Russia Land Reform and Private Enterprise
Sources: The Library of Congress Country Studies; CIA World Factbook
The economic reforms of the post-Soviet era brought drastic and problematic changes in the Russian housing system. In the first years of that period, state support for new construction dwindled dramatically, making enterprises a more important source of financing in the absence of large-scale private investment. Privatization of existing housing increased substantially in the mid-1990s, and more types of dwelling became eligible for privatization. The rate of new construction did not keep pace with demand, so waiting lists continued to exist, and the beginning of landownership law reform encouraged construction of fully private housing by Russians who could afford it. However, in mid-1996 the average Russian still spent less than 3 percent of his or her budget on rent because a large share of Soviet-era state housing subsidies remained in place.
The establishment of a full market system in housing was complicated by several factors. First, the notion of private ownership of land and housing was diametrically opposed to the concepts at the base of Soviet society, so the advantages of privatization were not immediately understood--especially as low-rent state housing continued to exist alongside expensive private property. Second, high inflation priced most Russians out of the housing market, especially as the inflation-adjusted incomes of most social groups declined. Third, continuing monopolies in construction materials, finance, and urbanized land kept construction costs very high; the first steps toward privatization were taken in the building industry only in 1993. Finally, a relatively high percentage of existing housing stock remained in the public sector, which promised to remain a significant housing owner through the near future.
After a relatively slow beginning in 1992, privatization of housing stock increased dramatically. The Soviet privatization law of 1989 began the process, which was continued in Russia by the 1991 Law on Privatization of Housing. But the newness of the laws, the lack of administrative procedures, and the continuing attractiveness of low rents in state-owned housing limited the total number of units privatized in 1991 to about 122,000 units, or 0.3 percent of urban housing stock in the Russian Republic. By the end of 1993, more than 40 percent of urban housing stock (about 8.6 million units) in Russia had been privatized, and the total was between 55 and 60 percent one year later. Often the privatization process involved renters buying the apartments in which they were living. An important step in this process was a 1992 constitutional amendment that allowed free distribution of housing, broadened the categories of housing that could be privatized, and simplified privatization procedures. In the mid-1990s, the growing problem of how to house military families formerly domiciled outside Russia caused the Ministry of Defense and agencies dependent upon it to withhold their housing stock from privatization; in 1993 defense budgets financed 15 percent of Russia's total housing investment.
Availability of new private housing improved somewhat by the mid-1990s, after a sharp decline in the first post-Soviet years. In 1993 the output of new housing was 57 percent of the peak Soviet-era output reached in 1987, and in the early 1990s the ratio of unfinished projects to usable housing output was more than three to one (compared with 84 percent in 1988) because incentives promoted new starts rather than completions. Between 1986 and 1992, the number of names on housing waiting lists increased from about 8 million to some 10 million, mainly because in that period Russians began to change jobs and places of residence more frequently and because family units became smaller. In 1993 more than 21 percent of urban households were on waiting lists for housing. The waiting lists began to shrink in 1993, and by the end of 1994 about 9.1 million Russian households (including single-person households) were registered for housing. Inflation also played a major role in housing availability; in 1994 the price of a typical Moscow apartment of fifty-five square meters increased by five times over the 1993 average. A housing allowance program has been established to bridge the gap between rental costs and family incomes.
Because they felt the direct pressure of longer waiting lists and the support costs associated with the movement of people into their jurisdictions, local housing authorities lobbied against abolition of the internal passport (propiska; see Glossary) system that had restrained internal migration in the Soviet period. In 1993 the system was officially abolished in all jurisdictions except Moscow and St. Petersburg (see Social Welfare, this ch.).
Housing maintenance has been problematic in the post-Soviet era because local housing authorities, to whom full maintenance responsibility was shifted in 1991, have reallocated funds from maintenance to more pressing needs. Meanwhile, individual attitudes toward routine maintenance have been slow to compensate for this shift. In Soviet-era collective living quarters such as urban high-rise apartment buildings, which housed as many as 1,000 people, housing managers were expected to uphold minimum standards of cleanliness and service. In the 1990s, those complexes still house people from all economic levels (a survival of Stalin-era policy), but, given the newly fragmented condition of Russian society and economic distractions facing tenants, initiatives by residents often give way to disregard for voluntary maintenance of common property. Housing officials demand bribes for routine services, and housing complexes have become increasingly shabby. In some cases, the suspicion and anonymity of the Soviet era have been reinforced among people of disparate backgrounds forced to live in a more cramped environment than in Soviet times. However, in some apartment buildings condominium associations have been formed to advance the common welfare of families in a building or neighborhood.
Land Reform and Private Enterprise
Experts consider reform of landownership and condominium laws an important step toward full privatization of housing. Privatization of land, both urban and agricultural, has been a controversial issue for Russian legislators; there is a strong body of opinion that land is fundamentally public property that cannot belong to any single person. In the late Soviet period, new landownership laws confused rather than simplified the legal status of various types of land. Consequently, housing privatization has been hindered because ownership of a residence may not include ownership of the land on which it stands--a disparity rare in Western property law. Legislation passed in August 1993 legalized the sale of land, allowed villages to give away plots of land to individuals, and removed the space limitation on private homes on collective farms. Although dwellings built on suburban garden plots technically still could be no bigger than a summer cottage, such land increasingly was used to build year-round housing, thus expanding the number of available residences in Moscow and other cities.
In general, Moscow was the center of land-use innovation because it was the center of new commercial activity and foreign influence. The constitution of 1993 recognized for the first time the right to private ownership of land, a departure that experts believed would have a major impact on overall real estate ownership. In late 1993, a presidential decree established Russia's first set of provisional condominium regulations, which were considered an important clarification of housing ownership policy. But additional legislation, drafted by the Yeltsin administration to expedite landownership, was blocked in the State Duma in 1996.
Especially in Moscow, the emergence of Western-style enterprises associated with housing construction, such as finance companies, real estate offices, plumbing suppliers, and lumberyards, heralds more growth. The rapidly rising cost of existing apartments has fueled a brisk property business, as speculators buy privatized property in the hope that prices will continue to rise. In the mid-1990s, private houses began to appear rapidly just outside the ring of Soviet-era high-rises that surrounds Moscow. According to a 1995 report, prices for private land and housing in Moscow ranged from US$900 for an unimproved small plot to US$300,000 for a four-bedroom villa in a compound with security guards. As of mid-1996, mortgage loans were not yet offered by the Russian banking system, so buyers had to pay cash. Many Russians build their own dwellings, bribing city officials and contractors when necessary and collecting materials wherever possible. The demand for materials has prompted the emergence of numerous building supply stores and a parallel rise in the price of materials. Thus, although many Russians remain on waiting lists for existing housing, others have begun what they hope will be a Western-style progression from a first modest dwelling to something larger. The same divergence has appeared in housing as in other aspects of socioeconomic activity: individuals with financial resources or unusual initiative have taken advantage of the new opportunities of the 1990s. Those not so fortunate remain dependent on state housing subsidies.
Data as of July 1996
NOTE: The information regarding Russia on this page is re-published from The Library of Congress Country Studies and the CIA World Factbook. No claims are made regarding the accuracy of Russia Land Reform and Private Enterprise information contained here. All suggestions for corrections of any errors about Russia Land Reform and Private Enterprise should be addressed to the Library of Congress and the CIA.