CSOK housing support could help build energy efficiency

The government’s plan to support the development of new housing should include measures to encourage the construction of energy-efficient homes.

The unprecedented drive to reduce utility bills for household consumers in Hungary resulted in a price drop of 25%. The aftermath of the “war on private utilities” leaves the Hungarian government dealing more closely with consumers, through the establishment of the First Public Utilities Company (ENKSZ), which took over the task of selling gas to households in Hungary from the private utilities. Now the Hungarian state needs to move from acting as a supplier of household energy services to a manger of households’ energy demand.

The establishment of the Family Housing Allowance scheme (CSOK) in Hungary provides an opportunity to build a sustainable energy system for future generations – if modern energy-efficient building practices are made a condition of qualifying for housing support under the program.

The introduction of the European Union’s new energy efficiency standards (NZeB) offers the potential to significantly reduce homeowners’ energy bills. Implementation of these standards is scheduled for the end of 2018 for public buildings and 2020 for other buildings, including residential. Failure to institute modern EU energy efficiency requirements in the projected building wave of family homes under the CSOK program will keep energy bills high and repeat the shortcomings of the “panel house” program of low-cost, high-rise housing from the communist era. Cheaper gas and electricity are hard to maintain under the Hungarian energy system. It is better to accelerate EU energy-efficient building standards for new homes qualifying for CSOK money and VAT rebates.

The Paks nuclear power plant heralded an era of subsidized Soviet technology, and “cheap” Soviet gas was once shipped here in exchange for Hungary building the gas supply pipeline. In 1994, MOL lost HUF 1.4 billion on Hungary’s gas import bill. In 2004, when E.ON purchased the country’s gas supply assets, the company took over HUF 150 bln in debt. In 2013, when the Hungarian state – through MVM and the Hungarian Development Bank – “bought” back the assets and debt, they held a negative net worth of as much as HUF 355 bln. Now the decommissioning fund for Paks will likely be tapped to subsidize electricity consumption. New EU building standards and EU funded retrofit programs hold the potential to truly reduce Hungary’s future gas bills.

Office market already going green

The Hungarian office market exemplifies the long-term solution for high energy bills. According to Colliers International, 26-27% of Budapest office stock is green accredited. Previous savings in energy costs amounting to 10-20% are projected to have increased to 30% in 2015. Office buildings with green accreditation, such as BREEAM, LEED and DGNB, deliver an average rental price of 6% more than non-accredited buildings, along with higher occupancy rates and 16% higher sales prices. More notable is the impact buildings have on national energy consumption. In Hungary, according to the Ministry of National Development, buildings represent 40% of the primary energy consumption, with residential buildings accounting for 60% of this wedge. Private office owners are saving both money and energy; homeowners should also be able to realize these savings.

The Hungarian government has already committed to the EU to renovate 700,000 residential buildings and 2,400 public buildings by 2020. Conditional lending on energy efficiency standards for the CSOK program and the VAT rebate for new dwellings will speed up energy efficiency as a main component of Hungary’s energy strategy. Improved standards will also reduce the country’s energy imbalance – which is significant. Improving energy efficiency in the Hungarian building sector requires both government action and private initiatives. The Budapest office market represents a “green star” and shows the financial benefit of reducing energy consumption. Qualification for both CSOK and the VAT rebate should be dependent on higher energy efficiency standards. Instead of saddling the children who will grow up in CSOK houses with more energy debt, the government should begin to build them a sustainable low-cost energy system.

Michael LaBelle is an Assistant Professor at the Central European University (CEU) Business School and the Department of Environmental Sciences and Policy. Sergi Moles Grueso is a PhD Candidate in the Department of Environmental Sciences and Policy. This column is part of a continuing series of opinion columns from experts at the CEU Business School in Budapest. The opinions stated here do not necessarily reflect those of the Budapest Business Journal.