As Hungary’s capital and largest city, Budapest has ambitious plans to improve life for its residents through cleaner public transport, energy-efficient housing, stronger flood protection and greener public spaces.
EU funds should help the city administration turn these plans into reality. However, Budapest’s experience with Cohesion Policy – the EU’s main investment tool for supporting regional and local development – shows how difficult this can be when national governments control decision making and access to funding.
New research from the EU-funded ESPON URDICO project shows that Budapest’s access to cohesion funds has been limited by a highly centralised system, where key decisions are made at national level. As a result, projects that directly support EU goals, from tram network upgrades to flood prevention and housing renovation, have faced delays, blocks and uncertainty.
As negotiations on the next EU budget gather pace, the ESPON research on Budapest provides a clear warning for the future of Cohesion Policy: EU investment risks falling short if national governments act as gatekeepers and cities are excluded from deciding where funding goes.
A capital city with major ambitions
Home to around 1.7 million people, Budapest accounts for almost one fifth of Hungary’s population and more than a third of its GDP. As the country’s economic, educational, cultural and transport centre, Budapest is central to delivering both national and European goals on climate action, mobility, housing and social inclusion.
For a city of this scale and importance, EU Cohesion Policy should be a key source of long-term investment, helping to finance sustainable transport, climate adaptation, energy efficiency, affordable housing, social inclusion and urban regeneration.
EU funding has already made a visible difference in Budapest, supporting major investments in metro lines, sewage and flood control systems, modern trams, and other green and social projects that have improved daily life for residents.
There are many EU funded projects in Budapest which can serve as a best practice and a good example.
More recently, EU support has helped finance new trolley buses, new trams, cycling infrastructure and a directly funded housing project that will transform a former school building into near-zero emission social housing.
“There are many EU funded projects in Budapest which can serve as a best practice and a good example,” says Benedek Jávor, Head of the Representation of Budapest to the EU. “For example, we have a project for the transformation of a non-residential building, a former school building, into a near zero emission social housing complex. This reacts to two problems at the same time: climate action and affordable housing.”
However, Budapest’s experience also shows what happens when the partnership principle breaks down.
When funding exists on paper, but not in practice
The ESPON URDICO research shows that Hungary has one of the most centralised Cohesion Policy systems in the EU. Cities have not been assigned Managing Authority or Intermediate Body roles, and the Integrated Territorial Investment tool has not been introduced.
This means that, even when Budapest prepares projects aligned with EU goals, final decisions on funding remain heavily controlled by the national level.
This became especially significant after 2019, when Budapest elected an opposition-led city government. According to the URDICO research, political tensions between the national government and the capital have affected the city’s access to EU funds.
For the 2021-2027 period, Budapest was initially almost excluded from Hungary’s national development plans and operational programmes. Following pressure from the city and engagement with the European Commission, around €750 million was eventually included for Budapest in the approved national plans.
However, this has not translated into full access to funding. By late 2025, only a small number of grant agreements had been signed, only a few projects had started, and many planned investments were still delayed or at risk.
“The approved national plans included close to €750 million for Budapest,” says Jávor. “That was a big success. On the other hand, even though these sums and these projects are there in the operational programmes for Hungary, the practical payments still have serious obstacles.”
He adds: “Sometimes, for example, they modify the operational programmes last minute and delete projects within the city of Budapest, or they create administrative difficulties artificially to make it impossible for the city to apply for EU funding.”
For residents, this means delayed climate protection, slower housing renovation, fewer transport improvements and postponed infrastructure upgrades.
Projects delayed, reduced or blocked
The Budapest case provides clear examples of how centralised decision-making can prevent EU funding from reaching local priorities.
One major example is flood prevention. Parts of Budapest remain vulnerable to flooding, a risk that is increasing as climate change makes extreme weather more frequent. According to Jávor, flood prevention investments were included in the relevant operational programmes, but were later removed by the national government.
“We have some important flood prevention projects,” he says. “Parts of Budapest are still under the threat of floods, and for decades Budapest would like to solve this problem. These were already included in the operational programmes. But at the last minute, the government blocked the city’s access to funding from the programme.”
He warns: “The risk of floods is increasing in the city due to climate change, and withdrawing money from flood prevention projects is really a very risky exercise.”
Without the allocation of major EU funds, the large-scale renovation programme which is really needed in the city cannot be started.
Housing and building renovation are another major area of delay. Budapest faces rising rents, energy poverty and a limited affordable housing stock. The city has prepared plans for municipal apartment renovation, conversion of non-residential properties into housing, heating system modernisation and rent support programmes. However, several housing-related calls under TSDOP Plus had still not been published by late 2025.
