4 30% and, by late 1997, a number of municipalities across the country have acquired initial experience with targeting mechanisms designed to provide housing support for the most needy segments of society.

Since early 1997, housing reform has increasingly moved into the ceniter of the GOR's reform efforts. Present policy calls for a reduction in stages of housing subsidies so that cost-recovery from all but the neediest tenants will be 100% by 2000. But this more than three-fold increase in the household contribution to financing the costs of housing over the next five years will almost certainly not be matched by a commensurate increase in household incomes. Thus, the share of housing costs in the average household budget will steadily increase. It remains to be seen whether this policy will survive the political pressures to reschedule cost-recovery increases that will undoubtedly be brought to bear on it from various quarters.

# Towards a **More** Efficient Allocation of the Russian Housing Stock

The allocation of the housing stock that was part of the Soviet legacy to the Russian Federation was determined over decades by essentially non-market forces and was characterized by a high degree of economic inefficiency. Thus, while increased recovery of housing costs has exacerbated for many the pain of transition, to the extent that this tendency represents the removal of gross distortions in the housing sector, it has played a positive role in helping to stimulate the development of the housing market and the reallocation of the existing housing stock to a more efficient state.

An indication of just such a move towards a more efficient allocation is found in the analysis of "mover households", that is, those who moved at some point in the years under study. As is detailed in Section 2 below, survey data revealed that a certain part of the mover households moved from their original apartments to apartments that were in some respect inferior (smaller, farther from the center, in lower quality buildings, etc.) in reaction to the economic forces affecting them. They benefit by selling their superor apartments to a buyer who can pay the prce, and use the money to buy their new housing. The housing market in this scenario allows poorer households to maximize itheir benefit from their initial allocation of housing, and to find housing more in keeping with the household's ability and willingness to pay for it.

It would be misleading, of course, to present the Russian housing market as fully developed and exhibiting the attributes of a mature housing market in a stable market economy. ]Indeed, one of the most important findings of this paper is that of the various demographic groups identified in the analysis, two disparate groups emerge as most likely to have pdvatized their apartments. Pensioners constitute by far the largest group of "privatizers" in all cities in which surveys were conducted. The other, much smaller group consists of the relatively well-off who intend to improve their housing situation by selling their apartments with the intention of acquiring better housing.

These two groups have essentially opposite effects on the development of the Russian housing market. The pensioners, older people who live on modest, fixed incomes, are not inclined to move. They are "outsiders" to any dynamic processes taldng place in the formation of the housing market and they are motivated to privatize their housing primarily by the desire to bequeath it to their children or grandchildren. The dominant position of pensioners among those who have privatized their housing has a negative effect on household mobility which, despite relatively high rates of privatization, remains low in Russian. Low mobility in turn retards the advancement of the housing market in Russia. The other group-the "leaders" in the process-is younger, has a higher income by definition and can be expected to become active participants in the housing market.

Of significance in the examination of issues pertaining to privatization is a look at the reasons why many renters in Russia have thus far chosen _not_ to privatize their apartments. The concept of housing "ownership" was not particularly relevant in the Soviet Union, and particularly not so in Russia since most of the country is urbanized, and most urban residents lived in apartments that were directly or indirectly owned by the state. Aside from a limited system of apartment exchanges, there was no housing