The housing problem of the new stage of development of the housing relations in Russia

Table of contents: The Kazakh-American Free University Academic Journal №4 - 2012

Selutina Larisa, Saint-Petersburg economic university, Russia
Bulgakova Kseniia, Saint-Petersburg economic university, Russia

Since ancient times dwelling has been not only the center of the private life of a man but also backbone factor of his environment. Comfortable home is an overriding necessity of every family. When it’s not satisfied it’s impossible to speak about people’s positive mental and physical health and, therefore, about their political assessments and about the desire to work for the benefit of the country.

The housing problem didn’t appear in Russia all of a sudden. Its birth can be relatively dated back to the end of XIX – beginning of XX century, when the great mass of Russian empire population lived in unacceptable conditions. Just then, in the beginning of XX century, in 1913 the famous term “the poverty formula” appeared in Saint-Petersburg. It denoted the poorest settlements of workmen who lived in the cellars, barns, basements and flophouses not far from noble, luxurious mansions [6, p. 32].

In 1917 Civil revolution destroyed the institution of private property. According to the decree of Council of People's Commissars from December 14th, 1917 "On prohibition of real estate business", the land and immovable property ceased to be the object of sale. The management system in housing services was based on the principle of dual subordination: to the central government authority and local Soviets represented by the respective executive committees of cities and regions. The most important resources and the real levers of power were in the hands of the government which dealt with them via system of departments under the control and management of communist party.

More than 70 million m2 of housing space were completely lost during the Great Patriotic War of USSR. 25 million people found themselves without hearth and home. For example, Leningrad underwent the following during the siege: 840 enterprises were destroyed, serious damage to property of more than 3 thousands buildings was caused, 78% of medical establishments were phased out, 85% of rolling stock of passenger transport and almost ½ of school buildings. From every 100 m2 of living area 27 m2 had to be rebuilt or repaired.

Postwar years were dedicated to the reconstruction of industry. That’s why the housing needs of the population have reduced to the acquisition of one separate room [1, p.7].

Housing policy of Soviet Union was characterized by balancing approach. At the expense of these organizations the major portion of flats was distributed free of charge among the persons on the waiting list and also among enterprise workers, taking part in the house building. Level of housing and public utilities was low and the housing made just 7 m2 of total acres per capita in 1950. It conformed to the level of housing in 1917 and didn’t meet the needs of citizens.

The building boom broke out in the country after 1957 resolution of the CPSU Central Committee about the conversion to the standard design and construction. New cities were appearing along with the objects of municipal facilities. However, this stage can be described as the stage of extremely inefficient usage of tight resources, lack of real economic relations between management system, housing sphere producers and consumers. Authorities of the country made attempts to improve the construction system in Soviet Union but in vain, because they had influence only on separate elements of economic mechanism and didn’t change it fundamentally.

In the end of 80s the decision about the transition from planned economy to market economy was taken. Organizations began to function on the principles of self-financing. Public revenues began to be formed from tax proceeds. The necessity of housing sphere reforming was stipulated not only by political-ideological but also economic changes in the country.

It is known that market can’t function without the developed institution of private property. That’s why the question about the transition from the public domain to private property was inevitable as far back as at the stage of perestroika, when Soviet Union economy came to grips with the necessity of gradual transition from single public domain to the diversity of its forms. At this conjuncture new approaches to the housing problem have been developed:

• soviet system of housing distribution has been abolished;

• community facilities were given to the private organizations and it has resulted in the increasing of utility bills rates;

• population has got opportunity to buy and sell immovable property;

• privatization of housing stock has begun.

• functions of government control of housing sphere have been reduced.

In 1991 the law "On privatization of housing stock in Russian Federation" was adopted. It became really a momentous event in the real estate market. Just then official market of housing buying and selling arose.

Privatization (from Latin "privatus" – private) is the paid or free process of transferring public or municipal property to the property of private persons or organizations. Under conditions of market economy citizens acquired independence in choice of housing and its acquisition. New housing policy presupposed that citizens should have their own incomes for the purchasing and building of housing and its maintenance. In these new conditions the government was obliged to implement support of disadvantaged population. It was adopted by legislation and fixed in Constitution of Russian Federation: according to the article 40, stated that everyone has a right on housing. Low-income people and people in need of housing are granted with social housing from state, municipal and other housing stocks for free or at charge [2, p. 74]).