“There are important projects for housing, building renovation, energy renovation and energy efficiency,” says Jávor. “We have ready-to-go plans. Some pilot projects based on the financial means of the city itself are launched, but without the allocation of major EU funds, the large-scale renovation programme which is really needed in the city cannot be started.”
Public transport is also affected. Budapest wants to extend and restructure its tram network, supporting cleaner mobility and reducing emissions. But large transport infrastructure cannot be delivered from the city budget alone.
“There are important and major public transport projects which we would like to implement: the construction of new tram lines and restructuring of the tram network in the city,” says Jávor. “But without getting access to major EU funds, there is no chance that the city could start them from its own resources.”
Direct EU funding as a lifeline
Faced with limited access to shared management funds, Budapest has increasingly turned to directly managed EU programmes. These funds are smaller in scale, but they allow cities to apply without depending on approval from national governments.
One of the clearest examples is AHA Budapest – Affordable Housing for All – funded by the European Urban Initiative. The project will convert an unused former school building into energy-efficient social housing, while also testing new support systems for households at risk of rent arrears and energy poverty.
For Budapest, the project is important not only because of what it will deliver, but because of what it proves: when cities can access EU funds directly, they can develop integrated solutions that respond to real local needs.
We tried to get as many directly funded applications as possible, and to bring home as much direct EU funding as possible.
“We tried to get as many directly funded applications as possible, and to bring home as much direct EU funding as possible,” says Jávor. “I already mentioned this near zero emission social housing or affordable housing complex. That is financed from the European Urban Initiative. It is a major project and we believe that it is important.”
Budapest has also launched energy efficiency renovation work with city districts, combining municipal resources, district funding and private capital from national banks. But these alternatives cannot replace Cohesion Policy.
“Without these major infrastructure fundings and access to cohesion money, we cannot launch big scale projects,” says Jávor.
A warning for the next EU budget
Budapest’s experience comes at a crucial moment. As the next EU budget is being negotiated, the European Commission’s proposals for a more centralised model based on National and Regional Partnership Plans raise serious concerns for cities.
If the urban dimension becomes optional, and national governments retain full control over planning and implementation, cities risk being left out of the investment decisions they are expected to deliver. “Cities will be left out from the design of the national plans, but also excluded from the management of the funds and the implementation of the programmes,” Jávor warns.
Budapest shows why safeguards are needed. The partnership principle must be mandatory and enforceable, cities must be involved in national and regional plans, and urban earmarking and direct EU funding for cities must be strengthened.
Without access to these Cohesion Policy resources, we have no chance to implement our plans.
For Budapest, Cohesion Policy remains essential. “Basically, that is the most important source of infrastructure investments and development in Hungary,” says Jávor. “Without access to these Cohesion Policy resources, we have no chance to implement our plans.”
Recent political changes in Hungary now offer a more hopeful outlook. Budapest hopes to build a stronger working relationship with the new national government, using Cohesion Policy to develop sustainable projects that improve residents’ daily lives, from cleaner public transport and greener housing to flood protection, energy renovation and modern public services.
The message from the ESPON URDICO research is clear: Cohesion Policy works best when cities are treated as strategic partners, not as the final stop in a centralised funding chain.
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This article is part of a Eurocities series showing why EU funding matters for Europe’s cities. As negotiations continue on the next seven-year EU budget, our series of articles show why city governments must have a stronger role in designing and implementing key EU funding programmes.
The information shared in this series is based on the findings of the EU-funded ESPON URDICO (Urban Dimension of Cohesion Policy and Other EU programmes) project. This is the first-ever targeted comparative analysis to examine how EU funds support different European cities in delivering both local and European objectives, how city governments use EU investments, and where gaps in EU support for cities remain.
- Read our first article in this series: Investing in Europe starts with cities: What new EU research reveals
- Read the ESPON URDICO project’s full targeted comparative analysis.
- Read the URDICO project’s Budapest case study, presenting an in-depth examination of the city and its engagement with EU Cohesion Policy.
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The findings of the ESPON URDICO research, including the experience of Budapest, will be shared at a high level, MEP-hosted meeting in the European Parliament on Tuesday 30 June, from 09:30 – 12:30. Speakers at the event – titled Urban Dimension of Cohesion Policy – will include Mathias De Clercq, President of Eurocities and Mayor of Ghent; Kata Tüttő, President of the Committee of the Regions, Kadri Uustal, Head of Unit, DG REGIO; and MEPs Gabriella Gerzsenyi, Marcos Ros Sempere, and Gordan Bosanac. Moderation will be led by Eurocities and the Representation of Budapest to the EU. REGISTER HERE.
