The Orbán government gave a wonderful Christmas present to families who either already have three plus children or who are planing to have at least three children in the next ten years. A couple, as long as they are young enough, can apply for a very generous subsidy for a newly built house or apartment even if at the moment they have no children at all. But there is a caveat: they must be officially married. Those people who have been worrying about all those children born out of wedlock can rest assured. The government is defending the institution of marriage and the traditional family structure even if currently half of Hungarian children are being taken care of by a single parent, usually a mother.
The rules and regulations of this generous package are spelled out in great detail. Those who put it together tried to think of all possibilities, including in vivo insemination and its possible failure as it impacts the contract signed by the state and the couple who agree to produce at least three children in ten years. Almost all the major internet sites summarized the law, which appeared a few days ago. I read the version that appeared on Index. Put it this way, the hopeful couples should begin studying the law because it will not be easy to follow all the rules that will regulate their lives over the next ten years. For those of us who are not interested in participating in this undertaking, these details are not really important. What is important is the country’s financial investment in this demographic scheme. The young couples who decide to embark on this latest brainchild of the Orbán government will most likely hit the jackpot. But will they break the country’s bank?
Although couples whose goal is to produce two children will also get free money, 2.6 million forints, I would like to concentrate here on those with three children either on the ground or still only a twinkle in the eyes of the parents and the state. Here the stakes are high: 10 million forints gratis and 10 million forints in a low interest (under 3%) loan as long as the apartment or house is new construction and of substantial size.
How much will this cost the taxpayers? No one really knows because, as usual, the government neglected to conduct an impact assessment as Ágnes Hornung, undersecretary in charge of finance at the National Economic Ministry, perhaps unwittingly admitted in an interview with Magyar Idők when she said that they are “currently studying the possibilities of [the program’s] financial sources.” They don’t seem to have any idea how many people will take advantage of it, but if current calculations by economists are correct, one would be a financial fool not to participate. Zoltán Balog was the only cabinet member who dared to guess the number of applicants. He talked about more than 100,000 couples. This would involve a financial outlay of more than a trillion forints.
This talk of subsidies and low-interest loans guaranteed by the state brings to mind another Fidesz project initiated in 2000 which a few years later had to be scrapped because it put too great a burden on the budget and added to the country’s indebtedness. Moreover, the project didn’t really alter the demographic situation.
Let’s take a quick look at some of the statistics of families with children. In 2011 there were 615,815 families with one child, 449,261 with two, 131,321 with three, 29,043 with four, and 15,686 with five or more children. So, families with three or more children number 176,000 while another 449,000 already have two children. If all the people with three children were to receive ten million forints, that would come to 1,760 billion forints, which is more than all the revenue the government receives from personal income tax in a year. And we didn’t talk about families with two children who just might be tempted to produce a third. Moreover, as it is, these families are eligible for 2.6 million forints even without a third child, which must be added to any calculation. Then there are the very low-interest loans for which the government is responsible. If we add all this up, the cost will be enormous. This plan poses serious risks to the country’s financial well being.
The government, of course, wants to weed out certain undesirable elements whose reproduction is not in the interest of the state. They are the poor, the unemployed, and, as we just learned, those in the public work program. The last group counts as employed only when the Orbán government wants to boast about the fabulous improvements in the unemployment figures. But even without these restrictions only those who are better off will be able to afford to sign the contract. A newly constructed house must be at least 90m² and an apartment 60m². They cannot consist of only smaller rooms; there must be at least one room that is 12m². And the house has to have central heating.
Origo reported on some calculations done by Bankmonitor that show how much couples who take advantage of this new program will gain at the expense of the taxpayers. Bankmonitor took as its examples two apartments, one in Budapest and the other in Debrecen. Both are fairly large: 75m². The average price of such an apartment in Budapest is 40,275,460 forints, while in Debrecen it would sell for 28, 777,620 ft. The new owners of the Budapest apartment will have to pay 20,275,460 out of pocket while the Debrecen couple would need only 8,777,620. Then Bankmonitor compared the monthly mortgage expense at a very low interest rate to one bearing the current 6.9% official rate, which resulted in another 6,786,043 ft savings. One also has to consider the difference between the monthly mortgage payment and renting. The final word is that the Budapest family will be able to own a house at 37% of its market value while the Debrecen couple will have a house at 42% of its market price. As Origo said, “it is worth rushing because the stakes are high.” Mind you, the paper also added: “This is the world’s most generous assistance for the sake of a third child. Can it be sustained? We don’t know.”
If large numbers of people can scrape together the money for a down payment, I have my doubts. To keep it going would need a level of economic growth that is not in the cards right now. In fact, all estimates predict slower growth in the next few years. If, on the other hand, only the affluent can take advantage of this program, it will further widen the gap between the haves and the have-nots, with the poor subsidizing housing for the wealthy.