# **Box 4.2 Categorical Privileges (L’goti) in Russia**

Reduced rent and utility rates (or “privileges”) date back to 1975 when a 50-percent reduction was introduced for some disabled war veterans and families of servicemen killed in action. In subsequent years, these reductions were expanded to include war veterans and other groups, such as specialists who lived and worked in rural areas and people working in hospitals for lepers located in rural areas.

A huge number of privileges have been introduced since 1991. Privileges were provided not only for services to the fatherland to Heroes of Russia and war veterans, to families with many children, disabled people and other similar groups, but they were also provided to people of particular occupations, such as customs officers, militiamen, prosecutors, army officers, judges and others. More then ten new laws providing for reduction of rent and utility rates for particular groups of citizens in 1991 through 2002, and more than 30 additions were introduced in them during the same period. The privileges provided in accordance with Soviet laws and resolutions are still in place.

In addition, many Russian city and regional governments have introduced local privileges to certain groups of citizens by their decisions (privileges to honored citizens, participants in operations in Chechnya, single mothers, people affected by natural disasters, etc.). As a result, more than 40% of Russians are now paying reduced rent and utility rates, according to the State Statistics Committee of the Russian Federation (Goskomstat).

Source: Institute for Urban Economics. “Overview of Legislation on Housing and Utility Sector in Russia.” <u>http://www.urbaneconomics.ru/eng/index.php</u> Accessed on Dec. 11, 2004.

# **4.2.5. Housing context**

In addition to access to services, access to adequate shelter comprises an especially important dimension of household well-being. This section reviews the quantity and quality of housing, considers housing affordability and mobility rates, and concludes by assessing the links between housing and income poverty.

**The region is well provided with housing but housing quality (services, location and maintenance) is deteriorating.** As a result of the severe recession in the region, transition countries experienced contractions in the housing capital stock during the 1990s.  A Bank study on housing and land market reforms (2001) shows that housing production dropped in parallel to declines in incomes in the region over the last decade.  Since households in most countries use housing as an investment, inflation and declines in real incomes and savings all affect housing supply and demand and the patterns seen in transition countries are not surprising.<sup>32</sup>

The quantity of housing when measured by floor space per capita is relatively high in ex-socialist countries, given their level of income. Households living in Eastern European cities are especially well off in terms of housing space per capita (Hegedus, Mayo and Tosics 1997). Our findings confirm this result. As the Figure 4.25 shows, when space per capita in the capitals of transition countries is compared with that in 34 other countries of similar incomes, all of the transition cities are above the trend line for the comparator cities.

But, when quality (measured by location, availability of services, housing maintenance and crowding) is taken into consideration, the situation is less clear. One problem is that under central planning, cities were built in response to government directives, not market forces. With transition and the introduction

> 32 Notably, the study also found much smaller than expected declines in a few countries, including Russia, which results from the continued priority the government places on housing construction over housing maintenance.

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