Privatization program has been lasting in Russia more than 18 years and should finish by March 1st 2015.

By the end of 2011 Russian Federation housing stock made up 3288 mln m2, which includes 2374 mln m2 (72% of total acres) in urban settlement, 912 mln m2 (28% of total acres) in the countryside. Total acres of living accommodation per capita in the end of 2011 in Russian Federation was 23,0 m2. It has grown on 19% in comparison with 2000 [4]. But its growth is partly provoked not only by quantity of housing but also by population decrease. By the end of 2011 86,3% of housing stock was in private property, 82,9% of which transited to the citizen’s private property as the result of privatization.

On the assumption of the improvement level of the housing stock, by the January 1st 2012 housing stock considered as dilapidated and dangerous was 99,0 mln m2. It is 1,5 times more than in the year 2000. Its share also increased from 2,4% to 3,0% (table 1).

To some extent, the problem of ramshackle housing stock can be solved by its complete overhaul and reconstruction. By the beginning of 2011 282,2 thousands blocks of flats (8,8% of the total amount) needed complete overhaul. During 2011 35,8 thousands of block of flats were repaired and it’s 12,7% of demand. Repair works of blocks of flats were carried out with financial support from the Fund of housing and public utilities.

Table 1- Dilapidated and dangerous housing stock of Russian Federation


2000 2009 2010 2011 2011 as % for
2000 2009 2010
Whole dilapidated and dangerous housing stock, mln. m2 65,6 99,5 99,4 99,0 150,8 99,5 99,6
particularly: dilapidated 56,1 80,1 78,9 78,4 139,8 97,9 99,4
Dangerous 9,5 19,4 20,5 20,6 in 2,2t. 106,2 100,5
Specific weight of dilapidated and dangerous housing stock,% 2,4 3,1 3,1 3,0 - - -

As a result of privatization, Russia became an owner of high share in housing property - 86.3% [4]. Free privatization determined present diffi-culties with the housing market:

• Un readiness of citizens to the legal consequences of privatization: not all owners of housing can afford maintenance of their property;

• deep ownership inequality: limited part of the population got housing of high quality, the floor space of which exceeds social norm few times, while the majority of the population became proprietors of dilapidated housing and should pay for the capital repairs;

• purchasing of ready housing by citizens having surplus of cash assets with the aim of hoarding. no more than 19% of population has enough financial means to buy housing under existing prices and more than 60% of families are not satisfied with their housing conditions.

According to the Housing Code, Russian citizens admitted needy in housing should get housing due to the Municipal Housing Agreement. Municipal Housing Agreement in Russian Federation is an agreement according to which residential properties belonging to government and municipal housing stock are given to citizens in need of housing improvement for permanent residence.

In a number of developed countries housing rights ensuring responsibility is laid on the government bodies. In other countries government body solves two problems at the same time. Firstly, it works out terms of housing provision for every citizen. Secondly, it carries out measures, encouraging population to buy housing on their own [7, p.11].

Depending on the share of social housing in the total volume of housing stock, member states of the European Union can be divided into three groups:

1. States with the share of social housing no more than 30%. The Netherlands fell into this category.

2. States with the share of social housing ranged from 15 to 25%. This category includes: Sweden, Austria, Poland, Great Britain, Denmark, France and some other countries.

3. States with law level of social housing 1-7%. As an example we can name Belgium, Ireland, Italy, Germany, and Hungary.

This situation is demonstrated in figure 1

In Russian Federation 2,82 mln. families were registered as in need of housing at the beginning of 2011 (5,1% of total number of families). 181 thousands families (6,4% of registered families at the beginning of 2011) got residential properties and improved housing conditions for the last year. Total number of families registered as in need of housing in 2011 reduced on 0,7% and made up 2,8 million by January 1.01. 2012 [4].

Figure 1. Share of social housing in the total volume of housing stock in some countries

Currently, 10% of Russian citizens are in the housing waiting list but time of waiting can exceed 20 years. More than 70% of country citizens can’t afford to buy housing or take a mortgage due to the low incomes. After approval of Housing Code citizens’ income began to be taken into account to put them on the list for housing conditions improvement, while previously they were put on the waiting list on the basis of square meters number for one person. Thus, more than 60% of population in need of housing conditions improvement found themselves in difficult situation: a person can’t be considered indigent due to the level of his incomes but to rent a flat from private individual is too expensive for him.

