Hungary’s bold family policy and the story of Anna and Peter
Let me tell you the story of an average, young, Hungarian woman, Anna, who is 28 years old, earned her university degree in law four years ago, has been in a loving relationship with 32 year-old Peter for three years and lives in Debrecen, a major city in northeast Hungary.
Anna works at a medium-size company, loves her work, earns an average salary and lives in a very small, rented apartment with Peter, who works in town as a high school teacher. Anna and Peter want to get married and to have a large family. Anna, because she herself was raised with her two brothers, wants to give this same experience to her children. Peter, on the other hand, because his parents’ marriage didn’t work out, was raised by a loving single mother as an only child and has always wanted to know what it means to have brothers and sisters and a long-lasting relationship.
If Anna and Peter get married and decide on having a large family, what can they count on in Hungary?
Right after they marry, they will become eligible for a tax allowance for two years. This additional 120,000 HUF (378 EUR/year) will increase their joint savings. They dream about moving into their own apartment, one that is big enough to raise even three kids and also has a small garden or terrace. What kind of help can they count on? Anna and Peter can benefit from the government’s housing subsidy program called CSOK, which offers them a 10 million HUF (31,500 EUR) grant that they do not have to pay back and a 15 million HUF (47,200 EUR) mortgage loan at a guaranteed interest rate below 3 percent.
Anna and Peter don’t have much savings themselves and their parents can’t offer financial help, either. From this 25 million HUF (78,700 EUR) they could already buy a small house near Debrecen, but the flat they dreamed of costs 5 million HUF (15,700 EUR) more. If they choose to buy this one, can they count on any other help from the government? After July 1, 2019, Anna and Peter can take advantage of the new program called Babaváró Támogatás (Subsidy for those Expecting a Baby) and will be eligible for another 10 million HUF (31,500 EUR) as an interest-free, general purpose loan.
Anna and Peter worry that they won’t be able to make monthly payments that add up to 172,000 HUF (540 EUR) (the monthly loan payment for CSOK is 72,000 HUF (227 EUR), for the Babaváró Támogatás is 50,000 HUF (157 EUR), and Anna has also got a student loan to pay back that carries a monthly payment of 50,000 HUF (157 EUR)), so they decide to wait until their first baby is on the way.
When Anna has reached the second trimester of her pregnancy, the couple applies for the Babaváró támogatás and for CSOK with the accompanying mortgage loan. So they receive 35 million HUF (110,170 EUR) to buy the home of their dreams and still have 5 million HUF (15,700 EUR) to save. Because their baby is on the way, they can keep the 10 million HUF (31,500 EUR) from CSOK support and also don’t have to begin reimbursing the “Babaváró támogatás” for three years. Thanks to another government assistance program, Anna will also have a three-year-long suspension of reimbursement of her student loan. This way, the couple will only have to make monthly payments on the CSOK loan, which amounts to 72,000 HUF (227 EUR) a month.
In the meantime, Anna and Peter have also become eligible for a family tax allowance that increases with the number of children they have, so if they decide to have a third child, they can save up to 99,000 HUF (312 EUR) per month. (The family tax allowance amounts to a tax reduction of 32 EUR per month for one child; 126 EUR per month for two children; 312 EUR per month for three children; and 104 EUR per month for each additional child.)
If they realize their dreams about having a large family, they not only benefit from the family tax allowance but they also don’t have to pay back any of the Babaváró támogatás, so Anna and Peter can keep the 10 million HUF (31,500 EUR) without having to reimburse it, and their CSOK loan will also be reduced by 5 million HUF (15,700 EUR). Anna’s student loan will also be completely forgiven. The couple only has to pay back the 10 million HUF (31,500 EUR) loan with its discounted, state-subsidized interest rate fixed below 3 percent.
Does the Hungarian government tell Anna and Peter what to do with their lives? Of course not! But if young Hungarians dream about living in a loving, strong family with children, they can count on our support. We never tell anybody what to do, nor whether and when they should have children and how many. We simply support young people should they decide to have a family.
If Anna would like to stay home to care for the children, and if they can afford it, she may stay home for three years with each child. If they so decide, Peter can also take advantage of this opportunity; moreover, from January 1, 2020, even one of the grandparents becomes eligible for the childcare fee, if Anna and Peter both work and choose this option. If they want, they can choose to send their children to daycare, and during these years, Anna may ask her employer for part-time employment, and the employer is required by law to offer her that possibility.
If Anna and Peter eventually decide to have a fourth child, then Anna will become exempt from personal income taxes for the rest of her life.
Our aim is not only to offer financial assistance to Hungarian families but also to create a family-friendly environment at each stage of life. We recognize the essential role of parents who raise their children in a responsible way. Their commitment is valuable to our whole community.
To provide some context, Hungary has endured a demographic downturn for over 37 years. Our population is decreasing and ageing. Yet Hungarian people maintain a very family-oriented nature. Young Hungarians, studies show, would like to have at least two children on average, but the fertility gap ranks among the highest in Europe, and the fertility rate stands at only 1.49. We are seeing positive signs, though. This fertility rate is a 20-year high, and so is the number of marriages, which has increased by 43 percent in the last eight years while the number of divorces fell by 23 percent. The employment rate of women has hit an all-time high, and the number of abortions has fallen 30 percent since 2010 to an all-time low.
The Hungarian government considers families one of its highest priorities, which is why we have double our budget for assistance to families over the last eight years. Adding up to 4.8 percent of GDP, we consider this an investment, not an expenditure, because there is no better investment if we want to make our community, our economy, and our country even stronger.