19 household incomes under conditions of a sharply increased income disparity and the advancement of the housing market is examined.

These issues are explored primarily by means of a comparative analysis of the findings of sociological surveys conducted in Moscow in December 1993 and in Janualy 1996, as well as in Vladimir and Gorodets (Nizhny Novgorod oblast) in October 1994 and in December 1996. A description of the surveys can be found in Annex 1.

# **2.1. Foundations and environment of the development of the housing market** in **Russia**

Housing reform in Russia did not abolish the old system of waiting lists whereby free housing was given (eventually) to people with very bad housing conditions. At the same time, Russians now have the opportunity to improve their housing conditions by _buying_ housing. Sales of new and secondary housing have begun. The secondary market began to develop at a fast pace as a result of large-scale housing privatization (as stated earlier in Sectionl, as of late 1996, 38% of the overall number of apartments subject to privatization were privatized, with the share of private housing in the housing stock rising to 55% from 33% before the outset of reform in 1990.12 The establishment of the housing market was accompanied by a number of problems. First, in the past few years commissions of new housing have slowed down considerably. Even in the decade preceding the period of reform (to say nothing of the 1960s and 1970s) the annual increase of the housing stock (in square meters of total space) was about 3%, while in 1996 -only **1%o.** Considering that a substantial part of new housing is still free, it is not surprising that its supply in the market is not large.'<sup>4</sup> Also typical are the high prices of new apartments (1.3 times higher than in the secondary market; see Table 2.1 below), which sometimes makes it difficult to sell them. For instance, in 1996 10% less of state and municipal housing was sold than in 1995.'5 The significant reduction in the volume of the construction of cooperative housing (in 1996, 26% less cooperative housing was built than in 199516) is another factor that makes newly built housing hard to afford for many Russians.

The limited opportunities to buy housing in the primary market increase the importance of the secondary market, where households can more realistically hope to find a satisfactory apartment in a convenient place at an affordable price. According to Russian State Statistical Committee information, in the fourth quarter of 1996 secondary housing market transactions were registered in 70 regions of the Russian Federation, while the sale of new housing took place in only 51 regions.

Indeed, as the prices of one square meter of floor space for different categories of housing in Russia in Table 2.1 demonstrate, the high price levels of housing compared to the incomes of most households is one of the most problematic housing-related issues in Russia today. According to (Goskomstat, 1996a: 124), the average price of one square meter of space in the primary housing market was, in the fourth quarter of 1996, 3,310,000 rubles ($610). The highest selling price of housing is in Moscow, 7,508,000 rubles ($1,385) for one square meter. In Moscow a two-room apartment would cost on average $74,682, and $32,940 elsewhere in Russia. At the same time, in November 1996 the average monthly wage in Russia was 835,000 rubles ($150), and the average monthly pension, 320,000 rubles ($60). It is easy to see that the households whose incomes are confined to wages and pensions cannot afford to buy an apartment.

> 12 Gosklomstat, 1996a, **p.** 199.

> 3 **Goskosmstat,** 1996a: 198; Goskomstat, 1996b, p. **238.**

> **14** In Moscow in 1995, approximately **80%** of newly constructed housing was still allocated on a gratis basis (Gorsky, 1996). **"** Goskomstat, 1996a, p. **198.**

> 16 **Goskomatat,** 1996a, p. 47.