Tenant satisfaction with public housing management: Budapest in transition

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Abstract
Poor maintenance, low rents, and high levels of occupants’ dissatisfaction with their housing have been hallmarks of state‐rental housing in Hungary and other countries in Eastern Europe. The introduction of private management has been touted as an efficient way to improve services and increase tenant satisfaction, thereby paving the way for higher rents. This paper uses a new data set for January 1992 for dwellings in Budapest which were state rentals in January 1990, the majority of which were still rentals at the time of the survey, to analyse the impact of private management on tenant satisfaction and willingness to pay. The central conclusion of this analysis is that the introduction of private management significantly improves the satisfaction with maintenance services of occupants of units owned by Budapest district governments and now typically managed by the public IKV management companies. Similar results were found for occupants of units privatised in the past two years. We take this to mean that private firms are providing more services more efficiently. Remarkably, the increase in monthly fees (compared with state‐administered rents) associated with private management are modest. This and other findings suggest a three‐part housing reform strategy: (1) a rent increase to finance improved services; (2) a major shift to private firms to provide management services; and, (3) introduction of a housing allowance programme to protect poor households from the full impact of rent increases and to make the rent hikes politically more acceptable.