 to almost 20 percent of the active population between 1990 and 2001.

The impact of the economic breakdown was tremendous

II. Budapest a Central European metropolis: historical trajectories and port-socialist transformation

1990s. After 1990 Budapest and its metropolitan region became the magnet of capital investments. Due to the aforementioned conditions causing its high competitiveness, Budapest became a major target of FDI basically for its size, favourable geopolitical position and good accessibility from Western Europe.

The special position of Budapest could also be attributed to the high concentration of human and financial capital, the highly developed infrastructure and means of production. Typical for the weight of Budapest in the Hungarian economy that in 1996 35 percent of the national GDP was produced here, and the per capita GDP was 181 percent of the national average. Since then the weight of the city in the national economy has not decreased at all. In 2008 the city produced 38 percent of the Hungarian GDP, and the per capita GDP was 221 percent of the national average.

In certain creative sectors of the economy (e.g. cultural industries, R&D, business services, ICT) the role of Budapest is extremely dominant (Kovács, Z. et al. 2007).

II.3.3. Transformation of the housing market

In the transformation of housing market privatisation of public dwellings played a very important role. Before 1990 public housing made up 51 percent of the total dwelling stock in Budapest. In most of the centrally located districts housing was owned predominantly (95–97 percent) by the state. Privatisation of state housing in Budapest meant a pure ‘give away’ type of privatisation to sitting tenants, at a very low price. Most public dwellings were sold for between fifteen and forty percent of the estimated market value depending on the physical conditions of the dwelling. Further forty percent discount was offered to those who paid in cash, which meant that the great majority of the public dwellings was sold for nine percent of the market value. Due to these circumstances the privatisation of public housing was very rapid in Budapest and in the first half of the 1990s a large segment of the public housing sector became privatised.

The logic of privatisation favoured the better-off families, since tenants (now ‘buyers’) of best quality dwellings with desirable

location gained the biggest amount of value gap. These changes in the housing market had far reaching ecological implications. First of all, households had more opportunity to actualise relocation desires as they became owners, secondly, new conditions allowed a greater plurality of values and promotion of self-interest. Factors in housing preferences of households like security or accessibility of green spaces gained great importance. The outcome was a rapid differentiation of the housing market.

While public housing became residualised and served as a shelter for urban poor, new residential areas for the better off were developed. Geographically, public housing became increasingly concentrated in traditionally low-status areas (Józsefváros, Erzsébetváros). In a survey conducted in summer 1995 we found that households who remained in the public housing sector were on average less educated, with lower incomes and they had much higher probability to become unemployed than other housing classes (Kovács, Z. 1998). All these changes on the housing market had their imprints on the socio–spatial pattern of Budapest.