The financial constraints of municipalities in historical and pandemic-related context
The privatization of the real estate property of the local governments has always been an issue of mismanagement and corruption in Hungary since the post-socialist regime change. With the pandemic and the consequent budget cuts for large municipalities, this process speeded up. Selling municipal property is usually an easy way to supplement the budget, but the decision making process is not transparent enough to provide the necessary guarantees for efficient economic transactions. Therefore, municipal assets are usually privatized below the market prices, which has a self-undermining effect on local governance. Selling real estate on low prices is often a consequence of decision making shortcuts and information loopholes in asset management that produce multiple negative effects on the performance of public tasks.
The assets disposable for local governments to carry out ambitious social housing projects and to revitalize public premises by offering local entrepreneurs business-premises are liquidated. K-Monitor conducted a research on the local asset management regulations and the legal-political framework of how this privatization process goes in different municipalities. Based on the research, policy recommendations will be made before the 2024 municipal elections to highlight good and bad practices and initiate discussion with local officials that can either catalyze local policy change or initiatives for changing the Housing Law that is one of the main reasons for underselling municipal real estate. Building on K-Monitor’s ongoing municipal transparency agenda (‘This is the minimum!) and our conscious efforts to promote and deepen citizen participation in local policy issues, K-Monitor advocates for a more strategic approach toward asset management and municipal policy making in general.
As the programs and projects of the 2021-27 programming period and the ones financed from the EU Recovery and Resilience Facility are still under regular scrutiny in Hungary, we see a window of opportunity for our recommendations to make a difference during negotiations. Pressure by the EU resulted in the set-up of new institutions such as the Integrity Authority, the Anti-Corruption Task Force (in which K-Monitor participates as a member) as well independent civil society organizations have been invited to participate in the monitoring committees for the new EU programmes. By joining such platforms K-Monitor can ensure that the issue of local governance is on the agenda during the design of future programs. The findings from the research informed our public comments on the state of local governance.