The hope for housing problem solving appeared owing to signed in May 2012 presidential decree on measures of ensuring citizens with affordable and comfortable housing. The government was charged to ensure affordable leased housing market grouping and development of noncommercial housing stock for people with low incomes. In August 2012 the government of Russian Federation approved list of measures for creating of noncommercial lease system. Mr Minregion’s conception suggests building of noncommercial housing stock. Noncommercial lease can became effective substitute for existing social rent which doesn’t meet the needs of population. In total from 2013 to 2030 it is intended to build 76,3 mln m2 of leased housing, or 1,8 mln of flats with the area of 42m2 [5, p. 1].

In December 2012 there was developed Project of Federal law “On introduction of amendments to the Housing Code of RF and separate legislative acts of RF in the section about regulation of relations in noncommercial rent of residential properties” (hereinafter referred to as draft law). Draft law was necessary to correct a deficiency of legal regulations connected with noncommercial rent of residential properties. Enactment of such a bill is indispensable condition of mentioned measures realization and corresponds to assignments, contained in statutory legal acts of the president and government of RF. The draft law introduced to government for response offers to add the idea of rent of block of flats to the Housing Code. In such building all flats will belong to one owner and he will be able to lodge tenants on the ground of contracts of short-term, noncommercial or social contract of engagement.

The purpose of this draft law is carrying out of the following tasks:

- Improvement of general legislative regulation of rent of residential properties institution, which includes introducing of institution of rent house and rent relations regulation in such a house.

- Improvement of conceptual and terminological framework and classification of housing stock depending on the purpose, in connection with introducing of new housing stock (housing stock of noncommercial use) and new kind of contract (contract of noncommercial rent of residential properties);

- Legislative control of noncommercial rent of residential properties and corresponding new type of noncommercial rent contract.

Standard contract of noncommercial rent will be made for the term from three to ten years; short-termed contract for temporal housing – for one year or less. One will have to register in waiting list in the municipality to rent a flat in such a block of flats. It is not allowed to inherit the tenant-right. One more difference between noncommercial and social rent is that in the case of contract repudiation, a family will be evicted without giving other housing.

Thus, we can give the following definition of the term “noncommercial rent”. Noncommercial rent is a housing rent for the term from three to ten years, assigned for people with low incomes but who don’t belong to low-income groups

Noncommercial rent contract of housing renter can be defined as:

- Noncommercial organizations being owners of these housings, created by the government body or local government body.

- Government body, local government body or organizations authorized to be renters of housing from government or municipal housing stock on behalf of proprietor of such housing.

- Other persons, in cases fixed by law.

There are few types of landlords in the developed European countries. Table 2 shows characteristics of social landlords in individual countries [8].

Table 2 - Characteristics of 'social' landlords in individual countries

Country Owner % of housing stock Ownership Control Financial goal
1 2 3 4 5 6
Belgium Housing association 5 Private Public Non-profit
Public landlord 1 Public Public Non-profit
Private person or company <0,5 Private Private Profit
France Public landlord 7 Public Public Non-profit
Public-private landlords 10 Private Public Limited profit

Private person or company

21 Private Public Profit
Ireland Local authority 7 Public Public Non-profit
Housing association 4 Private Private Non-profit
Private person or company <0,1 Private Private Profit
Netherlands Housing association 33 Private Private Non-profit
England Local authority 10 Public Public Non-profit
Housing association 8 Private Private Non-profit
Private person or company Not available Private Private Profit
Germany Cooperative 6 Private Private Non-profit
Municipal housing company 7 Public Public Non-profit
Private person or company Not available Private Private Profit

Some social rented dwellings is almost all countries are owned by public landlords such as local authorities and private non-profit (or limited profit) organizations like housing associations. It is only the Netherlands that there are no longer any public landlords in the social sector. The Dutch municipal housing sector underwent a process of privatization during the last decades of the 20th century. This involved the transfer of the housing owned by the municipal housing companies to the private non-profit housing association sector.

