Although one might not expect this, theState Duma rarely votes inunison. However, this week saw such anoccasion, when all 444 Duma deputies voted yea toextend theFree Housing privatization extension. Not anunexpected turn ofevents; thevote toextend housing privatization is not thefirst nor thelast if one is tojudge fromhistory.
TheRussian free housing privatization process might just be acase oftheworld's lengthiest privatization process— starting in1991 after thebreakup oftheU.S.S.R. when theRussian Federation passed legislation allowing residents ofmunicipal, federal andstate-owned industry housing topurchase their units virtually free. Even early on, when it was implemented only inMoscow andafew other cities, theprogram yielded disappointing results andkept giving bad results till thepresent day. Intheprogram's first year, theauthorities failed totransfer anything close toplanned quotas ofstate-owned housing units tocurrent residents. However, theprogram's early disappointing results as well as thefollowing two decades ofcontinuous underperformance oftheprogram were not enough topersuade theauthorities toconsider alternative approaches tothedifficult issue ofsorting out thehousing market or realize benefits ofpotentially high home-ownership levels. Thus, Duma extended free housing privatization until March 1, 2015 and, how things are doing— they might just do it again.
This week's extension is thethird since 1992, allowing residents ofstate-owned housing toprivatize their units without paying fees or full taxes. Thefailure ofthis process has repercussions totheRussian economy beyond mere statistics (that should not be ignored either). As long as themajority ofremaining housing stock is not transferred fromthestate toprivate owners, meaningful development ofthehousing sector cannot follow.
This, inturn, reflects badly onRussia's mortgage market already facing aslowdown due toincreased interest rates andtheinsurance industry. Another aspect affected is thedevelopment ofthelegal system andlegal issues ofownership that are so often hailed as amajor roadblock inRussia's economic development.
With themortgage market facing aslowdown, it will most probably be substantially fewer people that will be able torealize theprivatization oftheir housing units before thenew 2015 deadline andnot everyone remaining as President Putin expects. Finally, issues inhousing privatization are often seen as giving rise toinequitable distribution ofhousing assets. With prospects ofunderpriced utility prices rising, thehead oftheDuma's Housing Policy, Galina Khovanskaya, is very right when considering this apremier social goal toachieve intheshort term. What Russia does not need is more inequality, even between themiddle andlower social strata. According todeputy Khovanskaya, theHousing Policy Committee is considering different ways topursue free housing privatization— here's hoping that one ofthem works.
The views expressed in opinion pieces do not necessarily reflect the position of The Moscow Times.
