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July 11, 2018

THE DEATH OF THE BIRTH DEARTH: Is Hungary Experiencing a Policy-Induced Baby Boom?

In 2015, the government of Hungary announced a major new policy: families would be given generous subsidies to buy or build new homes, and the subsidies would scale up based on their marital status and the number of children they had. This “Family Housing Allowance Program,” or CSOK (the abbreviation of the program’s Hungarian name), gives a maximum benefit to married couples with three or more children, equivalent to a $36,000 grant to buy a new home, alongside a major value-added tax deduction for each home, and a capped-interest loan for part of the home value. These interest and tax benefits are probably worth around another $15,000 to $50,000 per family, depending on the house they buy and their likely loan terms. In other words, for a married couple buying a new house with at least three kids, the value of their total payout could run anywhere from $50,000 to $80,000. Meanwhile, for a couple with just two kids, the payout could be from around $18,000 to $35,000. In other words, that extra kid earns the family somewhere between $15,000 and $62,000 extra dollars. Given that the average salary in Hungary is only around $11,000 to $15,000 per year, an equivalently-impactful subsidy for Americans, based on our higher incomes, would need to amount to somewhere between $40,000 and $250,000.

I’m curious to see if Hungary can avoid going bust on babies without breaking the bank.