Moscow Debates How to Privatise Housing

Wednesday, September 18, 1991

By Irina Glushchenko

MOSCOW — Until a few years ago, you could still read about it in the Soviet press: families in the USSR received small but comfortable state or municipal apartments on an egalitarian basis for some of the lowest rents in the world. Electricity, gas and other services were provided at minimal cost.

It was never quite like that. The state compensated itself for the low rents and service charges by paying low wages. The waiting lists for apartments stretched out for a decade or more. Housing was often poorly built and maintained. Corruption and favouritism meant that high income earners — and especially, well-placed state or party officials — stood an excellent chance of getting a large apartment in quick time in a prestige district, while paying no more than the standard rents.

Now, the crisis of the housing industry is undeniable. In the first six months of 1991, the amount of new housing space handed over to occupiers was down 21% on the figure for the corresponding period of 1990 — a figure which itself represented a severe fall on 1989.

What is the solution, according to the neo-liberal ideologues who now decide the political line of the Russian government? Privatise! Turn apartment renters into home owners! Create a market in housing and let the laws of supply and demand satisfy housing needs!

Legislation on the privatisation of housing has now come into effect in the Russian Federation. In addition, large cities such as Moscow and Leningrad have extensive powers to decide how the process will go ahead within their boundaries.

In Moscow, however, the privatisation project is running up against serious difficulties.

First, how do you go about transferring ownership of an apartment? The sale of housing at market prices would be extremely unpopular among most Moscow residents, who are in no financial condition to make such purchases. In the few semi-legal housing auctions so far, modest apartments have changed hands for the equivalent of 100 years of the average wage.

"The only people who stand to gain from the privatisation of housing according to the laws of the 'savage market'", the weekly newspaper Glasnost noted in July, "are the rich".

The Moscow City Soviet plans to solve this problem by transferring housing free of charge to occupiers on an area basis. Each resident

will be entitled to 18 square metres "of average quality" free of charge, plus another nine square metres per family; if an apartment is larger than this, or of superior quality, steep payments must be made for the excess. However, these provisions contradict the law adopted by the Russian Federation, and evaluating the quality of housing is no easy matter.

A second stumbling block is maintenance. Most housing in Moscow consists of large apartment blocks. In the West, such buildings are usually the property of a single owner — a local authority, a condominium or a private firm. This single owner is obliged to deal with routine maintenance, repairs and so forth.

In Moscow, a bizarre situation is about to arise. Each apartment block will have many private owners with no particular link between them. Apartments will also be owned by the municipality, the state and various institutions. But provision of maintenance services will remain a monopoly against which the apartment owners will have no real defences. In such circumstances, major repairs to a building could well be catastrophic for the residents, and routine maintenance a difficult and expensive business.

Other unanswered questions surround the question of subsidies. Low rents in the USSR are due to state subsidies, which cover a large part of the costs of keeping housing in habitable condition. Here, to a large degree, we find the reason the authorities are enthusiastic to privatise housing: they lack the money to maintain it.

The new apartment owners will be spared paying rent, but at the same time they will cease to benefit from subsidies. For the state this is a saving, but for many new home owners it will spell ruin. Alexander Popov, a Socialist deputy to the Moscow City Soviet, summarised the situation in a radio broadcast: "The state is trying to shift the burden of expenses onto the population, while presenting this as a blessing".

Not surprisingly, many Moscow residents are less than enthusiastic about privatisation. Fearing that the scheme will prove a fiasco, various leaders of the Moscow soviet and the city administration are now demanding that housing be privatised compulsorily.

As the most coherent opposition bloc in the city soviet, the Socialist Party has spoken out strongly against forced privatisation. The party considers that the privatisation of apartments is acceptable only if it is genuinely voluntary, and if a series of other conditions are met.

First, prospective buyers must be given full information on the problems they are likely to meet. Second, any purchaser must have the right to sell their apartment back to the municipality within three years of privatisation if they cannot afford to maintain it.

Third, the city must acknowledge its obligations to the people who are still on the waiting list for improved housing, and compensate them out of the city budget if these obligations are not met on time.

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