3

# INTRODUCTION

The central purpose of this paper is to present a systematic review of the wealth of sociological information pertaining to housing in Russia and the development of a housing market there that has been collected by means of surveys over the last several years and that is largely unknown outside of Russia. The author has been personally involved in much of the research whose results are presented here. A particularly important contribution to research in this area was made by the World Bank's Enterprise Housing Divestiture Project, which was managed by Dennis Whittle, Mari Kuraishi and Lev Freinkman, to whom particular thanks must go for stimulating discussions and organizational support.' The analysis presented in the paper focuses on the process of housing privatization and the development of the housing market in Russia through 1996. This new market, still in the process of formation, has emerged from the privatization of the existing housing stock, from sales of newly constructed apartments 2 and from the reduction of housing subsidies. The findings presented here are based mainly on the results of household surveys conducted in 1992-1996 in Russian cities, and generally reflect developments in different types of urban settlements throughout Russia.<sup>3</sup> The survey data also allow for analysis of the demand for housing and household mobility in Russia.

A brief overview of the problems of housing sector reform in post-Soviet Russia will serve as the backdrop to the detailed examination of the household survey results that constitutes the bulk of this analysis.

In the early 1990s, the Govemnment of Russia was preoccupied with the tasks associated with macroeconomic stabilization and consequently, until recently, housing issues were not a real policy priority. To the obvious extent that housing is a basic need of the entire population, the political sensitivity of reform of the housing sector has been tremendous and has resulted in widespread resistance to the implementation of housing reforms. Budget subsidies to the housing sector still consitute almost _25%_ of local fiscal expenditure, or three-quarters of the cost of the provision of the housing and associated services. Regional and municipal governments have made very uneven progress in the implementation of such federal housing policy guidelines as have been enacted over the years and, as a rule, have not been capable of making real breakthroughs with institutional reform of the housing sector. This is particularly the case in such areas as the introduction of competitive maintenance firms (to break through the inefficiency associated with traditional monopoly suppliers of these services); the creation of condominium associations (to facilitate the transfer of housing ownership from municipalities ill equipped to deal with large holdings of the housing stock); and strengthening utility regulation and supervision.

Still, given the overall fragility of the Russian reform process, Russia has been able to accumulate substantial experience in reforming its housing sector 4. Starting from late 1993, a number of key pieces of a regulatory framework have been approved, cost recovery has increased from less than 2% to about

**1 1** would also like to express my gratitude to Raymond Struyk of the Urban Institute, Washington, with whom I had the good fortune to work during the past five years in the course of conducting housing surveys in Russia. I am especially grateful to my sociologist colleagues Ludmnila Vatfa, Alexander Temnitsky, Irina Kiseleva ofthe Institute of Sociology, Russian Academy of Sciences (RAS); Nadezhda Nozdrina of the Institute of Economic Forecasting, RAS; Gennady Diachenko of the Institute of Physics, RAS; Vera Gromova of InfiDemo, Vladimir, Yuri Gapienkov of Institute of Sociology, RAS, Nizhny Novgorod; and Natalia lagodunskaya and Olga Kuzina. I would also like to thank Natalia Veligura of the Moscow Resident Mission of the World Bank, translator Natalia Belskaya and editor Michael Haney.

2 The term "housing stock" as used in this paper in reference to privatization will always mean that part of housing stock that is subject to privatization unless otherwise indicated. This represents almost the entire housing stock of Russia, with the minor exception of military housing and some other forms ofjob-related housing provided for the tenure of employment

> 3 The findings ofthese surveys are presented by the Foundation for Enterprise Restructuring, the Urban Institute and the World Bank. Annex I provides a background of the social survey work conducted by the author in Russian cities in the years from 1992-96 as well as other surveys from which this analysis draws.

4 Struyk, Ch. 6 (1996).