Corruption on the local government level

Corruption is a well known phenomenon in local governments. Here the most common scenario is that a mayor (and, in the case of Connecticut, our former governor) ends up in jail for taking kickbacks from contractors. I'm certain that this kind of corruption is also widespread in Hungary, but the latest corruption case centers around selling properties in the hands of local governments. The governments sold them on the cheap to middlemen who then passed them on to foreign investors for fabulous prices. Some of the money ended up offshore, some apparently went into the pockets of local politicians.

Here is a bit of socialist history. During the Rákosi regime the government nationalized practically all real estate. Every family was entitled to only one dwelling (house or apartment) and if that dwelling was, according to the authorities, "too large," the authorities forcibly put another family in with the original owners. Both families shared the kitchen and bathroom.

In Budapest there were some real estate investors who owned three- or four-story apartment buildings which they rented out. When these buildings were nationalized, the owner and his family (assuming they lived in the building prior to nationalization) could keep one apartment often shared with a "co-renter" (társbérlő). Since there was no real owner of all this property the buildings were terribly neglected over the years. By the 1960s and 1970s it became obvious that these state-owned (stolen) buildings should be sold to individuals. Just to give a  bizarre, but I'm sure not unique, example here is a family story. My family had a piece of property that was nationalized but for some strange reason only the building was taken from us, not the vineyard that came with it. We needed a cellar to keep the wine, so the family had to rent it from the state. When the state decided to sell our former property they had to offer it to us first, because by renting part of the building, we had the right of first refusal. Therefore, the state that took the property without compensation offered to sell it back to us for good money. My father was not too keen on this particular bargain and declined! Although many pieces of property, single dwellings or apartments, were gotten rid of this way there were still an incredible number of apartments in the state's hands in 1989-1990.

And now we can return to the corruption case in the VII district in Budapest. After the change of regime these state-owned properties for the most part were handed over to the local governments. The local governments were eager to get rid of some of these apartments, especially the ones they didn't think were particularly valuable. The new buyers were normally the people who lived in them and these people didn't have a great deal of money. Therefore, the local governments  practically gave away less desirable smaller apartments. Some of them, a little more valuable, were passed on to people with connections. For example, Viktor Orbán and his family managed to get a rather large downtown apartment for practically nothing because of his political connections. (The V district was then in SZDSZ hands and Fidesz was considered practically the youth organization of the party at the time.) In less than two years, Orbán "flipped" the apartment for a handsome profit.

Despite the initial inventory reduction the local governments still owned quite a few buildings that they were slowly selling to investors. In the VII district (Erzsébetváros) a certain SZDSZ member of the local district council was in charge of these transactions. His name is György Gál. The interesting thing about Gál that unlike his fellow party members who are considered to be eggheads, Gál has apparently only an eighth-grade education and in his former life was an electrician. In any case, with an accomplice, he is accused of pocketing about 700 million forints. As usual there are different stories that appear in the media and one doesn't really know what is true and what is not, but according to some it is impossible that Gál and his accomplice could do all this on their own. The appraiser was also arrested and some people claim that even the mayor (MSZP) and the town clerk were in on it.

There is a two-bit Fidesz politician, Zoltán Illés, whose "expertise" is the environment although according to some people his expertise is questionable. But he likes to stir up trouble. The district next to the VII is VI (Terézváros) where again there is an MSZP mayor. Illés is now convinced that District VII's real estate dealings are carbon copies of those of District VI. As evidence, he points to the sale of eight houses on Andrássy út. Andrássy út is a particularly beautiful avenue that was built in the 1880s-1890s. Illés claims that these houses were sold way under value. The problem is that almost all the houses on Andrássý út are on the historic register and once a house is a "national treasure" it is almost impossible to sell it for a fair price. The problem is that practically nothing can be changed without or within. According to the mayor of Terézváros there were only three houses in question and not eight and they were sold in the 1990s, way before he became mayor. Moreover, he claims that one of these houses was sold at the time the local government had a Fidesz majority and a Fidesz mayor. Apparently, the houses then were sold for only a few hundred millions and by now one of them is for sale for a couple of billion. How is that possible, asked Illés. Well, first of all real estate prices have gone up tremendously in Budapest in the last ten years or so. And second, they're not exactly flying off the shelves. One of these houses, still in the hands of the original buyer, has been languishing on the market. Apparently the problem is lack of parking.

What I suspect is that something is truly wrong in Erzsébetváros but that it is unlikely that there was anything illegal on Andrássy út. For SZDSZ it is unfortunate that the suspect is an SZDSZ politician. The party has enough trouble without György Gál.

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d
Guest

As a resident and apartment owner in VI district, rightly or wrongly, my impression of local government involvement in the Pest property market is that of corruption on the part of ALL of the major parties- there is blame enough to go around, as with your previous post on the spy files.
This endemic problem is a fundamental problem in hungary that keeps one of the most beautiful city centers in europe looking like WW2 just ended last week, and I regret to see the only reaction on the part of Hungarians is acceptance that power corrupts and as long as they have their little apartment they got practically for free and can dodge paying their house charges while the building crumbles away then let’s not rock the boat.
hungarians deserve better from their government but will never get it till they demand better of themselves.

d
Guest

As a resident and apartment owner in VI district, rightly or wrongly, my impression of local government involvement in the Pest property market is that of corruption on the part of ALL of the major parties- there is blame enough to go around, as with your previous post on the spy files.
This endemic problem is a fundamental problem in hungary that keeps one of the most beautiful city centers in europe looking like WW2 just ended last week, and I regret to see the only reaction on the part of Hungarians is acceptance that power corrupts and as long as they have their little apartment they got practically for free and can dodge paying their house charges while the building crumbles away then let’s not rock the boat.
hungarians deserve better from their government but will never get it till they demand better of themselves.

Eva Balogh
Guest

d: “As a resident and apartment owner in VI district, rightly or wrongly, my impression of local government involvement in the Pest property market is that of corruption on the part of ALL of the major parties”
We agree. It is quite obvious that it was a “joint venture.”

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