In England and the Netherlands, the actives of housing associations are not necessarily restricted to social renting. In both countries, the unregistered subsidiaries of housing associations many also operate commercially. Additionally, housing associations in the Netherlands rent out more expensive dwellings to higher-income groups.

In our opinion, in Russia municipal Housing and Utility Sector, as well as specialized noncommercial organizations, controlled by special federal low and profit organization with bounded norm of benefit can act as owners of rent houses. Public authorities, local authorities and big enterprises and organizations can be founders of as specialized noncommercial organizations.

Realization of the draft low in Russia will require government’s participation in noncommercial lease fund, main aspects of which can be defined as:

- Change of Russian Federation legal framework (Civil, Housing, Tax Codes of RF and other federal lows).

- Regulation of rental payment.

- Provision of social and noncommercial lease to disadvantaged groups.

- Backing of lessons providing housing of noncommercial and social lease.

- Attraction of public and private organizations for leased social housing control.

- Free connection of social and noncommercial rented houses to infrastructure.

- Backing of rented housing building.

- Allocation of free plots of land for block of flats building for social and commercial rent.

- Attracting of private investors to the building of rented housing.

- Organization of financing funds of housing building and renting.

- Amendment to the tax laws with the aim of utility bills reducing for the tenants of noncommercial rent.

According to the data from the Institute of city’s economy, if the state take upon itself financing of 40% investment expenditures on the building of houses and interest payment, budgets of all levels will spend on rented housing creation 1,44 trillions roubles for 27 years. Rent payment for two-room flat with an area of about 40 meters in Saint-Petersburg should average 8300 roubles. If the state deposit only indirect investments (for example, it provides land for free), rent payment will be approximately 13500 roubles a month [3].

From our point of view, realization of major investment projects and programs is possible within the frameworks of social development programs. It’s connected with the following circumstances:

- Every investment program is carried out in the frameworks of economic, legal and organizational system of the region. Therefore, they can’t be considered out of its investment structure, social and economic environment.

- Organizational and investment problems of the project or program can’t be solved without regional authorities support and use of tax and legal instruments of regional authority bodies.

- Investment programs can present real mechanism of region’s economy reformation and its surmounting the crisis.

- Economic, investment and social priorities formed and accepted by regional legal and executive bodies of Russian Federation, can not only give a support to investment projects but also secure by warrants of the respective level.

- Let’s define the main problems, impeding the development of housing sphere and sector of noncommercial rent in Russia:

- Mass and free privatization of housing, which put emphasis on appearing of housing owners class and change population’s preferences in the favor of housing ownership.

- Weak crediting of housing building and developer’s financing at the expense of direct investments of future owners of the flats in the blocks of flats.

- Sector of rent housing switched over to shadowy tax zone.

- Upsetting parity between charges of living space owner and living space rent charges, worsening of structures of property categories and, consequently, lack of economic incentives for commercial economic sector development.

- Delay of the free privatization end and, as consequence, the lack of motivation to build municipal noncommercial rent housing.

The process of housing privatization will end in March 2015. In our opinion, this event will be additional motivation for the development of building of noncommercial rent houses.

Development of rent housing market is profitable not only for the state but also for property developers. Last few years dramatic reduction of effective demand on flats is evinced. It can result in market collapse when there will be nobody to buy housing.

That’s why the variant of noncommercial rent market development will allow to build millions of square meters of housing necessary for population and will reduce social tension.


1. Ayzinova I.M. Housing problem in three dimensions // Prediction problems - 2007. – ¹ 3.

2. Ivanchenko V. Social implication and perspective of housing credit // Economist - 2008. – ¹ 11.

3. Mishina E. Housing rent will be cheaper // Russian newspaper – 2012. – 12 (5975). Russian annual statistic. M, 2012.

4. Sapozhkov O. The end of free privatization // Komersant – 2012. – ¹164 (4949).

5. Sindalovskiy N.A. Legends and myths of Saint-Petersburg – Spb.: Norint, 2002.

6. Sokolova T.V. State housing policy: social dimension. – M, 2009.

7. Marietta Haffner, Joris Hoekstra, Michael Oxley, Harry van heidjen «Bridging the gap between social and market rented housing in six European countries», IOS Press BV, 2009.

Table of contents: The Kazakh-American Free University Academic Journal №4 - 2012

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